New-York tribune., 1900-05-19
ONE FORM OF SHRINKAGE.

What is called Shrinkage in business embraces
one large item about which need be
alarmed. The stocks carried by dealers vary
widely in different years, all aware, but per-
haps few realize how great difference that
variation makes with the volume Of trade. In
the Census of 1890 an estimate was included of
only S752, 100000 for merchandise in stock To
many, no doubt. that seemed sufficiently large
until it was observed that there were eight hun
dred thousand traders in that year, for whom
the sum would allow an average stock of mer-
chandise costing less than $1,000 each, whereas
the commercial Indebtedness of firms averages
about S., 600 each. Taking in stock two or three
times in year, the large and small dealers
alike must vary widely in the quantity they
have on hand at different times, but the average
cannot be far from half the difference between
the largest and the lowest stock carried. AS 1t
is of no consequence TO seek accuracy in the
matter, if only the enormous magnitude of the
stocks thus in transit between producers and
consumers is recognized, it is enough to note
that from third of the years supply in some
lines to half in others is thus carried by dealers
When business is active and growing and
prices are rising, with prospect of a sustained
advance. dealers of all kinds want to anticipate
as far ahead as they can the needs of future
buyers and increase their stocks to the maxi
is slow and the chief anxiety of dealers is to
find opportunity to distribute the stocks they
hold or have ordered, then stocks are reduced to
their lowest point, the manufacturers and agents
wait because orders are few, the jobberS and
wholesalers take in no more than they must
and the retail dealers get rid Of their stocks rs
far as they can before ordering more Between
the first state Of things and the other there must
be difference amounting to thousands of mill
ions In the value of goods held by traders At
one point everybody is strainng his credit in
order TO get all the goods he can in the belief
that their prices will rise. That was the state
of business throughout nearly all last year, and
besides the quantities actually taken for cou-
sumption there were purchases of half as much
more. it may be roughly estimated to swell
dealers stocks to the utmost
This year the main effort of the dealers has
been to tighten stocks. Not in all lines for in
some prices do not yet yield at all nor threaten
to yield, and demand for consumption continues
heavy. But in nearly all branches of business
the dealers have been trying to sell before prices
and paper profits slip away, and the buyers have
been so far restricted that the decline In prices
which most of them have struggled to avoid
has come in earnest The retailers doubt the
maintenance of the highest prices taken in last
years excited RISE and have kept back their
buying In order to tighten stocks. The whole
salers and the jobbers have curtaiIed their buy
ing for the same reasons and the new orders 10
manufacturers have been materially reduced
not so much by decrease of consumption as by
sales to consumers from stocks yet remaining
and by the cessation of purchases based on
belief that prices will rise.
Thus If the payments through clearing houses
have represented the volume of business in
much the same ratio at different times the
payments this year in four months ending
with April We're smaller than last year by
S3,313.o00,O00. or more than 10 per cent Yet it
would be much more important to note that
payments were larger by $70O0,O00. 600 than in
the same months OF 1898, which had been in
their day the greatest ever known. To put II
plainly, natural trade based on consumption
recovered its volume in 1895 with payments of
about S22.000.000,0O0. Replenishment of stocks
and enormous speculative buying by every
body raised the payments in 1890 10 more than
S52,ooo,o00,OOo. But this year. with the replen-
lshment terminated and no speculative rush for
goods, the volume of trade drops more than 10
per cent. to $4,000, 0,00O,0OO and still retains