The Problem of Commercial Rebates
Page 31
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A Reply to Certain Points Raised in Our Leader of April 27 Entitled " The Motor Trader and Commercial Rebates"
By T. G. Slater, m.i.m.T
y011.1R leader of April 27, entitled " The Motor Trader and Commercial Rebates," calls, I think, kir comment. The impression conveyed by it to .me is that—(J) Group buying will seriously impinge upon the interests of the retail motor trade, particularly the small trader, and be detrimental thereto. (2) There
• is a considerable difference between the price at which small and large hauliers buy. (3) The loss of this margin is a substantial drawback to the small haulier.
These supposed facts seem to have been accepted. as axiomatic without challenge. The points now raised will, I hope, help to give a more balanced perspective.
Supplies bought by hauliers fall, roughly, into five groups: fuel, tyres, vehicles, spare parts and ge.neral supplies. Fuel, tyres and general supplies are not purchased through the retail motor trade, and in many cases can be bought cheaper by the average haulier than by the majority of motor traders therefore the motor trader
Suffers no loss in this direction. .
Vehicles and spare parts are the only items which are bought in any quantity from the retail rooter trade, although in the heavier class even these are mostly bought direct. However, if any retail supplier does an efficient job of work, the haulier or group will continue to buy through this channel: The motor trader must, however, do something useful—Such as stocking spares —to justify the small margin of proftt he retains.
Before the war, buying of commercial vehicles was conducted on an intensive system of barter, in which the small haulier was by no means at a disadvantage compared with his larger competitor; in fact, lie was often in a superior position because he had more time to devote to the transaction, could concentrate his whole energies on driving the bargain, and could thus squeeze the last drop out of the orange.
Large and Small on Same Footing The significant point is that "quantity buying" was never used as a bargaining argument, for the elementary reason that even large users very rarely bought more tlian one or two at a time. The "quantity owning" argument was very often quoted, but was an entirely useless weapon and always will be, because it is supported by no real economic incentive. From a bargaining point of view, the small and large hauliers are . therefore on an equal footing, with the advantage perhaps slightly in favour of the small man. It may possibly be wise at this point to clarify the meaning attached to the words " small haulier." For the purpose of this article, such a persoiefi is considered to be one with a small number of vehicles, say three to ten, and who owns his own petrol pump.
Comparing the position of the small haulier with that of the large in relationship to the purchase of fuel, tyres and general supplies, it is true that the large man hasean advantage. The important questions are:—How big is the advantage? Is it worth having? Does it carry with it any disadvantages? The answer to the first is that the advantage is very small and is in fact of an order that would interest only a financier manipulating big figures. The advantage is, of course, worth having, provided it costs no trouble, but is certainly not worth neglecting one's business for, nor the trouble of forming a group to obtain it. The question concerning any dis advantages is a little more. invcilved, as these do not lie on the Surface and are of a long-term variety. Provided we agree that the success of a business is proportional to the amount of attention bestowed Upon it by its owner, it is easy to see the nature of the pitfall.
The danger is that the haulier will drift away from. giving adequate attention to his main business and spend too much time dabbling in the Motor trade as a sideline. The inevitable result is that haulage becomes a sideline, and suffers accordingly, Those who have tried it know which side of the .business is the more involved and occupies the greater attention.
When this possibility is pointed out, most hauliers reply that _while their vehicles are awaY they have no urgent business to .deal with, and fail to see why they should not employ the time in gaining a Little extra profit.
Haulier& Sidelines Not Economic It is in this .point of view' that 'the danger lies. The kernel of the matter is that in order to keep any business alive and progressive it requires feeding with ideas; it needs constant attention to the improvement of both its details 'and its major policies.
Attention of this sort, can be given only when the demands of urgent business routine and familiar problems are for the time being not in evidence. This is the time for Working out new methods and new, systems, improving one's knowledge of the fundamentals of the business, searching' for new customers, finding new avenues of business, and, in proper proportion, devoting a legitimate amount of time to buying wisely.
To sum up these considerations, the haulier, by and large, did not, before the war, make his purchases through the motor trade, with perhaps the exception of vehicles, and even then not at list price. Therefore what the trade has never had it will not miss. There is very little difference between the Price at which hauliers buy, be they big, or little, and the consequence of any small difference that does exist. is very small.
. My own opinion regarding rebates is that they should be completely discarded and a new and more honest list price established. The word " rebate " applied to all commercial vehicles and supplies before the war was just a meaningless piece of commercial jargon. It was meaningless, for the simple reason that everybody got. it in some form or other. It was pernicinus because a vast number of men wasted their time in fighting for it. in spite of the fact that they knew it would be given anyway.
Cannot we leave this wasteful finessing and get down to solid business? The motor trade can perform a useful service -En the road transport industry, that is in supplying vehicles, stocking spares ' and executing efficient repairs; and this service is worthy of just remuneration. The present attitude of both hauliers and MOtOI traders requires readjustment.
The raotor trader should discard the idea that he has a right to a rake-off on everything connected with the motor industry, and accept the principle of payment only for services rendered. •The haulier should forsake the tempting sport of discount chasing and let it be known that if the motor trade gives good honest service it will receive encouragement according to its deserts.