CO129-440 - Others & Individuals - 1916 — Page 88

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this connection were the cigarette and kerosene oil companies, but their example has been followed by manufacturers of alkalies, household soap, aniline dyes, candles, sewing machines, patent medicines, condensed milk, refined sugar, Japanese sheetings and drills, and Russian cotton prints, while certain firms in the Treaty Ports are doing a considerable trade in drugs and chemical products, and in one case quite a promising general mail order business with native clients by means of the efficient parcel post, cash on delivery system of the Chinese Post Office. This method of direct distribution, which at first sight presents enormous difficulties, evolved from the realisation that the Chinese merchant does not distribute foreign imports as widely and efficiently if left to his own devices as he does when working under a modern system and with constant and stimulating foreign supervision. The systems vary in accordance with the needs of the various districts and the articles handled, but the most elaborate method is to divide China into territories under foreign managers, and these territories are subdivided into districts with a European in charge. Native agents are appointed in each city or large village, who are always secured by a good shop guarantee, and frequently make a deposit with the company, which allows interest thereon. Goods are consigned up to the value of the deposit and/or guarantee and are stored for account of the company pending their sale. Prices are fixed, and the agents work on a stipulated commission. Returns of sales and unsold stocks are made weekly, and these are verified by foreign inspectors, who travel constantly, appoint new agents, investigate complaints, and make suggestions as to future possibilities of extension. Remittances are made periodically to the district headquarters, all losses or profits due to fluctuations in exchange being for account of the agent. The difficulties of inland taxation are overcome either by the taking out of transit passes, or else by the dealers making their own arrangements with the authorities, and in this way the goods are distributed into almost every village in China up to the borders of Tibet, under the direct supervision of the firm which manufactured them in Europe. The losses

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drills and 20 per cent. of Turkey Red cambrics are credited to Japan, this trade having been built up largely on the same lines.

If it is possible for our competitors to build up a satisfactory and increasing business in such complex articles as cotton prints, surely the time has arrived for the great British houses in China carefully to take stock of the position and earnestly enquire whether the present methods of selling piece goods to a closed circle of native dealers in Shanghai are adequate in order to cope with existing conditions and the general trend of events. Organisations for the direct distribution up-country have many risks and difficulties to contend with, such as internal taxation, difficulty of communication, currency and exchange questions, and the increasing difficulty of securing capable European salesmen with a knowledge of handling Chinese. They have, however, the following great advantages

(1) There are the economies to be secured from the fact that the goods remain, until sold to the consumer, in the hands of the distributing syndicate, thus elimi- nating the Shanghai native brokers' and merchants' commissions, and effecting an enormous saving in interest, and inasmuch as a Foreign Syndicate need not in normal times charge more than five per cent. per annum, the native interest under the present system is from one to two per cent. per month. Carrying charges, such as storage and fire insurance, are also much lower in the interior than at the ports.

(2) With an organisation extended all over the country any effort of the Chinese to combine and defer purchasing until the importer brings down his price to an urre- munerative level is practically impossible, as transfers could be effected; and, besides, the Syndicate could afford to offer prices very much below those of goods imported under the present system. This removes the evils arising from a limited market such as Shanghai, where the Chinese constantly exercise their powers of combination against the foreign importer.

(3) There is the incalculable advantage of having a perfect knowledge of the special wants of and quantities

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