Old And Sold Antiques Auction & Marketplace
Antiques Digest Browse Auctions Appraisal Home

Old And Sold Antiques Digest Article

Textile Fibers
Historical Sketch Of The Textiles
Mechanical Devices For Preparation Of Textiles
Cotton Production
Cotton Marketing
Cotton Manufacturing
Geography Of The Cotton Trade
Prices Of Cotton Goods
Classes Of Wool
Production Of Wool
Wool Marketing
Manufacture Of Wool
Geography Of Wool Production
Mohair, Its Nature And Uses
Raw Silk Porduction
Silk Manufacturing
Silk Waste
Imitations Of Silk
Construction, Color, And Finish Of Cloth
Dyeing And Printing
Cloth Finishing
Care Of Textiles
Textile Tests

Distribution And Prices Of Cotton Goods

( Originally Published Early 1900's )

Most of the material in this chapter has been drawn from the Report of the United States Tariff Board of 1912 on the cotton schedule. This Board made a most exhaustive and careful survey of the conditions of the business in this country with respect to cotton and cotton goods. No better treatment of the subject has yet been printed.

Processes preliminary to distribution.-In most cases when cotton cloth leaves a textile mill it is not in the shape in which it ultimately reaches the consumer. Ginghams and other goods made of dyed yarns, as well as cloths which are retailed unbleached, such as certain kinds of duck, sheetings, etc., leave the mill ready to be placed on the market. The great bulk of cotton fabrics, however, reach the consumer either bleached or colored by one or more processes of finishing, such as printing, dyeing, mercerizing, etc. A number of textile mills have their own finishing departments in which the goods are bleached, dyed, or printed, and otherwise finished for the market. In most cases, however, the textile mills do not go beyond the process of weaving, leaving the finishing to be done in special finishing mills.

Most finishing mills finish goods on contract for converters or for textile mills which have their own selling agencies. Only a few large concerns combine under one control the business of finishing, converting, and distributing cotton goods.

The converter.-The converter is an important factor in the cotton goods trade in this country; it is he who takes the initiative and assumes the risk not only of placing finished goods on the market, but frequently also of ordering gray goods. His method of operation is as follows: Having studied the various styles of goods in demand in this and other countries, he selects a number of styles which he thinks are likely to prove popular, and places orders with textile mills for cloths of a given construction in the gray. The order is usually placed after a number of mills have been asked to submit bids on samples furnished them by the converter or have submitted samples made up for the converter according to specifications drawn up by him.

American mills generally require a minimum order of about 30,000 yards, including "tailings" (short lengths) and seconds, which must not exceed ten per cent. of the entire quantity contracted for. A reduction of five per cent. from the contract price is allowed for seconds. The contract usually calls for delivery of goods in installments extending over a period of from three to six months. Payment is made within ten days after each delivery on the contract.

Having placed his order for gray goods, the converter calls for bids from various finishing mills, and enters into an arrangement for the season with those offering the best terms and prices for the different finishes called for. As the goods are turned out by the textile mills, they are stored at the converter's risk either in the mill's warehouse or in the warehouses of the various finishing plants, subject to the converter's orders. From time to time, following the demand of the trade, the converter orders certain quantities of cloth held for his account to be finished. The minimum quantity finished at a time is usually 400 yards for bleached goods, 400 yards for dyed goods, and 7,500 yards for printed cloths. Deliveries are made in from two to six weeks, and payment within thirty days after the delivery of the goods. During the rush season from December to February a longer period for delivery is required, which may extend to eight or ten weeks.

Both the gray goods mill and the finisher thus appear in The role of contractors, assuming no trade risks and doing business practically on a cash basis, while the converter, though not engaged directly in the process of production, assumes the initiative and the risks which in other lines of industry are generally borne by the manufacturer. It should be stated, however, that in staple lines, such as standard gray print cloths, sheetings, lawns, etc., mills frequently produce on their own initiative in order to keep their plants busy, and in such cases may stock up ahead of the "spot" demand.

The jobber.-Whether the goods are placed on the market by the converter or by the mill, they are, as a rule, handled in either case through the jobbing trade. Goods that are used by the cutting-up trade (manufacturers of shirts, shirtwaists, etc.) are, however, generally bought direct from the mill. It is also a growing practice among the large department stores to dispense with the jobber by buying direct from the mill. The jobber maintains a selling force not only at the place where he is doing business, but also by traveling over a large area soliciting trade among the retailers through whom the goods reach the ultimate consumer.

When sales are made.-The manufacturers and converters put out their lines and make their sales to the jobbers beginning in May. Deliveries commence in November, continuing all through the winter and early spring, sometimes extending into April or May of the following year, the jobbers calling for their goods in accordance with the demands made upon them by the retailers. The jobbers make most of their sales to the retailers in September and October, but begin to deliver in January and continue into the summer, the retailers calling for the goods in accordance with their requirements. These terms of delivery do not apply to heavy cotton goods which are used principally in the winter, such as dometts, flannels, quilts, etc. These goods are generally ordered by the jobbers between October and December for delivery in June, and are purchased by retailers from March to May for delivery during August and September, most of the goods being sold to the consumer from August to January. This so-called fall trade is not to be compared in volume with the general spring and summer trade.

Location of finishers and distributors. Location o f converting houses.-The offices and warehouses of the converters and commissionmen dealing in cotton cloths are generally found in and near the cotton-manufacturing centers; the converters and commissionmen also maintain offices, usually in the great trade buying centers, as, for example, New York, Boston, Philadelphia, and Chicago.

Location of jobbing houses.-The jobbing of cotton goods is associated with the dry goods jobbing trade. The largest centers are New York, Chicago, and St. Louis. After these come Philadelphia, Baltimore, Boston, St. Paul, Kansas City, Denver, Atlanta, San_ Francisco, Cincinnati, Cleveland, Memphis, Dallas, Milwaukee, and a great number of other cities.

Retailing.-The retailing of cotton goods takes place in every city and village in the land. The amount sold varies according to the demand of the people. No figures are available showing the amount per capita purchased of each of the principal cotton manufactures, but it is known that over twenty-five pounds of raw cotton per capita are needed every year to supply America's present demand for cotton goods.

Expense of manufacturing, finishing, and distributing.

Manufacturing costs.-The costs of manufacturing cotton fabric include the costs of raw cotton, labor, power, mill expenses, depreciation in value of plant due to wear, repairs, insurance, taxes, and interest on capital invested in the mill. To the total of these expenses the manufacturer seeks to add something as profit.

Converters' expenses.-The converter also has his expenses, not the least of which is the risk which accompanies his undertaking when he puts in an order for patterns or styles that may not prove so popular as he supposes. His price includes the cost of the goods as they come from the manufacturer, plus the total cost of his labor, storage, and other expenses, plus such profit as he may be able to obtain in the markets or from the jobbers to whom he, usually sells. As pointed out already, the converter's expenses may include charges for finishing processes which are true manufacturing costs, and for transportation to and from the finishing mills. The percentage added by the converter to the manufacturer's price will vary, then, according to the amount of work which remains to be done upon the cloth.

Jobbers' expenses.-The usual margin added by the jobber to his purchase is from ten to thirty per cent., most of the business being done on a fifteen to twenty per cent. basis. As will be seen from the table, however, instances are not uncommon of jobbers adding between thirty and forty per cent., while in a few instances the margin is less than ten per cent. These figures cover all the expense of marketing, so that there is here no indication of the net profit.

Costs of retailing.-The retailer, in his turn, adds to the jobber's price anywhere from one-third to two-thirds. As will be seen from the prices quoted in the table, retailers sometimes must be content with a smaller margin, anywhere from ten to twenty per cent., although the margin

occasionally may reach one hundred per cent and more. The large department stores are in a position to buy direct from the mill, and, in most instances, while somewhat reducing the retail price, combine the jobber's profit with their own. Where smaller additions to prices are made, they are usually coincident with frequent turnovers, so the annual profits may be as large as on cloths sold at a higher advance over the jobber's price but handled to a less extent. Of course the margin added by the retailer to the price he pays does not represent the net profit to the retailer, as out of this he must meet his selling expenses, which are greater for each yard of cloth than they are in the wholesale trade. As recently as fifteen years ago, the margin added by the retailers used to be much less, ranging from twenty-five to forty per cent, but the advent of the department store with its modern methods of marketing, expensive advertising, free delivery, and many other recent features, has considerably advanced the cost of retailing. The small retailer, so far as he can, must follow the standard set by the large department stores, and add such of these various features as are within his means.

Vasiation in prices.-Prices on given commodities are not maintained at the same level throughout the season. The retailer gets his regular prices until the month of May, when they begin to be reduced. In June, as the season wears on, they are cut considerably to prevent goods remaining on the shelves when the season is over. July and August constitute the "cleaning up" season, when white goods reach their lowest retail price level in the year.

Custom in retail prices.-The most important factor affecting the prices of cotton goods at every stage of distribution in the American market is the custom of charging "set" prices in the retail trade. The most common retail prices for different kinds of cotton cloths are 5, 7 1/2, 8 1/3, 10, 12 1/2, 15, 19, 25, 29, 35, 39, 59, 65, and 75 cents a yard.

Deviations from these prices seldom occur, save in case of' a special sale. It is only in the last few years that the 29 and 39 cent prices have been introduced. Little of the cotton goods is sold above 50 cents a yard, except in wide goods, such as cloths 40 inches wide and more, heavy upholstery goods, corduroys, velveteens, etc. Corresponding to these retail prices are the prices at which jobbers sell to retailers, and those at which they purchase from the manufacturers.

Range of customary prices.-The following table gives the prices which the retailer and jobber pay for cotton goods selling to the consumer at the customary retail prices. In addition to the average price charged by the jobber there is given his lowest and his highest price to retailers. There are given in the same manner, not only the average price, but also the highest and lowest figures obtained by the converters, or by the manufacturers who sell direct to jobbers.


Retail jobbers' Prices Manufacturers' Prices

Prices Average Low High Average Low High

5 4 3.25 4-5 3.75 2.65 4.1

7.5 5 4-25 6.5 4.75 4-25 6

10 7.5 7-5 8.5 6.25 6.25 7.5

12.5 8.5 8.5 10.5 7-75 6.25 7.5

15 10.5 9-5 11.5 9 8 10.25

19 12.5 12.5 113.5 10.5 10 11.5

25 16.5 15 18.5 13.5 11.5 16

29 19 16.5 22.5 16 14.5 20.4

35 25 19 26.5 20 14.5 22.5

50 35 32.5 37.5 27-5 27.5 33

Retailer's price.-To illustrate the connection between prices at the different stages of distribution, let us take a fabric retailing at 25 cents a yard. The usual price which a retailer will pay for this cloth is 16.5 cents. If he has to encounter considerable competition and if he caters to a discriminating public, he may be obliged to get a higher grade of cloth for which he will have to pay 17.5 cents, and sometimes as much as 18.5 cents. On the other hand, if conditions are favorable to him, he will try to save on his purchase price by getting cloths at a lower price, paying as little as 15 cents and, in exceptional cases, 14.5 cents or less. Whether he pays 2 cents more than the customary 16.5-cent price, or 2 cents less, he will still continue to retail his cloth at the set price of 25 cents. Within certain limitations, therefore, competition between the retailers will take the form not of selling the same cloth at a lower price but of offering better goods at the same set price.

Jobber's Price.-This custom reacts upon the jobbing trade, and, in turn, upon the policy of the producer. The jobber knows that a fabric that can command a 25-cent retail price can be sold by him only within certain price limits. His price must not exceed, as a rule, 17.5 cents, and for exceptionally attractive cloths 18.5 cents, or the retailer will refuse to buy it; and it need not cost below 16.5 cents in ordinary times, since at that price it will yield the retailer his usual rate of profit. If the jobber has to encounter considerable competition, he will handle cloths which he can offer to the retailer at as low as 15 cents per yard. He need not go below that price unless he can make a considerable cut, say to 13.5 cents, in order to enable the retailer to sell at the next lower set price, namely 19 cents a yard.

Producer's price.-With these conditions facing him, the jobber has set limits for the price which he will pay to the producer. This will range from 11.5 to 16 cents as the extreme limits. Within these limits, the price will be affected by the same causes which regulate the jobber's price to the retailer; that is to say, by the quality of the goods and the character of the trade catered to. The prevailing price paid by jobbers for goods of this grade is 13.5 cents.

Effects of the customary prices on production.-The existence of these set prices reacts not only upon the price policy but also upon the character of the production of cotton mills and converters. Knowing the price limits within which sales of commodities of certain grades can be effected, the mills adjust their production to suit these conditions. If a mill produces a cloth which it could sell at a profit for, say, ii cents, it will, under favorable conditions, charge anywhere from 11.5 to 16 cents. The reason for this is that the producer knows that 1 1 cents is too high a price to the jobber to enable the cloth to retail at 19 cents. If there was no set retail price, as is largely the case in foreign countries, the cloth under these conditions would be sold by the mill at 11 cents and retailed at 20 cents. But knowing that the next retail price is 225 cents, the mill realizes that if it sold the cloth at 11 cents, it would merely enable the jobber or the retailer to make an extra profit, since no matter what price the jobber pays within the limits of 11.5 to 16 cents, the article will reach the consumer at 25 cents a yard. The producer will therefore charge a price nearer to 13.5 cents, or anywhere from that to 16 cents, if the cloth is of an especially attractive design meeting with little or no competition.

On the other hand, if the cost of production should rise, the producer cannot increase the price of his fabric beyond the limit set for the 25-cent cloth, as just explained. Should the cost of production change to an extent that would require an increase of price beyond this limit, the producer's price would either have to be increased beyond the limit, with the ultimate increase of the price to the consumer to 29 cents, or, more frequently, to 35 cents; or, if the jobber insisted that the cloth must be retailed at 25 cents, which is more frequently the case, the only alternative would be to lower the quality of the cloth by reducing the number of threads to the inch or by effecting some other change that would not catch the attention of the average consumer. This practice is common, and a typical situation is described in the following extract from an article in the Textile Manufacturer's Journal of November 22, 1910, commenting upon the situation created by the high price of cotton which prevailed at that time:

The sale of good-sized quantities of subcount prints emphasizes a feature in this division of the trade which may develop into sizable proportions. Demand for this character of merchandise seems to have had its inception and to have depended for its continuance upon the apparent need of goods at a price by the jobber. This status applies not only to prints but also to other classes of textiles. The development of such requests, however, has probably been greater in the case of the staple prints than in almost any other line. . . . Therefore, in order to produce business in volume, it was necessary either to reduce the price of existing qualities or to bring out new lines which by reason of their cheaper construction could be sold at cheaper prices. Of course, the former plan could not be pursued in view of the high price for raw cotton and printed cloth, and it was necessary to resort to the expedient of a lower cost of fabric.

What has been said with reference to the twenty-fivecent grades applies likewise to other grades. Each retail price given in the preceding table has corresponding jobber's and producer's prices which are ordinarily paid in the trade, but from which deviations occur both up and down within certain limits, according to the condition of the market. In the case of the retailer, competition at a given pricegrade is confined to quality. In the case of the jobber and the producer, however, there is competition in price for a given grade within certain limits. As soon, however, as the price limit for the grade is reached, competition again takes the form of an adjustment of quality to a given price rather than of fluctuation in price.

Conditions affecting profits.-If a dealer can sell his goods rapidly and does not need to store large quantities for long times, thus not keeping his capital locked up, he is likely to get a pure profit at the margins fixed by the trade. Hence both jobbers and retailers buy their goods with the aim of selling them quickly, "from hand to mouth buying," as it is sometimes called. Goods that can be turned a dozen times a year, yielding a net profit of two cents on the dollar, make a better business than goods yielding four cents with only three or four turnovers per year. Goods that need not be carried in stock at all, those that can be ordered from the manufacturers and then immediately reconsigned to the retail merchant or the consumer, or goods that can be shipped direct from the manufacturer to the retailer or consumer, may be handled with advantage at a very small margin of pure profit on each sale; the gross margin may be less in most instances also. In such cases, expenses for handling, storage damage, risks from fire and other disaster are minimized or entirely eliminated.

The costs of doing business vary according to location, the efficiency of the salespeople and of the system, the service requirements, and the amount of needful handling, storage, etc. Very efficient systems cut the expense down to a point that leaves a good profit margin, while other stores are not able to make any pure profit at all. Efficient salesmanship and economical system and service are the primary conditions of success in this matter.

The losses and leaks attendant upon a business have never been entirely eliminated; their amount, however, depends largely upon the system of management in the store. It may not be desirable to try to get rid of all such leaks, since the cost of such extra vigilance would perhaps more than counterbalance the losses prevented. Nevertheless, the main difference between a profit-making store and one that is running behind is often in the attention to such little details as breakage, spoilage, leakage, and slovenliness.

In manufacturing there are differences in the costs of production which seem almost unbelievable to outsiders. Differences in location, in power, labor, raw material, and machinery costs, in management, in secret processes, in the use of patented machines, in advertising and selling ability, and in many other respects explain why some manufacturers go into bankruptcy, while others, selling in the open market at the same prices, become opulent.

Bookmark and Share