Major Household Appliances: A Lesson in Distribution

Perhaps the classic reference on the institutional structure of marketing is Duddy Edward W. Revzan David A. , Marketing: An Institutional Approach (2d ed.; New York: McGraw-Hill Book Co., Inc., 1953), esp. Part VI.

Of course this is only one of many ways of looking at middlemen. From the standpoint of consumers, or of middlemen themselves, their function and the structural configuration best able to accomplish it may vary. See Alderson Wroe , Marketing Behavior and Executive Action (Homewood, Ill.: Richard D. Irwin, Inc., 1957).

Obviously the manufacturer need not use all or any part of the existing structure of distribution in order to reach consumers. For a concise treatment of this decision, see Howard John A. , Marketing Management: Analysis and Planning (Rev. ed.; Homewood, Ill.: Richard D. Irwin, Inc., 1963), Chaps. 8 and 11.

Converse Paul D. Huegy Harvey W. Mitchell Robert V. , Elements of Marketing (7th ed.; Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1965), pp. 534–535.

This question, one way or another, is treated under the “cost-of-marketing” studies. One of the more comprehensive such studies is Cox Reavis , with Goodman Charles S. Fichandler Thomas C. , Distribution in a High-Level Economy (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1965).

In the end, middlemen's margins are determined by some combination of influence from producers and middlemen. For a comprehensive treatment of the many possible influences at play, see Vaile Roland S. Grether E. T. Cox Reavis , Marketing in the American Economy (New York: The Ronald Press Co., 1952), Chaps. 20, 21, and 22.

This issue was most clearly brought to light with the advent of the discount house which, presumably, made its inroads under the umbrella of the artificially high margins and prices of traditional retailers. For an articulate discussion of this point, see Gilchrist Franklin W. , “The Discount House and Channels of Distribution,” Frontiers in Marketing Thought, ed., Rewolt Stewart H. (Bloomington, Ind.: Indiana University Press, 1955), pp. 4. 5–59.

This is not to imply that margins are the only (and, in some cases, even the most important) consideration in channel relations. It is simply to assert that, given the economic character of marketing enterprises, their functioning is likely to be far more responsive to economic stimuli than to other types.

Ridgeway Valentine F. , “Administration of Manufacturer-Dealer Systems,” Administrative Science Quarterly, I:4 (March 1957), 464–483.

Wittreich Warren J. , “Misunderstanding the Retailer,” Harvard Business Review, XL:3 (May-June 1962), 147 ff.

Gilchrist , op. cit. Also see “Discount Houses Big, National and Maybe a Retail Revolution.” Tide, May 8, 1954, pp. 18–25; June 5, 1954, pp. 26–27.

For example, see “The Builder's the Hot Market,” Business Week, Feb. 4, 1961, p. 82.

The dimensions of the price reductions are reported in Jung Allen F. , “Price Variations Among Discount Houses and Other Retailers,” Journal of Retailing, Winter 1960–61, pp. 201–206, and “Who Pays List Price,” Fortune, June 1952, pp. 104 ff.

Bliss Perry , “Preretailing and Consumer Buying Patterns over Time,” Journal of Marketing, XXI:1 (July 1956), 83–85.

“Appliance Dealers Protest to FTC Over ‘Low Price’ Sales to Builders,” Business Week, Sept. 22, 1956, p. 56; “Dealers Find a New Enemy,” Business Week, Jan. 28, 1956, p. 61; Westervelt Richard E. , “The Discount House Problem,” Journal of Retailing, Summer 1954, pp. 69 ff.

For further insights into the distribution of appliances, see Cascino Anthony E. , “Household Washing Machines,” Marketing Channels, ed. Clewett Richard M. (Homewood, Ill.: Richard D. Irwin, Inc., 1954), pp. 171–194; also, Weimer Harvey E. , “Some Changing Patterns of Product Design and Distribution in the Major Appliance Industry,” Marketing's Role in Scientific Management, ed. Clewett Robert L. (Chicago: American Marketing Association, 1957), pp. 540–547.

For a summary statement of the nature, compilation, and associated deficiencies of this measure, see “The Wholesale Price Index,” U.S. Cong., Joint Economic Committee, Government Price Statistics, Hearings … January 24, 1961 (Washington, D.C.: U.S. Government Printing Office, 1961), pp. 61–71.

There may be some question as regards the relevance of these aggregate indices to some specific kinds of middlemen. In effect, that is, to what kinds of middlemen does this “average” apply? Since price indices are inherently macro measures, this is a difficult question. It may be approached better perhaps in terms of what kinds of middlemen it does not apply to. One obvious exclusion is those selling “private” or “distributors'” brands, such as Sears, Roebuck and Company, Montgomery Ward, and Western Auto Stores. The margins attendant to these brands—their levels and methods of determination—typically differ from the case of producers' brands. So also do the channel relations. Thus, although the notion of margin employed here is incomplete (to the extent that it clouds the distributors' brands-producers' brands issue), the error is tolerable, for the intent of the analysis is to gauge margin changes that are otherwise difficult to measure—namely, those of the independent, traditional middleman. Where distributors' brands are involved so also is control over distribution, which implies information about realized margins. In this case, there is no need for a technique such as proposed in this paper.

The extent to which the CPI to WPI ratios reflecting margin changes may be adulterated (i.e., may overstate a margin squeeze) is suggested by the fact that, in some appliance categories (e.g., automatic washers, gas dryers, and freezers), distributors' brand sales approximate some 20 per cent of annual industry sales. See Look National Appliance Survey, Volume One—Major Household Appliances (New York: Cowles Magazine and Broadcasting, Inc., 1961). Although precise measures are not available, it is generally held that the percentage of industry sales accounted for by distributors brands exhibited small to moderate increases during the period, 1947–1960.

For some candid observations on this point, see “The Consumer Price Index,” Government Price Statistics, op. cit., pp. 51–59.

Comparable data not available after 1960.

Hart B. I. , “Significance Levels for the Ratio of the Mean Square Successive Difference to the Variance,” Annals of Mathematical Statistics, XII:4 (1942), 446.

For a treatment of resale price maintenance which takes a comparatively broad perspective, see Griffin Clare E. , “An Economist's View of ‘Fair Trade’,” Michigan Business Review, X:5 (Nov. 1958), 21–26.