CHAPTER XIII

PRICES

1. The Relation of Retail Prices to Wholesale1

So far as I have been able to ascertain, there are no instances of constant and definite relation between wholesale and retail prices; and in most cases, if not always, the fluctuations are greater in wholesale than in retail prices. The fluctuations in wholesale prices have probably increased in frequency with the facilities for rapid carriage and rapidly conveyed intelligence by telegraph and telephone, but have been kept within a narrower range. If all trade were free and all dealers solvent and sufficiently wealthy for the purposes of their trade, fluctuations would be reduced to a minimum, but they would by no means cease, so long as buyers and sellers differed in business ability, mental constitution, and social habit, qualities which enter into and influence prices to a degree greater than might at first be thought possible.

One would expect to find the relation between wholesale and retail prices much nearer uniformity in those articles of commerce which are prime necessaries of life, such as bread, meat, fuel, clothes, than in the case of other articles, because of the universal interest in their cost and the greater publicity of their wholesale prices arising from such interest. In the case of wheat there is probably as near an approach to uniform relation in its wholesale price to the retail price of bread as in the case of any article of general consumption. The variations in this relation are those chiefly which are common to almost every case, such as skill in buying, command of capital, and tricks of trade within very limited range. One reason of this comparative 1 By Robert Newman. Reprinted from the Economic Journal, September, 1897.

uniformity is the small amount of credit given in the retail of bread and the absence of any considerable variety in quality not easily detected. Of course there is variety, but retail price follows the quality pretty closely.

Goods rapidly perishable afford good examples of pretty uniform ratio of wholesale to retail prices. Rapid sale is imperative; supplies are governed largely by conditions of weather, and competition has generally free play. Fruit, table vegetables, eggs, and especially fish, are examples which will occur to every one. Discrepancies between demand and supply will modify the relation of price in this, as in all cases; the perishable character of the articles, too, fixes a sudden limit to the demand, whilst it does not materially or so readily affect the supply,the lowest price does not tempt the purchaser to buy more than he can immediately use.

Some less perishable articles of food, such as bacon, butter, cheese, appear to be subject to constant variations in wholesale price, whilst the retail prices remain steady. In these cases there is no excessive variation either in the demand or the supply over such periods as the goods can be safely kept, at any rate in the case of bacon and cheese; and the fluctuations in wholesale price appear to arise from the partial union or the competition of wholesale dealers.

The relation of wholesale to retail price of butcher's meat is more complex. The whole carcass of ox, sheep, or pig is bought at a price per stone, according to quality and market fluctuations, which are considerable. The retail prices are much steadier, though subject to fluctuations as regards particular joints; for example, in winter most of those inferior parts usually eaten boiled are sold for prices little below those of prime joints, whilst in the summer they sell for little over half the price of prime joints. But the more important variations. in price depend upon the skill of the butcher in gauging the means and disposition of his customers. This is of course not a peculiarity of butchers, but in so prime an article of consumption as meat it is remarkable that so much laxity in fixing the relation of wholesale to retail prices should prevail and should

have been tolerated for generations. It seems quite a rare thing for a butcher to sell his joints at fixed prices even to people paying ready money; and it is, I am told, common to charge various prices to customers taking credit, without so much regard to the safety of the account as to the disposition of the buyer. The variations are widest where the butcher's customers differ most in social status. Where they are mostly wealthy charges can be made high enough to include a good rate of interest on the account; but even in such cases there are variations arising from the disposition of the customers. Where the customers differ much in social status meat of varying quality can be sold, but the same kind of variations are common throughout. In the poorest markets the fierce and more public competition of retailers forces down prices and leaves room only for the trifling variation determined by higgling.

In so common an article as salt, which is not easily perishable and of which there is no natural scarcity, one would look for something like uniformity in price both actual and relative. What variation there is in the wholesale price seems to be the result generally of the action of "rings" of wholesale dealers. In retail price there is much variation, bars of 17 pounds being retailed at prices varying from 31 d. to 6 d. per bar. Small quantities are sold at from about 4 d. to 1 d. per pound. The wholesale price is now 34 s. per ton, or about 5 pounds per penny. Salt is but rarely weighed, and one of the tricks of the trade is to make bars of about 24 pounds for 28-pound bars to assist cutting dealers.

The influence of advertising upon retail prices is very remarkable. The subjective result of advertising is a form of insanity to which perhaps we are all more or less liable, and is seen as certainly in subscriptions to a memorial of Sacheverell in Southwark Cathedral as in the purchase of twopennyworth of pills for 1 8. 1 d.

The master soap makers of London have a trade union and meet periodically to determine uniform rise or fall in prices to retail dealers. The prices among themselves are not uniform, but were determined by competition before the formation of the

union, the variations being maintained by reputation, disposition to give credit, or quality of goods.

The present price at which one of these firms is selling best yellow soap to retailers is £17 per ton net, which works out at 72 farthings per pound, or within a fraction of 5 d. per.3-pound bar. A few linen drapers and grocers are selling this soap at 51 d. per bar, as a bait to catch customers for other articles bearing a profit. Leaving these unscrupulous dealers out of consideration, ordinary retailers are selling at 6 d., 61⁄2 d., 7 d., 71 d., 8 d., and 8 d., per bar. In small quantities it is sold at 2 d., 21 d., 3 d., 31 d., and 4 d., per pound.

Some soap maker, having hit upon the device of cutting up the three pounds into single pounds for the convenience of the retailer, the practice was followed by others, and large quantities were sold at from 2 d. to 3 d. per pound bar. An advertising firm met this by putting the smaller pieces into a wrapper, to give them the respectability lacking in the naked bar or the plebeian pieces. The cover lent itself to the purposes of the advertiser; but the advertiser must, by fair or foul means, get a larger profit than the fair dealer who does not advertise. If the stimulus of monstrous and unscrupulous advertising is only made sufficiently exciting, the advertiser can venture to do things which would excite the envy or perhaps even prick the conscience of the ordinary tradesman. If the public persistently demand at particular quack medicine or a particular maker's soap, it is imperative on the dealer's part to supply the demand. The wrappered bars were made up to resemble the ordinary pound bars, but weighed only 12 ounces, and were not of course called pound bars. The bait took with the public. The dealer was charged a rather higher price for 12-ounce bars than he paid for the pound bars of other makers, but he had to supply the demand. The advertising firm stipulated that the 12-ounce bars were not to be sold for less than 2 d. each, some compensation being offered for the lower profit in the shape of a bonus on the disposal of a minimum quantity in a given time. The private purchaser is thus charged 3 d. per pound or 10 d. per three pounds, for soap procurable at 30 per cent less by ordinary dealing, but

without the stimulus furnished by the advertiser. Other firms followed suit with 12-ounce bars at a lower price, but the advertiser had the start, and all kinds of mania subside slowly.

The practice of stipulating with retail dealers that an article shall be sold at or above a given price is not uncommon with wholesale dealers in the case of commodities commanding a certain sale the effect generally of exorbitant advertising. A particular brand of whisky for example is sold to the retailers at 2 s. 9 d. per bottle, with the covenant that they shall not sell it for less than 3 s. 6 d. per bottle; whilst another brand sold wholesale at the same price but with no such agreement is retailed at prices varying from 2 s. 10 d. to 3 s. 6 d. per bottle. Here the dealer's cupidity is made to assist the whisky drinker's insanity.

8.

The skill of the retailer in hitting the taste of his customers will sometimes govern the price at which he can sell his goods. In the case of the two stimulants, whisky and tea, they are, as sold, mostly blends from different distilleries or of different growths. The blending in both cases is now generally done by the wholesale dealer, but not always. Here the profit includes wages for skill in blending, but the skill may cover a kind of fraud. The dealer sometimes finds that a low-priced article of peculiar flavor and perhaps of deleterious character is relished by a particular set of customers, and that he can charge them a relatively high price for such an article; and unless some neighbor gets to know his trade secret and undersells him, he will continue to benefit by the bad taste and ignorance of his customers.

Sometimes the introduction of articles of foreign make will show excessive variations in their wholesale price until prejudice is overcome and similar articles of home manufacture are supplanted. A dealer in china and glass showed me three quotations for a German-made ale glass, by different agents of different makers, the glasses being very much alike. The price for a glass made in England of the same shape and size but of better quality quality, however, not counting for much in the greater part of the demand for that particular article was 30 8. per gross. The German quotations were respectively 15 8., 12 s., and 10 s. 6 d. per gross.