Evening star. [volume] (Washington, D.C.) 1854-1972, 1919-09-14

Web5-Pomerene law for combinations
to promote foreign trade has offered
in China is the organization OF new
distributors of the character de-
scribed to operate along identical /
lines. This development merely tends
to strengthen the sole-agency theory,
however, as these combinations are
organized for the specific purpose of
developing the whole territory. and no
attempt is made to develop it piece
meal and distribute rather than con-
centrate the sales effort.
The main argument against these
large organizations has been the ap-
parently h & h
Charging High commissions which
they charge. II
gold basis it would manifestly be adj
vantageous for the New York ex-
porter to trade with the small native
firms direct on a small commission
and finance the deal from New York.
1t would also seem natural that on
other business offered the American
manufacturer by an American export
house a 10 per cent commission to the
Chinese distributor would be ample
order if the goods thus sold went
through firms in China with orSaniza-
tions as large as the distributor. But
most of those outside orders come
from native dealers who can afford to
trade on a small margin Of profit or
about ~ per cent. This added to the
10 per cent direct commission gives
a 12h per cent margin. which is not
enough to protect the large dis
tributor with a satisfactory profit and
allow for his heavier selling ex-
penses This would seem to argue
in favor of the manufacturer doing
business. entirely through such chan
nels. In actual practice. however. the
branch Office manager of the exporter
in China solicits business from the
dealer. This branch Office wants
turnover, and Is not particularly in
terested in any special make or
goods. ~ s
He might be persuaded to give
closer attention to certain manufac-
turers lines for a pecuniary induce
ment, but that would not deter him
from accepting similar inducements
from competitive manufacturer.
This would not register much OF
gain for any one except the agent
and the goods would go on the market
at just that much higher cost. The
Chinese distributor with sole agency
contract, however, has almost as great
an interest in the agency as the
manufacturer. He carries stock
and specializes only on that particu-
lar make of goods He endeavors to
render the same service to the dealer
as is rendered by a district distributor
in the United States. In this respect
he differs from the exporters agent.
who handles hundreds of lines OF all
classes of merchandise, and can
hardly be expected to know enough
about any particular line to exert any
intelligent sales effort on 1t, but is
an order taker" only.
There is also grave weakness in
divided action, the federal investiga-
tors point out. The far
n;uidad eastern division lays en-
=. phasis on the fact that if
ActIoA. the manufacturer decided
that the sole agency is the best
method of pushing his sales. he must
put aside any right to accept business
from the American export house. Any
reservation of this sort would work
to the disadvantage of both the manu-
facturer and the distributor. The
latter cannot carry large stocks be-
cause his prices. as has been pointed
out, are higher than the cost to any
dealer who buys through the Ameri-
can exporter Accordingly he cannot
estimate the amount Of business that
may be diverted from his stock and
placed direct. Not being able to carry
stocks to advantage. the distributor
is not in position to give service" to
the manufacturer or to carry on an
efficient advertising and selling cam
paign. as his compensation is limited
to the 10 per cent commission the
manufacturer allows him on direct
service by advertising. canvossing
and drumming up trade for the manu-
facturer. the latters line will remain
in comparative obscurity because the
merchants with whom the American
exporter deals will have no interest
in general service work. The volume
of business the manufacturer thus OBJ
tains will never be his proper share
of the total business of the country.
and the profits accruine to the agent
on intermittent orders through ex-
porters or occasional sales from de-
pleted stocks will hardly warrant his
continued interest in the agency.
X
The problem of exchange also enters
into the sole-agency question. Unlike
the local Chinese mer-
Evchonoe chant. the sole agent is
buying for the whole
1ropIem. territory and the size
and frequency of his orders carry with
them a corresponding volume of ex-
change transactions that unquestion-
ab,y tend to strike fair average of
costs in the long run.
The prestige of the sole agent in the
Orient is also much higher because
Of the fact that he is a sole agent.
He is proud of that fact and advertises
it. Under this plan the manufacturer
most assuredly gets large percent
age of the business in sight, as well
as broader more efficient, intelli-
gent and aggressive representation
than he could obtain in any other
way. The sole agency to be most eff
fectiye should be on longer than a
one-year term. This would be hardly
long enough to permit the goods to
reach their destination before the
merchant left with stock of goods
which cannot be sold with any as
surance of renewed supply. In
China and the far east generally. the
nature of foreign trade Is such az to
mako the sole agency the most accept
able, efficient and effective form of
contract WILL P. KENNEDY.