Proper Compensation for Wholesalers

At the last convention of the National-American Wholesale Lumber Association, there was considerable discussion on the report of the Committee on Cost of Conducting a Wholesale Lumber Business, which showed that it cost a large number of representative wholesalers 7.83 per cent to conduct their business. This report is accepted as an authoritative showing of actual costs and it has resulted in much discussion at group meetings of both manufacturers and wholesalers. It is realized that the wholesaler's prevailing margin does not adequately cover his costs and provide a reasonable net profit. The matter was further considered at the September meeting of the National-American's Executive Committee, when a further survey among rvholesalers was planned to promote a more serious study of the problem by the industry.

fn commenting upon this situation, Secretary W. W. Schupner says :-"I1 is appreciated that the results of our two National surveys are reported as an average, and that ea,ch wholesaler must consider the relation of his individual costs to the average. One fact stands out clearly, however, and that is, that the wholesaler cannot trade on a 5 percent basis, as he is too frequently expected to do, and steps must be taken to correct such an impression.

"Wholesale lumber distributors perform a vital service to the whole lumber industrv. They are constantlv devoting 100 per cent of their brains, enthusiasm and clpital toward directing our lumber production into channels where best market prices can be obtained. Buyers are being counselled, new fields are being constantly developed. Dealers are being assisted, financed and encouraged in the handling of wood products. It is estimated that nearly 75 per cent of the lumber production is marketed by wholesalers.

"For some time one outstanding problem has confronted the wholesaler-the increased cost of doing business and the difficulty of securing a sales margin to at least meet that expense. In many fields where the manufacturers' price is established and known, the old 5 per cent trade discount still prevails.

"It becomes increasingly apparent that the wholesaler can only serve his mills on a basis of compensation that will meet his costs and provide a margin of safety. Our interests with the manufacturers are mutual and they should recognize that their sales representatives should enjoy at least a living measure of prosperity. Many mills operating on the sales discount plan have already signified their willingness to ,consider this situation, providing that other mills join in the movement. Naturally, they will look for the highest degree of marketing efficiency and cooperation from wholesalers.

"Our members are now being asked for an expression on such vital questions s5 ;-'l)6 present costs of wholesaling lumber warrant a minimum margin of 8 per cent, based on net f. o. b. mill price?';'If you consider 8 per cent insufficient, what amount do you suggest?'; 'Are you opposed to cutting the sales margin allowed by mills or to other secret rebates to customers?'; and 'Should mills protect wholesalers from direct sales to the trade in territory where mills sell to wholesalers ?'

"The answers to some of these questions may seem obvious, as, for instance, that referring to secret rebates, more commonly called, "split commissions." Wholesalers appreciate such a bad practice must be corrected within their industry and that is a problem in itself. At the same time correction depends upon cooperation with and through manufacturers and fairness to them requires a frank expression from lvholesalers themselves. This whole inquiry is planned with a view of working in the mutual interest of both manufacturers and wholesalers and we believe this situation affects most wholesalers whether they operate on a trade discount or flat price basis. The result of this survey should be helpful in the further negotiations through the joint Manufacturers-Wholesalers Committee, which is studying the question of merchandising relations between these two branches of the industry."

The Special Committee consists of A. E. Lane, Chairman, F. S. Davis, W. B. Eaton, O. N. Shepard, H. J. Strong, G. W. Taylor, and B. L. Tim, New York; J. I. Coulbourn, Philadelphia; R. C. Pepper, Springfield, Mass.; with President C. A. Mauk, Toledo, and Secretary W. W. Schupner.