In Europe, as has already been pointed out, the co operative idea goes far beyond the retail store. The cooperative societies have developed along lines re sulting in far more important savings than are repre sented by the usual profits of the single retailer. The first step was to obtain the advantages of quantity buying. Chains of stores were established, and the wholesaler's profit was eliminated. Then came the attack on the profit of the manufacturer, with the wide-reaching results that we have already described. Probably the chief success of the cooperatives abroad is attributable to their control of the manufacturer's and wholesaler's profits, rather than to the question able saving in the cooperative conduct of a single store.
11. Cooperative buying by consumers.—The other substitute for the distributing middleman whith has its start in consumer initiative is the buying group, which is formed primarily for the purpose of pooling purchases, and which does not perform the function of storage. A group of this sort is usually called a buying exchange, altho other names are also used.
A successful example of this type is the Farmers' Exchange of Schellburg, Pennsylvania. The Ex change handles only certain staple lines. Regular quotations on farm supplies and equipment are mailed to the members. Anyone who wishes to buy makes out his order and deposits it with cash in full for the amount of the order in a designated bank be fore a certain date. The bank certifies that the money is there, awaiting the shipper's draft. The executive officer of the Exchange then collects the orders and certificates from the various town groups belonging to the Exchange and forwards them to the supply houses that have been willing to quote prices. The Exchange assumes no financial respon sibility for the order. It is filled, and shipment made, with an order form bill of lading attached to a draft. Payment is then effected thru the bank in which the money for the goods has already been deposited. The saving to the individual lies in the lower prices quoted by supply houses in consideration of getting the business of the Exchange--usually a wholesale price--and thru the freight savings which are effected thru consolidating the shipments from one supply house to several buyers in one town group. There is practically no expense for administration.
The significant thing about buying exchanges of this type is that they are growing very rapidly; and that they have a certain amount of government sanc tion thru the interest which the Federal Department of Agriculture has taken in them and thru the semi official activity of some state officials in their behalf.
12. EireCt Olt retailer and jobber.—In such con sumer attempts to find a substitute for the middle man the retailer feels a price competition which he often cannot meet. It deprives him of trade in profitable staple lines, and leaves him to supply only the more infrequent needs of the members of the co operative societies. It takes away cash trade because the cooperative groups almost universally must do business on a strict cash basis, and leaves the retailer the less desirable credit business. If cooperative stores and cooperative buying exchanges increase, the independent retailers must decrease in numbers and will face a serious situation. On the other hand, it must be remembered that the buying exchanges do not create time utility, and the cooperative stores are lacking in many of the kinds of service which consid erable numbers of consmners demand and for which they are willing to pay. While there need be no fear that cooperation will ever eliminate the independent middleman from the distributing system, it may lessen his opportunities and greatly increase the prob lems of competition.
The effect on the jobber is similar to that on the retailer. The chains of cooperative stores and the buying exchanges usually wish to purchase at first hand. If the system grows in the United States as it has done abroad, the cooperatives will find little use for the jobber and his activities. The problem is no problem now; few jObbers have given it a thought, but it may become a very real problem in the future.
13. Effect on the vianufacturen—Some manufac turers see in the cooperative movement only an op portunity to incur consumer good-will by dealing di rect, at wholesale prices, with the cooperative stores and buying exchanges. The movement does not in crease consumption, but it increases the opportu nity for direct manufacturer-consumer contact. Few manufacturers see any menace in it, simply because it has not developed far enough in this country to bring to light any of the difficulties which the future may hold.