Is Group Buying a By Commercial Proposition ? T. G. Slater, M.I.M.T.
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Have Hauliers Become Temporarily Blinded to its Pitfalls by the Tempting Bait of Discounts?
I N a letter published in " The Commercial Motor " dated August 18 the writer stated that there is no half-way house for group buying. Once groups have been -loaned in any number and have got into action, they will inevitably be compelled to go all the way and establish complete repair and marketing organizations capable of satisfying -all their requirements, the reason being that the commercialvehicle distributor will have disappeared. This will not be becaute he was unable to compste with the groups' own organizations, but because most hauliers would have entered into undertakings to deal with only their groups.
On superficial consideration, grouping of repairs and supplies appears to offer substantial attractions, but, upon mature reflection, it will be seen that there are fundamental reasons why it has not been attempted by other industries. The writer is fully convinced that the only reason why the matter is, at the moment, being discussed by the transport industry is because the subject has been raised as an offshoot of traffic pooling. Certain people have allowed themselves to become temporarily blind to its pitfalls by the tempting bait of discounts, and by reason of the overlapping that occurs between the two industries.
The real problem confronting group buyers, when stripped of its attractive trimmings, is one of economical and effective management. There are two ways of approaching it. One is to place the management in capable but dictatorial hands. The other in the hands of a committee.
Government by a committee is a safeguard against exploitation by the aggressive and unscrupulous. This is an obvious precaution where nations are . concerned, and exploitation is a real danger. Nevertheless, if any real degree of efficiency is to be obtained, control by committees must be abandoned, and the power vested in the hands of one capable person. This fact has been recognized by the United Nations, and, in many instances, " dictatorships " are deliberately allowed, so that we may not be under a disadvantage against aggressor nations.
Hauliers' Present Freedom
Where hauliers are grouped for the purpose of running a motor repair business, it will be altruistic blindness to suppose that each haulier would not require some safeguardto insure that he received a square deal. In his relations with the present motor repairer, the process is simple. If he be not getting what he thinks is fair treatment, he goes somewhere else, and, if his suspicions are well founded, the inevitable process of competition supplies a familiar remedy.
With a group, of which the haulier is a member, the situation is very different. The group is, in effect, a nonprofit-making firm, wherein the haulier plays the dual role of sleeping partner and customer. Consequently, in one capacity or other, he must foot the bill for any inefficiency.
In addition, the group member quickly finds that he is buying from the group. For instance; lorries and petrol would not be passed on to him at the same price at which the group bought these commodities. A charge would he made to cover office expenses, handling costs, bank charges, garaging, insurance, trade plates, management, and RO on.
The next situation inevitably to arise would he for the individual to start bargaining with the group. Will the haulier with, say, 25 vehicles, agree to buy at the same price as the man with one vehicle? Thus the buying company will have replaced the motor trader, with this difference, that the haulier is in an inferior position for bargaining. Having attached himself to a group, he 'has, more or less, got to take it and like it.
It is true that a disgrulitled member could attach himself to another group, but this is a two-edged weapon. The , largest group member could enforce his wishes by a threat to join another'group. The small haulier would thus he less independent than before. The problem, therefore, to be solved before there is any possibility of a successful buying group is to provide efficient management, together with safeguards that are, at the same time, effective and not too expensive or unwieldy.
Up to the moment commerce has'not come forward with any solution of the problem, nor suggested any system that is superior or even approaching in efficiency to the dictatorship of the proprietor of a privately owned firm, and held in check by open competition. The privately owned firm, competing in the open market, is regulated by an inexorable law—namely, the law of get on or get out—the administration of which does not cost the customer a penny.
Doubtless, the first thought in the mind of the group buyer is that the motor trader makes a profit, and why should not this profit go straight into the pocket of the haulier? The answer to this fallacy is that the efficient motor trader earns his profit. It is his wages for running his business successfully. It has got to be paid; anyway, and it is the haulier's Cheapest method of purchasing management for the repairs and supplies he needs.
A parallel case exists between the haulier and the transport user. Why should not business firms pool their transport, hire a manager, buy bulk supplies, and cater for their own transport needs? If this be a business proposition it would have already been done.
It is true that certain concerns run their own transport, but it is always admitted that this action is forced upon them by special circumstances, such as the perishable nature of the goods, etc. However, the average user realizes that he needs the haulier's ability to organize transport and that his requirements cover a wide range of problems which the haulier solves for him, Efficiency Should Come First Supposing that an answers to these problems was at hand; managers having the required ;combination of engineering and managerial qualities are difficult to come by, and, if found, it is evident that they would require a salary corn. mensurate with their .abilities.
In the commercial-vehicle distributor, hauliers have at hand an instrument eminently suited to fulfil their requirements. It should be remembered that all these things. require cultivation to give ot their best, and, as the repair industry is so necessary to the existence of the haulier, the latter should; in his own interest, do his share towards encouraging the growth of an efficient motor trade. This can best be implemented by laying less accent on price in their dealings and by insisting on efficiency.
It is very evident that just the bare merchandising of, say, a lorry can be done quite as well by a haulier as by anyone else, and thehaulier who buys purely on price andexpects no further benefit from his association with the seller is paying. but receiving nothing. Such a state of affairs, of course, could not continue, and there are two possible trends. One is group buying. The other is for the haulier to buy from a motor trader, but to becomemore discriminating in his service requirements.
Most buyers bring a high degree of astuteness and logical argument to bear oh the question of price, but it is unusual to meet with even a . superficial investigation into the important subject of what the seller is doing in return for his profit. In fact, the buyer usually takes it for, granted that he is doing nothing, and, therefore, proceeds to make this item of expenditure as small as possible. This attitude between buyer and seller cannot he too strongly condemned. It is short-sighted and unbusinesslike on the part of both haulier and motor trader. The haulier who investigates the seller's capacity for efficient business as keenly as he investigates the product and the price is, indeed, buying wisely. The motor trader whose sole objective is merchandising will inevitably disappear,