2. The Distribution of Products
There are four general ways in which a cotton mill may dispose of its products: a. by selling direct, b. through a selling house, c. through a broker, d. through a converter.
a.
Selling Direct
A few very large mills maintain selling offices of their own in the large centers of distribution through which they market their goods direct to the jobbers and retailers. In most cases where direct selling is done, however, the goods are sold in the gray by the mill treasurer at the mill. This practice is common with those mills which make staple gray goods and which, when not sold ahead, are able to manufacture for stock against spot sales. A few Southern yarn mills also sell direct.
b.
Growth of the Selling House
The relation between the manufacturer and commercial banker or commission house is as old as the industry itself. Slater’s first mill in 1790 was financed by Almy & Brown of Boston, who undertook to market his goods and also to furnish him the credit he needed to buy cotton and supplies. In the early days the cloth was sold at auction by the selling house and the proceeds less commission credited to the mill. Later on the factors developed extensive selling organizations throughout the country by means of which they were able to market the products of a good many mills.
“Fancies”
The distribution of fancy goods requires a great deal of skill. The Fall and Spring lines to be manufactured by the mills are sent out to the trade by the selling house about six months ahead, and orders are taken before manufacture begins so as to be sure that the line will “take”. Of course there is always the danger of cancellations even then, for which the selling house must bear most of the responsibility.
Finances
In addition to distributing the goods and guaranteeing the accounts, the commission house renders financial assistance either by advancing on the mill’s product, or by indorsing its notes. In return it receives the sole agency for the mill’s products, interest on the money advanced and a commission. The latter varies with the amount of financial assistance required by the mill and the desirability of the risk.
As a general rule the Southern mills, because of their distance from the chief markets in New York, Boston, and Philadelphia, are more dependent upon their selling agents than the New England manufacturers.
In New England a great number of manufacturers are amply able to finance themselves, and could if necessary sell their own products. Stock ownership, however, and old ties have frequently kept up the relationship with the selling houses after its usefulness was partly outworn. Nevertheless in the selling of fancy goods, even where the mill is supplied with plenty of capital, the commission house fulfills a very necessary function.
c.
The Broker
Gray goods are very often sold either by a mill or a selling house through the medium of a cloth broker. The latter is strictly a middle man in that he does nothing but bring together prospective purchaser and seller. In the event of sale he gets a commission of ½%, which he often more than earns by his efforts. These brokers are in touch with all the mills, converters, and consumers.
d.
Merchant Converters
While there are some independent finishing establishments, most of them operate on a commission basis for merchant converters. The latter are a class of merchants of comparatively recent origin, having appeared first about 1880, since which time they have practically taken control of the finishing industry. They buy gray goods either direct from the mill, or through a broker or selling house, and have them finished according to whatever they think the requirements of the market are. Inasmuch as they pay on short credit and carry the goods during conversion, frequently selling on several months’ credit to jobbers and retailers, they perform an important part of the financing of the cloth. Their recent rapid rise has been due largely to the growing demand for a multiplicity of seasonal designs.
Some large cutters-up, and a few big mail-order houses do their own finishing or have it done. As a rule they buy from converters and sell to the jobber, retailer, or consumer.
We have now traced the cotton from the seed through the various processes of manufacture and finishing, and followed the finished goods through the channels of distribution to the consumer. It remains only for us to compare briefly the position of the United States with that of other countries, and the position of the various sections within the United States.