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Chapter XI.-IMPORTATION OF STAPLES
It is difficult to draw sharp lines of distinction between the different types of business organizations engaged in importing staple goods into the United States. In general, sales of staples to the American market are handled in the following ways:
1. Through import brokers.
4. By direct purchase by the manufacturer from the foreign producer or exporter.
The theoretical functions of these different import methods can be clearly defined, but in the importation of most staple goods one finds the trade using all of these channels, including variations of them. In practice the activities of the import merchant and the import broker frequently overlap. Staples may be sold by consignment, by job lots, by sample, by particular designation or order, or by a combination of these methods. The sales order may be communicated by cable or wire, by letter, by personal representatives of the seller, or by an agent representing the seller.
THE IMPORT BROKER
It is in the importation of staple goods that the import broker assumes an important place. This naturally follows from the very nature of the goods themselves, and is especially true with reference to foodstuffs. Most staples are subject to quite definite grading and standardization so that it is not necessary for the purchaser to see the product in order to know what he is buying. No. 4 Santos coffee or 96-degree sugar, for example, may be determined with accuracy to be exactly as represented, and consequently may be traded in freely and with safety to the purchaser.
In many instances the import broker is really not an importer in the final analysis, but is merely so called because he is handling imported goods. Thus, the broker may represent the import merchant and have as his customers other import merchants, manufacturers, wholesalers or jobbers, department and chain stores, and others. From this type of import broker who is not actually an importer, and who does not handle the goods or assume any financial responsibility, variations of his functions run the entire gamut of import activities up to a point where he actually imports the goods and maintains stocks. Here he assumes the functions of the import merchant though he may combine them with his brokerage activities. He may even maintain branch houses in the producing
countries, in some instances, to enable him to keep in close touch with the producing market.
OUTLETS AND CUSTOMERS
The principals and customers of the import broker are as numerous as are the different types of business houses interested in the imported commodity. He may perform a selling service for the foreign producer or exporter or, as a sales agent in this country, find the import merchant as his customer.
EXCLUSIVE IMPORT REPRESENTATION Perhaps, the larger and more highly organized brokers will contact all sources, but many brokers confine their major activities to contacts in one market. In many cases brokers act as exclusive agents for foreign exporters, engaging to sell the entire output of the merchant. Under such an arrangement the commission on any sales made directly by the merchant are included in the broker's commission. Such an arrangement is advantageous provided the merchant handles a more or less standard line of merchandise, and provided the broker has a steady market for this product. Often brokers have exclusive agencies in each of several important markets in a particular commodity. For example, a brokerage company handling wool may be exclusive agents for one merchant in each of the primary markets of Australia, Argentina, Uruguay, South Africa, London, or New Zealand. Because of the difficulty of enforcing legal contracts in foreign countries, exclusive agency agreements are usually gentlemen's agreements, and in many cases are mutually exclusive; that is, the brokerage firm agrees to fill orders for New Zealand wool from the New Zealand merchant with whom it has the exclusive agency agreement and the New Zealand firm in turn agrees to market all wool in the United States only through the brokerage house with which it has the exclusive agency agreement.
ADVANTAGES AND DISADVANTAGES OF EXCLUSIVE AGENCY A broker who is an exclusive agent cannot purchase at the lowest quotation from other sources and would be limited to one merchant's stock. While exclusive brokers may not compete in the market, other brokers must compete with each other in order to obtain desirable lots of merchandise. Brokers with exclusive agencies often obtain bargains that other brokers could not get. The agency arrangement is built up because of previous satisfactory relations between broker and client, and confidence between the two naturally develops to a great extent.
This confidence encourages consignment shipments, which, because of the mutual confidence and understanding between the two parties, usually prove satisfactory to the exporter. Consignment shipments of perishable goods are very frequent. Consignments of other goods are usually made in anticipation of certain favorable price trends and are made usually at the advice of the foreign shipper's broker. Consignments initiated by the shipper often indicate that the shipper feels that the cost of storage will not be compensated by any extra profit, or they may indicate that the shipper wishes to dispose of
his merchandise without delay in order to turn over his stock and get his money back into circulation. Consignment shipments are handled principally by brokers because they are ordinarily in a better position to effect a quick sale in a wide market. The survival of a broker depends upon the completeness and alertness with which he searches all possible outlets and customers and upon the honesty and efficiency with which he serves his clientele.
Selling through brokers by consignment is considered a fairly effective means of disposing of merchandise when immediate buyers are not available. In order to get the best possible prices for their clientele, brokers may find it desirable to advise a reconsignment to other countries. Prices of staples in a fluctuating market often fall below shipper's quotations and below the prevailing price in foreign markets while the goods are in transit. A broker who is alert to conditions in markets other than those in his own country will often find a reconsignment profitable and by obtaining the best possible price for the shipment the broker will thus merit the continued patronage of his customer.
Certain types of goods not suited to very definite standardization as shipped by the foreign producers or those in which there may be a scarcity, are best bought and sold by the auction method. Imported commodities such as grapes, furs, hides and skins, tobacco, tea, rubber, wool, and other raw materials and foodstuffs are frequently sold by auction—in some cases almost entirely by auction. Also, certain of these commodities are so bought and sold entirely at specific foreign places. Obviously, brokers dealing in any of these commodities must either have connections with buyers in these foreign places or maintain their own personal representatives in those markets to bid on the commodities they want. Perishable foodstuffs and certain raw materials are commonly sold by auction becauso of the inherent nature of the goods. Thus, the value of furs is determined by close inspection of each unit, and the buyers bid whatever they think the fur is worth. The actual value is entirely a matter of individual judgment. This is true of raw tobacco, tea, grapes, furs, hides and skins, and other commodities that do not make up a homogeneous mass and are not adaptable to minute standardization.
Goods of this nature are usually bought directly by manufacturer or import merchant whenever particular quality is desired. If it is impractical for the manufacturer, wholesaler, jobber, or import merchant to have his own representative, the alternative is to buy through brokers.
PROMOTION WORK OF IMPORT BROKERS
Finally, the broker can further his contact in many ways, the most important of which may be listed as follows:
1. Through personal representatives in various marketing centers. 2. Advertising. 3. Personal sales letters.