Marketing to and through the jobber

The major or exclusive use of the manufacturer-to-jobber trade channel is perhaps the most traditional and conventional method of marketing. In many cases, it costs the manufacturer considerably less to use the jobber and his warehousing, dividing, selling, and credit services than to attempt any other method of reaching the ultimate consumer.

However, conditions have been changing rapidly in the last few years. The jobber cannot render the complete marketing service to manufacturers that it was possible for him to give twenty years ago. Improved railroad and highway transportation, the development of the motor bus and motor truck, the increase in the number of local stores, and the tendency toward hand-to-mouth buying resulting in smaller stocks, quicker turnover and lower capital investment have altered the jobber situation. In many cases it is no longer possible to turn over the whole marketing job to the jobber.

Cost of marketing through the jobber

On the score of warehousing, credit, and accounting costs, a major or exclusive use of the jobber trade channel is much less expensive than a similar use of the direct-to-retailer channel. In the case of many product lines, it is probably less expensive than a major reliance upon brokers and manufacturers' representatives or sales agents.

From the standpoint of maintaining a field sales force, direct-to-jobber marketing is less expensive than direct-to-retailer marketing, but more expensive than selling exclusively through special middlemen, such as brokers, manufacturers' representatives or sales agents, and commission men. Selling to the jobber over any extended area, however, necessitates a fairly large field sales force. There has been a tremendous shrinkage in jobbing territories during the past ten years.

Jobbers are now more generally handling local or sectional trade areas. From 1920 to 1926 the number of drug jobbers increased 140 per cent; the jobbers of automotive supplies, 43 per cent; jobbers of boots and shoes, 24 per cent; dry goods jobbers, 17 per cent ; jobbers of electrical supplies, 80 per cent; furniture jobbers, 73 per cent ; grocery jobbers, 37 per cent; hardware jobbers, 199 per cent ; jewellery jobbers, 7 per cent; sporting goods jobbers, 128 per cent. The only important groups to show a decrease were the tobacco jobbers and the confectionery jobbers with percentage decreases of 55 and 62 respectively. A large part of these increases is due to greater jobbing concentration on localized areas.

The jobber is not an intensive salesman

The principal disadvantage of any large degree of reliance upon the jobber is that the jobber does not provide intensive salesmanship for any particular manufacturer's product line. The very nature of the jobber's business causes him to handle a wide variety of products frequently numbering into the tens of thousands. The average drug jobber, for instance, carries between 45,000 and 60,000 different items. In order to perform his function as a purchasing agent for the retailer, he handles competing brands of the same product.

The disadvantages of this situation are especially serious in the case of new products, or new brands of old products. Except in cases of extraordinary profit possibilities per unit of goods sold, the jobber cannot and will not do much intensive pioneering. Even in the case of established products and known brands, actual sales through the jobber depend very largely upon regular and insistent retail demand for those products.

Once a product is established, the jobber can and does keep in regular and frequent contact with the retail outlets the manufacturer may wish to reach, but the sales volume that is secured for any given manufacturer's line will be determined mainly by the pull of retail and ultimate consumer demand.

The manufacturer must assume the task of selling

This situation means that the manufacturer of a branded commodity who uses the jobber as his main outlet must consider the jobber primarily as a combined "warehouseman and banker, storing goods, dividing them, supplying the retailers' wants, extending them credit, and giving advice in merchandising so that they can prosper enough to pay their debts."

Consequently, the manufacturer must assume most of the burden of awakening and developing retail and ultimate consumer demand. In many instances, this fact implies a considerable use of ultimate-consumer advertising and a specialty or missionary field sales force to call upon retailers.

This missionary force usually will open up new retail accounts that will be filled through the jobber, and will carry on campaigns of demonstration and education to hold the old retail accounts. The manufacturer will be obliged to assume also the burden of influencing the jobbers' salesmen by means of prizes, sales manuals, etc., to induce them to give more than mere cursory attention to the particular line. In other words, the manufacturer who sells mainly through the jobber must do more than merely sell the jobbers' purchasing agent. He must assume a large portion of the job of awakening and intensifying retail and ultimate-consumer demand. This job is an expensive undertaking.

The jobber and his private brands

Another important disadvantage frequently met in marketing through the jobber is the jobber's competitive private brands and the emphasis he requires on these brands from his salesmen. There is a growing tendency on the part of jobbers to have goods put up under their own private labels, or even to manufacture some lines themselves and sell them under brand names.

In this way the jobber often becomes a competitor of his own clients, the manufacturers whose goods he distributes. Manufacturers may object to this situation but must put up with this competition if they use the jobber. There would be no problems in the practice if, for example, the wholesale drug salesman would say: "Here are a dozen different brands of face cream, among them our own; take your choice." But he seldom operates in that way.

Usually he has orders to push the private brand and frequently he receives a higher commission when he does so. Nor would there be any problem if the private-brand jobber refused to handle manufacturers' goods competing with his own private brands. But few jobbing businesses are conducted in this way. Usually the jobber believes that he should be supported strongly by the manufacturer as a legitimate and necessary middleman, and still be allowed to compete, as a manufacturer, with the manufacturers whose goods he handles.

To minimize this disadvantage, the manufacturer who sells through the jobber must turn his attention to ultimate-consumer advertising, to retail-trade advertising, and to specialty or missionary salesmanship. He must realize that it is necessary so intensively to cultivate retail and consumer good will on his own account and for his own brand that private brand competition will not cut his market.

Cycle of jobbers' and manufacturers' selling efforts

Unfortunately, selling effort on the part of the manufacturer often intensifies the competition he encounters from the jobbers' private brands. In assuming the burden of advertising and promotion efforts to reach the retailer and ultimate consumer he may cut the jobber's margin of profit. The jobber then probably makes relatively a much higher profit on his own private brands and redoubles his efforts to push these brands.

Most jobbers lay too little stress upon total profits and too much on obtaining a large margin of profit on each unit sold. Both the manufacturer and the jobber make greater profits by cooperating to bring about a high rate of total stock turnover at smaller profit margins than by pushing individual brands exclusively at higher individual margins. The jobber must also be relieved of the fear of losing the business as soon as the manufacturer has widened his markets and is tempted to undertake his own local distribution in order to increase his profits.

Products suitable for jobbing channel

If a manufacturer can make unbranded convenience or shopping goods at lower costs than his competing manufacturers, he usually can employ the jobber channel effectively. In such cases, larger profit margins can be given to the jobber to stimulate his selling efforts.

Likewise, if the manufacturer makes a branded line of convenience or shopping goods that is highly advertised and for which considerable demand exists, the jobber outlet may also be used to good advantage, especially with an attractive margin. Whenever consumer demand is strong and widespread and little sales effort is required, marketing through the jobber is likely to be effective and economical.

However, if the manufacturer is attempting to market a branded product by selling through the jobber, he should turn the warehousing, dividing, and credit functions over to the jobber, but he should assume for himself much of the burden of selling. He should advertise to the consumer and to the retailer and provide missionary or specialty salesmen to aid the jobber in carrying out the selling function.

Generally speaking, new products, new brands of old commodities, and products which require aggressive and educational salesmanship should not be sold mainly or exclusively through this channel of distribution.

Marketing through brokers, manufacturers' representatives, and commission men

Many manufacturers seek their market outlets through special middlemen such as brokers, manufacturers' representatives or sales agents, and commission men. In actual practice there is very little distinction between the services rendered by these different middlemen.

Normally, they occupy a position between the manufacturer and the jobber, although at times they may go around the jobber to sell to the retailer and even to the ultimate consumer. Brokers and commission men are perhaps more important in the marketing of agricultural products and the manufacturers' representatives in the marketing of industrial or technical goods. However, brokers often handle canned goods, flour, hosiery, and notions.

Manufacturers' representatives or sales agents are commonly engaged in the textile industries and also frequently handle grocery specialties and hardware. Commission men often market cottons, woollens, silks, hosiery, and notions.

Disadvantages in using such channels

The cost of using this trade channel is usually small. The manufacturer needs almost no sales force at all. However, in most instances, he will be obliged to assume the task of warehousing and dividing. If a branded article is being manufactured, there is no escape from the necessity of ultimate-consumer trade advertising, and perhaps some missionary sales work among the retailers.

Brokers and commission men often handle competing lines, and even though they do not, they usually handle too wide a variety of lines to be able to give much aggressive salesmanship to any one. Manufacturers' representatives, on the other hand, in return for exclusive territorial privileges, often agree not to handle competing lines and, in addition, confine their efforts to a narrow field of products.

In the marketing of industrial or technical goods, these sales agents are effective because in some cases they sell to and establish connections with the ultimate user. In the sale of consumers' goods, brokers, commission men, and manufacturers' representatives usually serve only to slow up distribution and often to intensify the problem of passing aggressive salesmanship on to the retailer. Another serious disadvantage of using this trade channel is that the manufacturer becomes dependent for his sales upon relatively few middlemen.

At any time they can leave him "flat" and make it necessary for him to find new connections or work out entirely new channels of distribution. If his product line does not have a well-established consumer and retail demand, such a situation may prove to be highly disastrous.

Conditions under which such middlemen may be sold

In general, the broker, manufacturers' representative, or commission man may be employed, to a large extent or entirely, by manufacturers who are small, who know very little about marketing, and who must devote most of their time, energy, and capital to production.

These middlemen may be engaged also for the marketing of unbranded, bulk, and staple consumers' goods. If ultimate general-store retail distribution is desired, the effort to reach large numbers of scattered local jobbers may necessitate the use of this trade channel. However, such conditions are frequently temporary and are often confined to the development period of a particular enterprise.

Combining or mixing trade channels

One of the most definite trends in marketing is toward the use of combined or mixed trade channels. There are certain principal combinations employed and certain governing factors to be followed in adopting such a policy of market distribution. Perhaps the most commonly used combination is that of marketing in part through the jobber and in part through the retailer.

Another grouping utilizes the jobber and the broker, who, perhaps, sells directly to voluntary chains and retail buying organizations. Still another possibility and a more complicated one is marketing in part to and through the jobber, in part to and through retailers, and in part to and through the broker, who, in turn, sells directly to voluntary chains and retail buying organizations and also to certain jobbers. These are only a few of the possible combinations.

The principle of demarcation

A "mixed" trade-channel policy should be governed by one very definite principle of combination. A line of division between different trade channels should be decided upon and adhered to strictly, so that marketing methods may be stabilized. The particular division may be a product division or a territorial division, or both.

The manufacturer who uses several different kinds of middlemen to assist him in reaching the consumer must develop and hold the good will of one and all to obtain maximum effectiveness. Nothing will sacrifice that good will more quickly than fancied injustices growing out of a disorganized trade-channel policy. Middlemen desire, above all else, equal opportunities with other middlemen of the same class, in the same territory, and in the handling of the same product line.

Territorial demarcation

A territorial division between two different trade channels is logically sound and often very effective and economical. For example, consider the manufacturer of a shopping line, who is operating a medium-size business and who discovers an opportunity to build up national distribution. Assume that his plant is located in Connecticut.

This manufacturer may decide to use his own sales force to call directly on the principal department stores in Boston, New York City and Philadelphia. It may be possible that stores in these cities may buy the product in relatively large amounts, and shipments can be made with great convenience directly to them.

Outside of these cities and east of the Mississippi River, this same manufacturer may sell through brokers and manufacturers' representatives or sales agents who, in turn, sell directly to department stores as well as to jobbers. A policy of this type secures a reasonably widespread distribution without involving the maintenance of an unduly large sales force.

The different types of middlemen do not compete with each other in the same general territory, and they are therefore satisfied with the plan. To be sure, this policy may "cut out" the local jobbers in the three eastern cities and may cut down the sales opportunities of certain sectional jobbers accustomed to selling to the Boston, New York and Philadelphia department stores.

But these metropolitan department stores usually buy very little from sectional or local jobbers, so that losses in sales through this source are small and will not lead to serious ill will on the part of the sectional jobbers.

The large department stores in other eastern cities may soon demand direct sales from the manufacturer when they learn that direct sales are being made in Boston, New York and Philadelphia. In this event, some difficulties will be encountered with the jobbers that have secured the initial department store distribution in these cities. However, if the change to direct-to-retailer marketing in these cities is not made until the quantities desired by the department stores are considerable and until the department stores refuse to buy from the jobber, little jobbing ill will may result.

As a general rule most of the jobber's business will come from the small department stores, and the specialty shops that handle shopping goods. If the jobber has succeeded in selling the large department stores at all, the sales he will have made prior to their demand upon the manufacturer for direct dealing will have been relatively small.

Product demarcation

A product division between different trade channels is also possible and often desirable. The manufacturer may market his first-grade, branded and packaged merchandise through the jobber, his first-grade, unbranded and bulk merchandise directly to the department store and the chain, and his off-grade, seconds, unbranded and bulk merchandise through the broker. Both the territorial and the product lines of demarcation may be used at the same time. The most effective and economical plan should be adopted, with careful attention to the problem of maintaining the good will of the middlemen.

Distribution

Whatever channels of marketing may be employed, the question of the number and the kinds of middlemen within a particular class which are to be used must also be decided. The manufacturer may adopt a policy of general distribution, selective distribution, or exclusive distribution.

He may use general distribution through one channel to the consumer, selective distribution through another, and exclusive distribution through a third channel. This program involves the separation of the several channels by definite territorial or product lines of demarcation.

General distribution

General distribution implies the use of every possible middleman of a particular class. For example, the manufacturer who is marketing through jobbers and by this channel alone, may decide to put his product line on the shelves of every existing jobber so far as is possible. The same is true of the manufacturer who sells through the retailer and who feels that his product line should be in every retail outlet in the land. Such a policy of general distribution is costly, yet it is employed successfully and profitably by concerns such as the National Biscuit Company.

The nature of the product line to be marketed influences the adoption of a general distribution policy. Convenience goods necessitate density of distribution. They should be available to large groups of buyers and in almost every retail outlet. Although using such slogans as "I'd walk a mile for a camel," the R. J. Reynolds Tobacco Company does not rely upon slogans alone but endeavours to keep Camels on sale at every tobacco counter in the country. Groceries, drugs, and hardware products are handled similarly. All such products are sold under a policy of general distribution.

To secure general distributing through the jobber involves selling to all types of jobbers—national, sectional, local, general, specialty, wagon jobbers, jobbers that deal in related products but handle sidelines and jobbers that specialize in selling to the general store. General distribution usually implies a mixed policy of distribution as well.

Sales may have to be made directly to chain stores, voluntary chains, and retail buying chains that will not buy through the jobber. The general store, the chain store, the independent neighbourhood specialty store, the department store, the roadside stand, and even the barber shop and the boot-black parlour must be reached in the distribution of the various kinds of convenience goods.

Selective distribution

A policy of selective distribution implies the use of a somewhat limited number of carefully-chosen middlemen of a given class. It does not mean, however, limiting the product line to one dealer in a state, county, or town, or in the company's natural trading areas. In selling through jobbers it may imply the selection of two of the most progressive jobbers in a particular trading area, although' five jobbers may be splitting up the retail clientele in the same territory. In selling directly through retailers, it may involve the selection of the two outstanding department stores in each medium and large-sized city.

Selective distribution merely turns sales efforts away from the less capable middlemen and builds up business with the aid of the more aggressive middlemen.

Shopping goods necessitate selective distribution through department stores, department store chains and neighbourhood specialty stores that handle such goods. Strong and progressive retail outlets located in shopping districts should be chosen. Usually, more than one store in each shopping district may be used with profit. In the smaller cities and towns carefully-selected general stores may also be included as desirable retail outlets.

Specialty goods, if not priced at exceedingly high figures likewise may be sold by means of a policy of selective distribution. Neighbourhood specialty shops of the better grade should be selected, together with several prominent department stores. As the price range of the specialty goods increases, selected down-town specialty shops also may be used to advantage. However, care must be exercised to protect the selected outlet from destructive competition on the same product from too many dealers.

Exclusive distribution

A program of exclusive distribution implies the use of a single middleman within each territory. Sometimes the definition of the exclusive agency arrangement is extended to cover the use of a limited number of representatives in a particular territory. Under this extended definition, joint exclusive agencies are said to exist whenever more than one middleman representative is selected to serve a given territory.

If the arrangement is confined to one middleman in a territory, a single, unlimited, exclusive agency exists. The former type of arrangement, however, is merely an application of selective distribution. True exclusive distribution implies the marking off of definite territories and the award of an exclusive franchise to one dealer in each territory. Of course, the sizes of the exclusive territories may vary.

A manufacturer who sells through the jobber may grant an exclusive agency to each one of a number of sectional jobbers, thereby limiting the retailers in each territory to one source of supply so far as the particular product line is concerned.

The manufacturer who sells directly to the retailer may grant exclusive agencies to one retailer in every city under 100,000, to two retailers in cities over 100,000 and under 500,000, and to three or more retailers in larger cities, being careful in every case to mark out the territories with precision.

Generally speaking, the manufacturer who desires exclusive retail outlets must sell directly to the retailer. He can hardly enforce a policy of exclusive retail distribution by reaching the retailers through the jobber. Once title to goods passes to the jobber, the manufacturer can hardly restrict the jobber's sales to cover only retailers within definite districts.

Advantages and disadvantages of exclusive distribution

From the manufacturers' viewpoint, the policy of exclusive jobbing or retailing distribution has very definite advantages. Usually, it results. in a more active sales effort on the part of the middleman. For example, a jobber who has the exclusive handling of a product in the territory that he serves may push the sale of goods with vigour.

The exclusive retailer, knowing that he alone in his territory will profit from his personal salesmanship and advertising, likewise will exert himself to sell the exclusive line. Exclusive distribution also reduces the manufacturer's operating expenses. Dealers are inclined to handle complete lines, to buy in larger amounts and to demand fewer "fill-in" orders.

Credit risks are minimized, fewer accounts must be carried on the manufacturer's books, and a smaller number of claims and adjustments are necessary. The manufacturer frees himself from price-cutting on his line within particular territories. Local competition on identical goods is absent.

Against these advantages the manufacturer must weigh the disadvantages of limiting his distribution and reducing the number of his outlets. One jobber cannot sell to all retailers, even in his own territory. One retailer in a thickly-populated city will be unable to sell to all the logical purchasers even of a high-priced and exclusive specialty line. Moreover, in ultimate-consumer advertising, the manufacturer pays on the basis of a blanket coverage although exclusive distribution may imply rather spotty distribution.

Conditions favouring exclusive distribution

Specialty goods are best adapted to exclusive retail distribution. High-grade retail outlets with an exclusive atmosphere will allow "such natural buying motives as quality, service, beauty, dependability and distinctiveness to exert their greatest influence upon the consumer."

Specialty goods are purchased without much regard for price and buyers will seek out the stores handling such products wherever they may be located. Single outlets in definite territories are sufficient. An exception is the specialty that possesses a high degree of novelty or fashion. For such goods the buying cycle may be short, so that it is usually wise to attempt to reach the largest number of consumers in the shortest possible time by selling directly to chains, department stores, cooperative buying syndicates and other volume outlets.

Other conditions indicating the desirability of exclusive distribution are: A product line that involves installation and repair service on the part of the selling retailer, a product line necessitating large investments in retail stock, a new product line requiring considerable pioneering work, and a product line, such as candy, that may need quick turnover or rapid sales to maintain a high quality reputation.

The trend of exclusive distribution

Except in outstanding cases where manufacturers unquestionably profit from exclusive distribution, the system of exclusive representation appears to present more advantages for the dealer than for the manufacturer. Since the manufacturer dislikes to limit his distribution, the tendency seems to be somewhat away from exclusive distribution.

The increasing use of national advertising is causing manufacturers to realize more and more the advantages of the widespread distribution that enables readers of advertising to find advertised goods with the least possible difficulty. Dealers are evidencing a growing interest in advertised goods, recognizing that general selling effort behind such lines means maximum demand and maximum sales.

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