Resale price maintenance

Front matter

BY

Sometime Lecturer in Economics, Columbia University Assistant Professor of Economics, Hunter College, New York

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN THE

Preface

Many investigations and much argument are at the service of the student of price maintenance. They spring from various sources a few of which are: trade associations and trade papers; chambers of commerce, including the National Chamber of Commerce; the Federal Trade Commission; the Committee on the Judiciary of the House of Representatives; the Interstate and Foreign Commerce Committee of the House of Representatives ; the American Economic Association ; the American Academy of Political and Social Science; economic journals; and numerous business experts and economists such as P. T. Cherington, F. W. Taussig, H. R. Tosdal, A. W. Shaw, P. H. Nystrom, R. S. Butler, Lee Galloway, Gilbert Montague, and Judge Brandeis. Much information has been gleaned from the evidence offered to the Federal Courts in the course of the abundant litigation over price maintenance. Unfortunately, however, much of the available data on the subject has originated from biased sources. Indeed, almost no important assertion of fact has escaped the charge of being either wholly false or intentionally exaggerated. Under such conditions the problem of evaluating evidence is extremely difficult. Engaged therein the most impartial and conscientious student is not entirely immune to deception.

The arguments and conclusions presented in the following pages are given with no assurance of finality. They favor neither the negative nor the affirmative side of price maintenance. Long study has convinced the author that neither side is wholly wrong nor wholly right. A compro- 379] 5

PREFACE mise solution seems inevitable. The reader should take note that the treatise is far more concerned with establishing the principle of compromise than in constructing any particular form of compromise. Though a form is suggested, it is done in the knowledge that first solutions are generally ill-fated. But what of it, if they serve in the capacity of prerequisites for those that succeed?

The author desires to express grateful acknowledgment to those who have so kindly advised and criticized in his preparation of this work. Especially are his thanks due to Professors Seligman, Seager, McCrea, and Haig of the Columbia faculty, and to Professor Cherington of the Harvard School of Business Administration. In fairness tc them it should be said that the study falls far short of the attainments suggested by their constructive criticisms, and it is by no means entirely freed of all the faults which they indicated. Its defects are attributable only to the shortcomings of the author himself.

C. T. Murchison.

New York, March, 1919.

Table Of Contents

PAGE

CHAPTER I The Organization of the Market n

Trade channels n

Type of manufacturer concerned with price maintenance 12

His choice of distributing agencies 14

Jobbers 16

Their economic functions 17

The functions of the retailer 20

Their selling methods 21

Summary 23

CHAPTER II Statement of the Problem

Origin of problem of price maintenance

Changes in the system of commodity distribution

Standardization

Origin of price-cutting

Attempts to prevent price-cutting

The Stevens Bill

Who are its supporters

Arguments of opponents

CHAPTER III Types of Price-Cutting : Motives and Reactions 32

Price-cutting defined 32

Different types 33

Economic justification for price-cutting 34

Reprehensible price-cutting 35

Miscellaneous causes 36

Evil results of below-cost price-cutting 36

Evidence of the manufacturers 39

Conditions under which price cutting does not injure .......... 43

Results of economically justified price-cutting 44

Tendency of price-cutting to spread 46

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24 24 25

26 26

8 CONTENTS [382

PAGE

CHAPTER IV Irregularities of the Present Retailing System 48

Chain stores ; Great A. & P. Tea Co 48

Other representative grocery chains 49

The United Cigar Stores Co 50

Meat, restaurant, clothing, dairy, and jewelry chains 50

Department stores 51

Mail order houses 52

Costs of operation 53

Survey of Retailing costs by Harvard School of Business

Administration 54

Elements of variation in retail costs 55

Contribution of chain stores to retailing 58

The private brand 59

Weaknesses of the small retailer 63

Advantages of the small retailer 66

The buying exchange 67

The Philadelphia experiment 68

The manufacturer's chain 70

CHAPTER V Price Control and its Relation to Quality and Service 72

Effect of price maintenance on conditions of manufacture 72

Why goods lose their market 74

Quality and service aspects of the private brand 75

Effect of price mainteance on conditions of sale 76

Branded goods v. those purchased in bulk 78

Price-cutting injurious only for the branded good 80

Profit-yielding price-cutting no menace to package goods 82

Advantages of profit-yielding price-cutting 83

CHAPTER VI Price Maintenance in its Relation to Retail Prices 85

Will price maintenance lower prices 85

The negative argument 87

The fixed price a uniform price 88

Poor economy of the fixed price 89

The good results of reasonable price-cutting 90

The laws of price relative to trade-marked goods 91

Advertising and price maintenance 94

Competition under price maintenance 97

Price maintenance a force for combination 98

383] CONTENTS 9

PAGE

Price maintenance a blow at cut price dealers who sell at a

fair profit 102

The status of price maintenance in European countries 103

Government price regulation 106

Price maintenance against the trend of the times 108

Price maintenance would crystallize the distributive system .... 109

CHAPTER VII The Ethical Aspects of Price Maintenance 112

Claims of the manufacturer based on "good-will" 112

Moral rights from the point of view of the retailer 116

Relation of the public interest to claims of the manufacturer

and retailer 117

Large scale enterprises viewed as virtual public utilities 118

CHAPTER VIII Price maintenance a uniform price regardless of various

conditions 120

Disregards service aspect of retailing 121

Necessity of flexibility 121

The optional type of price maintenance 122

Price maintenance shackles the dealer unjustly 124

Price maintenance and combination 127

Modified price maintenance as a solution 128

Application of the plan 130

Not price fixing but the determination of minimum limits to

price-cutting the solution 132

Number and nature of dealers affected by the proposed plan . . . 134

Uniform accounting necessary 135

Quantity discounts 137

CHAPTER IX History of the premium idea in retailing 141

Present extent of the use of coupons 142

Classification of coupons and trading-stamps 144

Coupons as advertising 146

Advantages of the coupon 147

High cost of trading-stamps and coupons 148

Coupons as a competitive weapon 149

Once established, practice of using coupons difficult to eliminate 150

10 CONTENTS [384

PAGE

As a device for profit sharing 151

State legislation opposed to their use 152

Court decisions relative to 154

CHAPTER X The Legal Status of Price Maintenance 156

Federal legislation 156

Illegal price-maintenance methods 157

Price maintenance and patent rights 158

First court decisions favorable to price maintenance 159

Subsequent unfavorable decisions 165

The Sanatogen Case 167

The Victor Talking Machine Co 171

The Motion Picture Patent Co. Case 175

The finality of the decision in the American Graphophone Co.

case 182

Price maintenance in relation to copy-rights 184

Proprietary articles and trade-marked goods 186

The decisive case of Miles Medical Co. v. Park & Sons 188

The legal method of the Cream of Wheat Co 192

Summary 196

Appendix 198

CHAPTER I The Organization of the Market

The problem of price maintenance would be simple enough of solution if it could be isolated and studied apart, after the manner of a star-fish or an aching tooth. But it refuses to be isolated. Its ramifications extend far and wide, permeating every nook and corner of our marketingsystem from the producer furthest removed to the most ultimate of ultimate consumers. A correct mental image of the marketing system as a whole must then be prerequisite to a proper understanding of the merits or demerits of price maintenance itself.

A manufacturer today may use at his discretion one or more of several trade channels in the transmission of his goods from the factory to the consumer. The most popular one is the manufacturer- jobber-retailer route. However, many goods are sold directly to the retailer by the manufacturer without the services of the jobber. To a small but increasing extent goods are also sold directly to the consumer from the factory, through the use of the mail-order system, or manufacturers' stores, or agencies.

Formerly the trade channels were more complicated and were generally traced as follows :

1. Manufacturer.

2. Commission merchant.

3. Jobber.

4. Wholesaler.

5. Retailer.

6. Consumer.

385] 11

This condition, however, is not typical of modern marketing. Better transportation facilities; better co-ordination between the factors ; the principle of more rapid turnovers ; more and better advertising; a growing response on the part of the masses to seasonal influences in demand; rapid changes in styles; fads, hobbies — all contribute mutually to the simplification and shortening of the road between factory and consumer. The commission merchant is now to be found in only a comparatively small number of industries; the functions of jobber and wholesaler have been practically merged, so that it is a matter of indifference as to whether they be termed wholesalers or jobbers. It has been estimated that 90 per cent of all groceries and a somewhat less proportion of other lines pass through the manufacturer-jobber-retailer channel.1 Let us study briefly the functions of each of these marketing factors.

The Manufacturer. For the purposes of this treatment those manufacturers only need be considered whose products are of the finished variety, that is, ready to be passed on to the ultimate consumer without any further alteration. Moreover, their products must be of the type which is readily identifiable, either because of inherent form, function, or quality, or because of special markings, labels, or cartons associated with them. The problem of price maintenance, then, does not touch the farmer as a producer of wheat, but it does touch the miller as a manufacturer of flour, if he attaches to the flour a distinctive brand or trademark. If, however, he sells the flour in bulk to be branded or otherwise identified by, or in the name of, some jobber or retailer, he is not concerned with price maintenance. The same rule applies to a baker as a producer of bread. The problem of price maintenance does not seriously concern a

1 Butler, Marketing Methods, pp. 32-23- fruit-grower who sells his fruit in bulk, but does concern one who sells his fruit under a definite brand, or in distinctive wrappings.

A packer who puts meat and fat on the market simply as ham or lard is not interested directly in price maintenance ; but a packer whose hams are trade-marked and whose lard is branded has a different attitude.

Having identified the type of manufacturer concerned with the problem, let us now outline the role he plays. In some cases his campaign is comparatively simple. He merely turns over his entire product to some sales company, or jobber, who agrees to assume all selling responsibilities. This leaves the manufacturer free to confine his attention to producing. The great majority of manufacturers are not content with any such arrangement, however. Big profits and rapid extension of business do not often come when the fate of the commodity is so completely in the hands of a less interested second party.

Should he desire to take a more responsible role in the selling process, he will probably choose one or more of the following methods : 1

A. From the manufacturer directly to the consumer. There are three possible variations of this direct route :

1. Through solicitors or canvassers who visit the consumers personally.

2. By use of the mails.

3. Through the manufacturer's own retail stores, usually conducted on the chain-store principle.

B. From the manufacturer direct to the retailer.

1. The manufacturer may reach the retailer through salesmen, or by mail.

1 Butler, Marketing Methods, ch. Hi.

I4 RESALE PRICE MAINTENANCE [388

2. He may deal with all types of retailers, or choose one or more of the following types :

(a) Country general stores.

(b) Specialty stores.

(c) Department stores.

(d) Chain stores not owned by the manufacturer.

(e) Mail-order houses.

(f) Co-operative buying organizations of retailers.

3. He may sell generally to all retailers in a selected class or he may confine his sales to one retailer or a few retailers in a community, regardless of class.

C. From the manufacturer directly to jobbers.

1. He may reach the jobbers either through salesmen or by mail.

2. He may deal with all jobbers who will co-operate with him, or

3. He may deal with selected jobbers in restricted territories.

D. From the manufacturer directly to special representatives.

1. Agents, — those having charge of extensive territory, marketing the goods through subordinate middlemen.

2. Commission men.

3. Brokers.

These special representatives all usually have the option of selling to jobbers, retailers, or consumers.

Whether a manufacturer is to sell through one or more of these channels, whether he is to use salesmen or the mails, or both, depends partly on custom in the trade, partly on

3*9]

the nature of the product, partly on his own ability to discover methods of marketing, and to adapt to his own use all marketing plans that appeal to him as offering new opportunities for the sale of his goods.

Should he choose the method of direct sales to consumers, he has the advantage of knowing just where his goods are being consumed, and hence can the better direct his advertising and sales efforts; he has absolute control of his market and, therefore, has no difficulties with price-cutting, substitutes, or lack of dealer co-operation. An offset to these advantages is found in the great expense of direct selling in most cases, and the antagonism of dealers who feel that the manufacturer is assuming a function properly theirs.

Should he choose to sell to retailers he will find it necessary to keep on the road at great expense large numbers of salesmen, or else to create the necessary good-will for his products by heavy advertising. Moreover, a large percentage of loss results from having to give credit accommodations to so many individuals many of whom are entirely unknown to the manufacturer as to honesty, financial standing and business ability.

But there are compensating advantages. Where the manufacturer deals with the retailer, the problem of price maintenance can be handled with a large degree of success. Moral pressure can be brought to bear more directly, or else the retailers may be relegated to the position of agents handling the goods on consignment, and therefore compelled to maintain the price. The manufacturer's salesmen meet the retailers personally, have an opportunity to educate them regarding the selling qualities of the goods in question, and perhaps can impart to them real interest in and enthusiasm for the goods. He may, moreover, choose to do business only with those retailers who will give the goods prestige and wide distribution.

t6 RESALE PRICE MAINTENANCE [390

Four general types of commodities are still for the most part entrusted to jobbers, namely: dry-goods, groceries, hardware and drugs. Moreover, jobbers are of great service in the handling of thousands of other commodities not so classified. The real jobber is one who buys goods in large quantities, transmitting them without alteration in smaller quantities to the retailers. Aside from this conventional type is the jobber who manufactures, and the jobber who sells not only to retailers but also to consumers. These last two types are playing an increasingly important role, but they will not be taken up for discussion until later.1 In selling to jobbers, the manufacturer need use only a relatively small sales force, as the jobbers, compared to the retailers, are of course few in number. For the same reason he is troubled with less bookkeeping, his credits are more concentrated and reliable, and his shipping costs are less, as a result of fewer but larger shipments.

Many people claim that the jobber is a superfluous factor in the marketing system, that his functions can be assumed and performed more economically by other agencies. The facts hardly bear out this contention. For in the first place the jobber is a specialist, a selling specialist. The machinery of his organization is shaped and directed to attain one goal only — maximum sales at minimum cost. His energies are not dissipated.

Secondly, the jobber holds an advantage in that he handles a variety of goods, far greater than can be put on the market by any single manufacturer. The items on his selling list are often numbered by the thousands. This fact achieves economies in several ways. (1) He can supply entirely the needs of the average specialty store. Thus the retailer receives his goods in fewer but larger, and hence more economical, shipments. (2) A

1 Cf. infra, p. 59 et seq.

391 ] MARKET ORGANIZATION iy

smaller number of salesmen suffices. Let us assume that the goods in an average specialty store are produced by five hundred different manufacturers — a conservative estimate. Were each manufacturer to do his selling through his own salesmen, it is easy to see that the resultant aggregate costs would be exceedingly high. But with the selling activities of all pooled, so to speak, in the person of the jobber's salesman, one man does the work of many. (3) The jobber can, and generally does, with good profit, confine his selling to a comparatively small territory. The manufacturer with his specialty must needs make his attack on the country as a whole. This wide distribution of effort entails a heavy unit cost, if the manufacturer takes the whole burden on himself. The concentration of selling within a limited territory is then a practice of which advantage can be taken in most cases only by the jobber. (4) The variegated stock of the jobber enables him also to perform economically the function of warehousing. This relieves the manufacturer of the necessity of keeping on hand a large surplus, and enables the retailer to secure virtually at any time, without previous notice, desired additions to his stock.

Thirdly, the jobber, by virtue of his extensive and continued dealings with the retailers of a limited territory, comes to know them well as to ability, honesty and financial standing. Thus he is in a position to manage his credit, giving wisely and safely. This has constituted a very large advantage for the jobber in the past. It seems certain, however, that it will diminish somewhat with the growing use of the trade acceptance, and the institution of better business methods in general.

In the light of these facts we must admit that the foundation of the jobber is a fairly solid one and will not easily yield to such developments as the chain-stores, the department stores, the mail-order houses, the co-operative assojg RESALE PRICE MAINTENANCE [392

ciations, and others.1 But these considerations must await a following chapter for fuller discussion.2

Direct sales to special representatives, the last of the trade channels mentioned in the skeleton outline, occur when the manufacturer chooses to forego as much selling responsibility as possible. This attitude may be occasioned by, ( 1 ) limited capital; (2) limited demand, not large enough to justify other arrangements; (3) unfamiliarity with the market, due to lack of means or disinclination to learn; (4) peculiar organization of the market which in some cases requires the use of brokers, as, for instance, the selling of stocks, bonds and produce.

Having thus traced, all too briefly perhaps, the problems and selling activities of the typical manufacturer who* is interested in the question of price maintenance, let us once more turn our attention to the jobber.

The jobber. As we have seen, probably ninety per cent of the country's groceries, and overwhelming proportions of many other lines of consumer's goods, are handled by jobbers.3 Of the jobber's stock, a large proportion is of the branded or trade-marked variety. It is to his interest, then, that the goods maintain a popularity on the market. In other words, his reputation and prosperity are in exact proportion to the reputation and demand for the goods he carries. All jobbers admit this. But all jobbers do not agree as to the selling policy that makes for reputation and demand. For some jobbers no selling methods are too aggressive. In striving for big volume and rapid turn-over they indulge in liberal price-cutting on many articles, and in addition grant generous quantity discounts to large buyers.

1 A. W. Douglas, Merchandising, passim.

2 Cf. infra, p. 68 et seq.

3 Cf. supra, p. 12.

Others believe that sound business goes with a maintained price and a conservative discount policy, and depend on service, reliability and other virtues to assure a large and growing trade. Some oppose national advertising as practiced by many manufacturers on the ground that the resultant large demand for the good compels the jobber to carry it, whether or no, and that, as a consequence, the manufacturer is arbitrary and often miserly in the granting of jobbers' discounts. Some jobbers sell directly to consumers in competition with retailers, thus taking an extra large profit to be sure, but arousing the wrath of all his customers. Large numbers of jobbers have transgressed the traditional boundaries of the wholesaling function by integrating in an opposite direction and assuming the role of manufacturer. The manufacturing jobber is becoming an increasingly important factor in the marketing system. A great majority of his products do- not originate in his own plants but are manufactured under contract by others, always bearing in the market, however, the brand and name of the jobber. The jobber's brand so used is popularly known and spoken of as the " private brand." Goods of private brand, having generally a restricted distribution, do> not readily lend themselves to price-cutting schemes. Moreover, they possess advertising value, and may add greatly to the prestige of the jobber in the market. Discussion of the private brand as it affects the price-maintenance problem is reserved until later.1

In relation to his competitors the jobber occupies a position far different from the analogous position occupied by the manufacturer. Any manufacturer of any branded commodity in competing with manufacturers of similar commodities for the market, is always in a position to plead superiority of quality, or of form, or of variety of uses, or of

1 Cf. infra, p. 59 et seq.

service, durability, and innumerable other real or imagined superiorities. He does not have to specialize on a price appeal. All questions of price can often be entirely subordinated.

Not so with the jobber. Any given jobber in any given line carries in his stock just what any other given jobber in that line carries. It does not lie in the province of any jobber to say that his Pear's Soap is superior to the Pear's Soap carried by all other, or that his Heinz products are of a peculiarly succulent quality. Wherein, then, can one jobber find advantages that will enable him to triumph over his competitors ? He may possess a strategic location, capable salesmen, financial backing, wisdom in buying, skill in exercising economies of various sorts. He may give liberal credit, good service, kindly co-operation, and be famous for square-dealing. But with all these, the temptation to make the price appeal is always present. How easy it is to cut a few cents per case on Cream of Wheat, to lower the standard price just a little of Welch's Grape Juice ! How immediate, how certain the results ! For the time being he is almost certain to prosper. In the long run, perhaps, the story is different, because the other jobbers will not be slow to take the cue. In the price-cutting game there is no limit to the number of players or to the size of the stakes.

Retailers.1 The retailer is the last link in the chain of middlemen. He sells to the ultimate consumer, without alteration in form, the goods purchased from jobber or manufacturer. He gives to the goods time and place utility. Retail stores may be divided into specialty stores and general stores. The former handle goods of one particular line, or

1 American Economic Review, June, 1917; "Marketing Functions and Mercantile Organization," L. D. H. Weld.

of several closely related lines, as, for instance, drug stores, groceries, shoe stores, music shops. The latter deal in varied and numerous lines. Such are the old-fashioned country stores which contribute to all the needs of the community, or the modern department store or mail-order house where one can buy anything from toilet goods to gas engines. From another point of view, retailers may be classified as follows : chain stores, mail-order houses, department stores and consumers' co-operative stores, the others being rather vaguely alluded to as the " average independent retailers."

The selling methods of retailers vary greatly. Some afford to their customers elaborate accommodations, parlors, lounging rooms, finely-appointed sales rooms, music recitals, luncheons, fashion displays, etc. Their practice varies as to credit accommodations and the privilege of returning goods. Some stores deliver the goods to the homes of the customers, and even transport the customers themselves; others, of course, do neither. Some engage in extensive advertising, the giving of premiums, coupons, trading stamps; some make a habit of cutting standard prices. Some cater exclusively to the wealthy, some to the middle classes, some to the poor. The resplendent department store, with its gorgeously dressed windows, its luxuriant and expensive furnishings, its numerous and immaculately dressed sales corps, may not be two blocks distant from the humble shop where windows are for lighting purposes only, where pine boxes serve as counters, and where the unkempt proprietor is his own clerk, bookkeeper and janitor. Apart from the selling function, the only universal characteristic to be found among retailers is that all of them handle large proportions of branded or trade-marked goods, and hence would in nearly all cases be affected in some way by a price-maintenance program. Retailers vary not only as to characteristics and general selling methods, but also in their buying.

Not all buy largely from jobbers. Some buy in large quantities, some in small, some pay cash, others always depend on credit; some believe in a variety of goods, others stock up only in staples. Some utilize co-operative associations for their buying, some prefer to buy independently.

These considerations taken in connection with many other varying business methods lead one to the conclusion that, as regards retailers, types are very numerous. Therefore costs and profits among retailers must be widely variant. In the beginning, then, one is disposed to wonder how a rigid price-maintenance formula can be adapted to so irregular and inconstant a system as is required by the present methods of commodity distribution.

By way of summary, we may conclude as follows :

1. The problem of price maintenance is directly connected with the marketing of only branded or trade-marked

goods.

2. Manufacturers have at their disposal a large variety of methods by which to reach the buying public, though the one most generally used is that of distributing through jobbers and retailers.

3. Jobbers vary greatly as to types and selling methods. We find price-cutting, quantity discounts, private brands, aggressive selling, all being regarded differently. Hence the variations in the cost of operating are large.

4. What is true of jobbers as to variations in method and costs is true to a still greater extent of retailers.

5. Both jobbers and retailers handle large proportions of trade-marked and branded goods.

6. Each jobber and each retailer is in such relation to his competitors that the temptation to cut prices, in order to gain a competitive advantage, is ever present.

7. Because of the intimate contact existing between all members of a competitive group of jobbers or retailers, any selling device, such as price-cutting, if practiced by one, seriously affects the business policies of all.

8. A close interdependence still exists as between retailer and jobber, and between jobber and manufacturer. The prosperity of one contributes to the prosperity of all. But this close interdependence leads to an additional result: whenever trade-marked or branded goods suffer in reputation or distribution through the act of one set of factors, they suffer likewise in the field of the other factors.

Additional References J. A. Murphy in Printers' Ink, Nov. 1, 1917, p. 46.

Butler, Marketing Methods, chs. i-xii, Alexander Hamilton Institute, New York, 1917.

Nystrom, The Economics of Retailing, ch. ii, The Ronald Press, New York, 1915.

L. D. H. Weld, " Marketing Agencies between Manufacturer and Jobber," Quarterly Journal of Economics, vol. xxxi, Aug., 191 7.

A. W. Shaw, " Methods of Distribution," Quarterly Journal of Economics, vol. xxvi, pp. 720, et seq.

L. D. H. Weld, " Marketing Functions and Mercantile Organization," American Economic Review, June, 1917, pp. 306 et seq.

CHAPTER II Statement of the Problem

The immediate occasion of the price-maintenance controversy lies in the general tendency toward the broadening of the functions of the manufacturer. Formerly they were confined, as a rule, to the creation of a finished product, the marketing responsibility devolving almost entirely upon other agencies. Such selling activity as the manufacturer did assume generally restricted itself to dealings with wholesalers or jobbers. In recent years a majority of those manufacturers who produce commodities for the retail trade have widened their activities to include not only marketing to wholesalers but to retailers and consumers. Though in most cases the manufacturer retains the services of the middlemen as channels of distribution, he does not entrust to them nearly so great a degree of responsibility as he once did.

This change of attitude on the part of the manufacturer under discussion is due to no fundamental psychological change, but to the removal of certain economic limitations under which he once labored : namely, difficulties of transportation and communication. Inadequate or relatively too expensive transportation facilities made it impossible for the average manufacturer of one product or of a small variety of products to maintain a large sales organization or attempt a wide distribution. Poor communication facilities, expressing themselves in slow or irregular mails, limited telephone and telegraph communications and a lack of 24 [398

THE PROBLEM widely circulated periodicals suitable as advertising media made it hopeless to attempt the building-up of a wide demand by appealing directly to the consumer or to the small dealer.

With the elimination of these difficulties it is not surprising that the manufacturer should take advantage of the open opportunity to create a wider market by his own efforts and at the same time to achieve a position of greater advantage relative to his distributors. Advertising, for so long a local device financed by dealers, in the hands of the manufacturer becomes national in its scope. Periodicals of national circulation become one of its most popular vehicles, and are in turn given great impetus both in numbers and in wideness of circulation by the financial support of the advertisers. By a single manufacturer great sales organizations are developed with tentacles reaching into the remotest sections. National periodical advertising is accompanied by a greater use of other forms such as circulars, posters, and catalogs. Utilization of the device, once its possibilities in the creation of demand are realized, rapidly develops into a science possessing a complicated psychological basis.