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The Costs Of Facilitating Agencies

( Originally Published 1939 )

DISTRIBUTION COSTS incurred by retailers, intermediary dealers and manufacturers include, in addition to the expenses of operating their own establishments, charges for a host of supplementary services. Although the cost of services provided by such agencies as banks, railroads, storage warehouses and advertising agencies, as well as taxes paid by distributors, were included in the total operating expenses of distributors as discussed in preceding chapters, it may be of interest to consider some of these costs separately and in greater detail.

By far the largest share of the cost of operating the nation's transportation facilities is chargeable to the distribution of commodities. Financing the storage, movement and sale of goods accounts for a large part of the activity of commercial banks and of hundreds of specialized organizations such as credit reporting and collection agencies and instalment finance companies. A part of government costs arising from the activities of regulatory and re-search agencies serving distributors also might properly be charged to distribution, although these costs are met out of general tax revenues as well as proceeds of taxes on distributors.

In recent decades especially, the growing emphasis on demand creation and "selling the consumer" has brought new agencies and functions into existence. In the case of many products advertising has come to be regarded as the most important method of selling rather than as a mere supplement to other sales effort. Specialized advertising and market research agencies, as well as newspapers, magazines, radio broadcasting systems, and other kinds of advertising media, have therefore become important parts of the whole system of distribution. In the following sections the costs of transportation and storage and advertising and credit used in distribution will be briefly reviewed.

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