AGENT, MANUFACTURER AND USER.
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The Difficulty of Arriving at Standard Working Terms.
THERE WAS A TIME when any discussion of the relations between agents and manufacturers in respect of commercial motor vehicles had to be focussed mainly upon the question of whether the manufacturer was prepared to do business through the agent and whether the agent was prepared to go sufficiently seriously into the business to be of any real help to the manufacturer.
The days for discussion on this basis are passed. On the one side we have the manufacturer not only willing to organize his sales through the agent, but . actually anxious to do so. On the other side, we have the agent fully prepared to equip his establishment so as to be able not merely to sell vehicles but to give good service to the user after the sale has been effected.
From the point of view of the user, it is obviously desirable that the manufacturer and the agent siereild come to terms, provided always that this does not mean that the user is to pay a, fancy price out of which two distinct people are going to make two very unnecessarily substantial profits. In this connection it must be remembered that, if the manufacturer does business direct with the user, the price must, as a matter of fact, allow for two profits or, at least, for one profit and for the balancing of a totally separate expenditure. The manufacturer must take his profit upon the products of his works, but we cannot merely take the cost of production, add a reasonable percentage for profit and call the resulting figure the list price of the vehicle. Before we arrive at that price we must add the cost of selling. This cost must be defrayed either by the manufacturer or by his agent. So long as the manufacturer is working on quite a small scale, it is probably more economical for him to organize the sales direct) but directly his scale of manufacture becomes considerable, the organization of his sales department, if he tries to do without the agent, is bound to become complex. In the end he is driven to establish local depots, and to staff these depots with men whose sole business is the sale of his products. Even if the depots are only run so as to be selfsupporting ahd not so as to show a profit, the chances are that the amount that must be charged against each vehicle for selling expenses is quite as great as the discount which would have to be allowed to an agent, because the agent's business need not be entirely limited to dealing with the products of one manufacturer, and, therefore, it is less difficult for him to organize so that the whole of his staff is kept occupied to full advantage. Moreover, if the manufacturer's selling organization falls anywhere short of the provision of a large number of depots, he cannot give the same direct service to users in all parts of the country as can be offered by a system of thoroughly well-equipped agents, each with his repair shop, spare parts store, and staff of mechanics. :
Our own view is that the selling price of a vehicle to the general public will be quite well regulated by competition, both as between British manufacturers individually and as between the British industry and its foreign competitors. Nobody can afford to take an exorbitant profit or to permit his agents to do so, because, in the process, he will put his vehicle up to such a figure as to kill the market for it or, rather, to divert that market to other firms.
Thus, if we Can regard the interests of users in the lump, there is very little doubt+ but that the user would be best advised to encourage the formation of a sound general working agreement between manufacturers and agents, involving the acceptance of terms on some uniform basis throughout the industry. Put ting the matter rather differently, if all manufacturers could agree with all agents that the discount allowed to the agent offering repairing and service facilities will be a certain fixed percentage, this agreement would be of advantage to the user, who would thus be safeguarded against paying. a price which would, in reality, allow a high profit to the middleman. We can safely assume that, if a general uniform agreement were reached, the terms contained therein would be strictlymoderate. They would merely provide proper payment for actual work done by the retailer and what may be called a living wage in return for hisOnterprise and the investment of his capital. Thus, the whole problem would be simple if the three interests concerned could each one be considered in the lump. Therefore we must next decide whether this can be done.
In the case of themanufacturer there should be no real difficulty, unless it might -be that very small or quite young firms might have a tendency to offer extra big discounts to agents in order to get in against better-known makes of vehicle. If, however, all considerable manufacturerstof high reputation were to enter into an agreement among themselves to control strictly the discounts offered either to the agent or to the user, the abstention of the small fry would not matter very Much. Next, as to the agent. Evidently, be cannot be considered in the lump, because there are agents of all classes, from the man who merely catches a stray order and places it, up to the man who runs a thoroughly 'well-equipped service establishment. As a preliminary to a general agreement, it would therefore be necessary to .classify agents under a certain number of categories. The biggest discount would go to the district agent entering into a firm contract to take a certain number of vehicles annually, and, in practice, obliged to give a. fail) part of his discount to sub-agents in the various small centres Within his territory. A smaller discount would suffice to the agent doing the whole of his business without the assistance of sub-agents. Next -we have the concern that is undoubtedly a part of the motor trade and possesses premises or offices as such; but which cannot offer really .good repair and service facilities. The agent of this class is of distinctly less value to the manufacturer and to the-public and, therefore deserves only a lower remuneration. Finally, we have the man who merely picks up stray orders and then tries to make a, little profit by passing them on.
We have, therefore, reached this point. All manufacturers should agree together as to the terms to be given to agents. These terms should be scheduled, and the schedule should take into account the ability of the agent to do Something more than merely effect an immediate sale.
-.The real difficulty is the small maker for whose goods there is not so firm a demand; consequently he is not always in a position to dictate terms.
They should also take into account the conditions under which some agents work, rendering it necessary for them to employ sub-agents.
Finally, we come to the user, and it is really at this point that we come up to our greatest difficulties. H all users were content to be treated alike with complete impartiality, & thoroughly sound agreement between manufacturers and retailers would be a comparatively simple matter. Unfortunately, however, that is not the view that all users can be readily induced to hold. Some consider that, for one reason or another, they ought to be given ,better terms than -the remainder. In the pastl this contention has been admitted to be sound inasmuch as manufacturers have sometimes given way on this point. For
instance, railway companies, municipalities Government Departments, and so on, have been quoted terms lower than those quoted to the ordinary buyer on a small scale. The large buyer also has been given special terms, and, when once he has been given them, it is very difficult to refuse to give them again. If we could get an agreement of the principle that a vehicle represents a certain value, which is in no way affected by the status of the purchaser, then we could readily agree that no discount should ever be offered to any direct buyer. This would not mean that the average direct buyer would be (barged any more for the vehicle, but merely that the vehicle would be listed at a lower price than is possible if the direct buyer is to be allowed .a rebate or discount.
Obviously, if no discount were ever allowed to the direct buyer, the discount allowed to agents would reflect this fact. If the inanufatcturer is prepared to give the actual user, say, 10 per cent., and another 10 per cent, is necessary to make the agent's business a sound commercial one, then the agent must be offered 20 per cent, so that he can ;quote the user the same price as the manufacturer would quote him if the user were to send a direct inquiry. If, on the other hand, no vehicle were ever sold to a member of the public at anything below its list price, something like 10 per cent, discount would almost certainly satisfy the agent.
Thus, of the three parties concerned, two—the manufacturer and the agent—are willing and able to come to an agreement, if only the third, that is to say, the user, will not stand in the way of their doing so. Our view is that it is Most distinctly in the interests of the user that the whole trade in industrial motor vehicles should be put on to a sound business basis. So long as no such basis exists some few users may, by clever tactics, secure discounts to which they are not really entitled. Some few big users may be able to get these discounts offered them without any real effort on their own part. If this occurs, it does not mean that the manufacturer is really giving anything away, but rather that one user is 'helping to pay another user's bill. If users could agree to accept the principle that the makers will list what are really the lowest prices they can profitably take, and that no user shall, on any account, be given any discount. whatever, then users would at least be able to feel secure that every one of them is getting the lowest possible price and nobody is doing better than the other fellow. They would also feel that they weie enabling manufacturers to ()erne to a uniform arrangement with agents, such . that the existence of the agent is properly recognized in proportion as his premises are properly equipped and staffed. Thus, if users wish to feel that they are really getting their goods at the proper market price, and if they wish to help to create a complete system of service depots available to assist them; the right course of action would be to take the initiative and deliberately to suggest that discounts to direct buyers shall be abolished and list prices amended accordingly. If the difficulty of terms to the user could be overcome, either on the initiative of the user or by the Users Association entering into an agreement at the request of manufacturers and agents, then we fully believe we should get the whole trade on to a thoroughly sound and dignified footing. There would remain one difficulty to be overcome, but we do not consider this difficulty to be insuperable. It is that, where the user is able to offer a second-hand machine in part payment for a new one, a, manufacturer or agent might think that,' he had a better chance of getting the business if he quoted a ridiculously high price for the second-hand vehicle. In effect, this would amount to price-cutting by the trade, which would be illegitimate under the trade's own agreement, but is difficult to detect: It would be up to the M.T.A. assisted bY the manufacturers, to discourage any such practice by taking extremely vigorous action in respect of any case at all flagrant in character.
Finally, our impression is that agents and manufacturers are striving to come together. Certain classes of users are, though they psobably do not realize it, standing in the way of the trade being 'put on a really good commercial basis. Either the users should act of their own accord, or the manufacturers and agents together should put the facts of the case before the users and ask them, or the bulk of them, to consent to collaborate in their own ultimate interest.
7scris.