The sun., 1919-10-08
SOLE AGENCY BEST
IN CHINESE TRADE
Distributors Interest Equal to:
That of Manufacturer I'm /:
der This Plan,
TERRITORY BIG PUZZLE:
Country Divided Into Three:
Great Export Areas for
American Purposes.
TERRITORY BIG PUZZLE:
Prepared BY the Far Eastern Dipi,ior
Bureau Of Foreign and Domestic


with which the American manufacturer
is not equipped by experience to cone 4,
the very difficult one of distribution ~,
territory. His experience has shown
him the value. perhaps, of dividing larrs
geographical areas at home and IN.
foreign markets into small territorie,.
under distinct agency contracts; but in
entering the Oriental field there are Ger.
tain considerations which should modify
10 some extent the rules which have,
been found advantageous elsewhere.
China proper. though covering vas,
geographical area. is. as far as tina,
American exporter is concerned, th~eo
very distinct trade areas-Canton,
Shanghai and Tientsin. This is due to
the fact that for generations the foreign.
trade OF China has been handled only
through certain treaty ports" and in
these ports have grown up large foreign
and Chinese organizations with branches,
In many other ports In the same terri
tory, and these form the main channels,
OF trade to and from foreign countries
AS these large organizations now.
operate, it Is highly inexpedient for them
to entertain any but sole agency ror
the whole OF their respective areas. and
at the same time where they arc efficient
1t is to the best interests OF the Amcrt.
can manufacturer to permit them 10:
do so.
Delivery ana Collection Services
The actual selling Of the goods. how.
ever, Is only a small part of mirketrnss
In China. The intelligent and economical
routing OF shipments by sea. rail- river
canal, whelbarrow and coolie with fre.s
quent delays and transshipments, means,
that delivery service must be main.s
tanned as well as selling service A.
separate collection service must also hos
maintained aud arrangements made sors
the shipment of the coin or bullion IN.
the trade centres from the interio. ,yhar.
inland exchange is uufavorabla Tho-o.
are several large distributors IN Chu,s
who have foreign and native statesmen.
in every town who look after these als
important details, and 1t is safe to saw
that without such services no wide dis.
tribution of products in China is DOS.
sible.
In connecting with these large dis
tributers the American manufacturer has
everything to gain. The only possihle,
alternative that would achieve the saue.
results would be the establishment o.
an extensive sales organization. sr5
whether this could be operated on a
large enough scale by any single manu-
facturer 70 overcome the low overhead
expense Of the large d striouter is highly
problematical. one Of the advantage.
which the Webb law has offered in Ch na'
* the organization OF new distributor
"t inc characte" described to operate
along identical lines.
This development merely tends IN
hn cn1a
ever, as these combinations are organ
lied for the specific purpose of devalog.
ing the whole territory, and no attennt
is made to develop II piecemeal and
distribute rather than concentrate the
sales effort
Sole Agency More Economical
The main argument against these.
large organizations has been the aprar-
entity higher commissions which thev
charge If China wer, on a gold basis
1t would nanifestly be advantageous 'l.. ..
ne New Nor'- exporter n tradn WIN
the small native firms direct on srail
commission ard finance the dal, from
New York. IT would also seem natural
that on other business offered the Amer.
lean manufacturer by an American ex.
port house 10 per cent. commission to-,
the Chinese distributor would be ample
protection. This would he entirely in
order IL the goods thus sold went through
hrms In China with organizations az
large as the distributor.
But most of these outside orders come
from native dealers who can afford N
trade on small margin Of profit Of
about 21a per cent. This 12ls per cent
margin is therefore not enough TO pro-
tect the laN'e distributor with . sa,iS-
factory profit and allow for his heavier
selling expenses. This would seem to
argue in favor Of She m1nufacturor 10
ing business entirely through suck chan
nels. In actual practice. however The
branch Office manager Of the exporter
In China solicts business from dealers
This branch Office wants turnover, and
Is not particularly interested In any
special make of goods He might, II is
true, be persuaded TO give closer attcn.
tion to certain manufa cturcrs lines by
means OF special pecuniary induce
ment, but that would not deter him from
accepting similar inducements from a
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, thus offsetting the appaFcnt
advantage.
The Chinese distributor with sols
agency contract, on the other hand, has
almost as great an interest in the agency
rs the manufacturer He carries n stock
and speciallzes only on that particular
make of goods. He endeavors 10 render
The same service to the dealer as Is
rendered by n district distributor I'm he
United States, In this respect he dutcfs
rom the exporters agent, who handles
hundreds OF Tines az sII SIasEaa NJ mar
'handise and can hardly be expected to
snow enough about any particular ino
o exert any intelligent sales effort or =,
out is an "order taker" only
Weakness IN Divided Action.
II the manufacturer decides that ms
sole agency is tho most logical method
If pushing his sales but stir retains
he right to accept business from the eN-
1ort house, reserv'ng 10 per cent.
commission for the aren't, such an lr-
'angement has its drawbacks for both
he manufacturer and the distributor.
The latter cannot carry large stocks ne
'ause his prices, as has been poin'eL
>ut, are higher than the costs og any
iealer who buys through the American
Accordingly he can not cst-
nate the proportion Of business when
will be diverted from his stocks ana
placed direct with the manufacture
through the exporter.
Not being able to carry stocks 70 aG'
'antage, the distributor Is not in 0.--
Ion to give Service TO the marufI'-
urer or 10 carry on nm efficient adv p
tsing and selling campaign II hts 1'7'-
is limited 10 the 10 per e0'.
the manufacture allows
\ Ina