It is inconceivable that prices should hold up in the face of a declining demand at the old price, supply remaining constant or increasing. A break in prices only accentuates the lumberman's haste to liquidate before irretrievable loss overtakes him, and thus ensue to the industry as a whole cumulative disastrous effects. The relative increase of price paid by the consumer of lumber has gone into the pockets not of the one who is playing the double role of manufacturer and speculator but of the original timber holder. If a break in lumber prices occurs it is at the expense largely of the lumberman, not as a manufacturer, but in his character of timber speculator. In any case, much of the fluctuation in lumber prices and most of the uncertainty respecting the lumberman's profit are properly charged to the timber owning and carrying function and not to the sawing and manufacturing operations. GEORGE A. STEPHENS. University of Nebraska. MARKETING FUNCTIONS AND MERCANTILE The services that must be performed in getting commodities from producer to consumer are usually called the "functions of middlemen"; in the title of this paper they are referred to as "marketing functions" because they are not always performed by middlemen, but often to a greater or less extent by the producers themselves. When a manufacturer performs practically all of them, as, for example, when he sells through his own retail stores, it might be said that he is his own middleman; but the term "middleman" commonly means an independent merchant, rather than a part of the manufacturer's selling organization. It is therefore helpful to think of "marketing functions," rather than "the functions of middlemen" because these functions are not necessarily performed by what we ordinarily term middlemen. should also be noted that the final consumer generally performs part of the marketing functions. One reason why many people believe that the cost of marketing might be reduced by the "elimination of middlemen" is their failure to realize that this does not mean the elimination of marketing functions-which still have to be performed. Furthermore, many who do realize that there are functions to be performed, do not appreciate their complexity, or the difficulty and expense involved in performing them. Therefore, a classification of marketing functions is absolutely fundamental to a study of and an understanding of the marketing machinery. Although these functions have been described to a certain extent by other writers,1 it seems worth while not only to reach as fundamental and significant a classification as possible, but to describe them in a way that will couple them up with the actual organization of the marketing process. Such is the object of this paper. The services performed in the marketing process, including practically every item in the detailed expense account of a merchant or of the selling organization of a manufacturer, can be classified under one of the following heads: (1) assembling; (2) storing; (3) assumption of risks; (4) financing; (5) rearrange 1 The writer wishes especially to acknowledge the help derived from A. W. Shaw's Some Problems in Market Distribution. The reader will recognize frequent indebtedness to this source. ment; (6) selling; and (7) transportation. The only important exception to this classification is the expense connected with accounting and office management, or what Shaw calls "the facilitating activities" of a business. But these are purely incidental to the primary functions enumerated above, and may properly be considered as assignable to, or incurred in connection with, their performance. I. Assembling. When communities were self-sufficing, there was no need of collecting or gathering commodities from distant places. But with the development of territorial specialization both in agriculture and manufacturing, the assembling of commodities from various places became a more or less difficult function to perform. The term "assembling," as used here, does not mean the actual physical transportation of commodities from one place to another, but rather the seeking out of sources, the making of business connections whereby commodities may be bought, and the study of market conditions so that they may be bought at the lowest price possible. Assembling therefore involves all the services connected with buying. Many wholesale houses assemble goods from different parts of the country-even from all corners of the earth. They have their specialized buyers, who not only go to trade and manufacturing centers to buy goods, but who have to make a constant and continuous study of market conditions, sources of products, qualities, grades, styles, etc. Many large houses maintain permanent buying offices in market centers, as, for example, the dry-goods wholesalers of Chicago, who maintain buying offices in New York. It is a common practice for wholesalers and even large retailers to send buyers abroad, and some, as Marshall Field and Company, even maintain permanent buying offices in several foreign cities. But the assembling from foreign countries is largely performed by a specialized group of merchants known as importers. Sometimes the buying function is so difficult and expensive to perform that jobbers employ independent purchasing agents in distant markets, who buy in larger lots than individual jobbers can handle, who have a more expert knowledge of market conditions and prices, and who keep their clients informed from week to week on these matters. This is common in the hardware trade. Department stores do not rely on jobbers to assemble goods for them. They buy largely from manufacturers, which involves sending buyers to eastern markets; and some of the largest stores, especially in the East, maintain permanent buying headquarters in New York. But the majority of department stores cannot afford such expensive buying organizations, and although they send their buyers to New York, they employ either "resident buyers" or their own coöperative buying syndicates to keep them in touch with market conditions, tell them where they can buy to best advantage, execute "fill-in" orders, and to provide desk space for their buyers when they are visiting New York. Not many years ago, it was the practice of country merchants to visit large cities perhaps twice a year to order a sufficient supply of goods for the season. This was a cumbersome and costly method of assembling; it involved loss of time, poor selection of goods, purchasing too large a stock at a time, and unsatisfactory credit conditions. The assembling function for country merchants is now taken over very largely by jobbers. Many other examples might be given of the importance and difficulties connected with assembling. It is one of the principal functions of wholesale produce dealers and commission merchants, who send solicitors into the producing regions to make business connections, who assemble first from one part of the country and then from another as crops mature in different climates, and who make a continuous study of crop and weather conditions. Brokers often help in the assembling function, in connection with both agricultural and manufactured products, although they more commonly represent the seller than the buyer. II. Storing. Storing, in its broad sense, means the holding of stocks of goods at convenient points. It involves expense for warehouse or storage fees, store space, and interest on capital employed. Producers have to perform the storage function to a certain extent, but they shift it as much as possible to middlemen. Manufacturers prefer to manufacture "on order," so that they may deliver the finished goods as fast as they are turned out; but many have to manufacture "for stock," thereby keeping capital tied up in finished goods on hand. When manufacturers sell direct to retail stores, or to consumers through their own retail stores, they have to keep a large stock of finished goods on hand, not only at factory, but often at convenient places throughout the country, thus assuming the expense of performing the storing function, instead of shifting it to middlemen. Retailers perform this function by keeping the shelves of their stores filled with goods. The tendency is for middlemen to reduce it as much as possible by purchasing goods in small quantities and very frequently; because small stock in proportion to sales means faster turnover and larger net profits. This tendency is especially noticeable among retailers, who shift the storing expense as much as possible to jobbers. Jobbers in turn always have warehouses with complete stocks, and the fact that retailers are buying in smaller and smaller quantities, but more frequently, accounts largely for the development of small jobbing centers, as in the grocery trade, and for the establishment of branch houses by large jobbers, as in the hardware trade. In other words, the jobber needs to be as near the retailer as possible, so as to supply his wants with a minimum of delay. The jobber also desires to order from the manufacturer as little as possible at a time, and this has the tendency of forcing manufacturers to carry a stock of finished goods. About the only middlemen who perform practically no storage function are brokers, manufacturers' agents, and purchasing agents. The storing function is so difficult and expensive to perform in some cases that it is taken over by a specializing set of warehousemen. General warehouses are found in all large cities, and in them all conceivable commodities are held. A sugar refiner on the Atlantic Coast, for example, needs to keep supplies of sugar on hand at large distributing centers throughout the country, and he has the choice of building and maintaining his own warehouses or renting space in public warehouses. He finds it cheaper to pursue the latter course. The large meat-packers, on the other hand, find it to their advantage to maintain their own warehouses, partly because they require a specialized service and equipment not furnished by ordinary warehouses, and partly because they do business in large volume. Agricultural products, which are seasonal in character, demand special forms of storage facilities, usually furnished by independent warehousemen. Cases in point are grain elevators, cotton warehouses, and tobacco warehouses. And when the element of preservation enters in, cold storage houses are required. The storage function has to be performed all along the line, from producer to consumer. Even the consumer, when he |