World’s Work. 21: 14248-51. April, 1911.
Parcels Post and the Retailer.
Fremont Rider.
Of all the arguments against a parcels post by far the most venerable is that of financial disaster; and even April 1911 finds many an opponent of a parcels post uttering gloomy prophecies of the enormous losses which the system would entail, losses which would have to be met, as he takes pains to point out, by an already bankrupt post office department.
On the other hand, the men best acquainted both with the problem of transportation and its cost and with the parcels post as it has been worked out abroad, go so far as to say, that so far from being an expense, a parcels post would probably be the most profitable business venture into which the United States government ever embarked. In fact a private parcels post, in certain of the metropolitan districts at least, would probably be started by private capital were it not for one thing—the growing agitation for a government parcels post which would render valueless the plant of the private company.
The plan of this private parcels post, in direct competition with the present express companies is no chimera.... Every thinking person marvels at the economic waste in the present day methods of city delivery. By your house in Yonkers, for instance, if you happen to live in Yonkers, there now rattles, once or twice daily, the wagons of your butcher, your baker, your laundryman, your milkman, and your grocer, as well as those of the various butchers, bakers, laundrymen, milkmen, and grocerymen of your neighbors, all covering in staggeringly wasteful duplication, the same route. Besides them, up from the city come, in further duplication and longer distance waste, the wagons of the nine different New York department stores that deliver in Yonkers, the wagons of the four local express companies that divide the “independent” business, and those of the two general express companies which do the high-priced long distance business. Yet, when you think of it, one wagon could come to you three times a day and do the work of all these people, more effectively and at one-tenth of the present total expense.
You buy a dollar’s worth of groceries of John Jones, the grocer. The whole package, bread, milk, eggs, butter, and vegetables, weighs, perhaps, ten pounds. A company doing all the delivery business of a town, centralized, complete, without waste labor or waste mileage, stopping its motor wagons two or three times a day at every house on every street, can make money delivering that ten pounds for six cents. It now costs Jones, sending out his boy and wagon to a dozen odd houses scattered all over town, two or three times that amount.
But such a private parcels post will not be undertaken because of the fear that the government may enter the field. Yet so far at least, although in the post office the government has most of the plant necessary to carry on such a business, it cannot be persuaded to go into it.
The most exasperating reason for this inactivity is the legislative assumption that our present “parcels post” approaches perfection. The fact is, of course, that the United States has no parcels post in the sense in which the term is in accepted international use. The present fourth class rate is but little used in this country simply because it is prohibitively high. To send ten pounds of merchandise from New York to Philadelphia involves, not merely the indefensible nuisance of separating it for mail transportation into three packages, but a charge of $1.60. Naturally, instead, the merchandise is sent in one parcel by express for fifty cents. As the work done by the express company, it is needless to note, gives them a very handsome profit indeed, it is evident that by far the larger portion of the government’s $1.60 in this case would be sheer profit—if the post office were as efficiently conducted as the express company.
The express company, however, does not attempt to carry a ten pound package from New York to Seattle for fifty cents. Such long and profitless hauls they leave for Uncle Sam. Yet, even so, with all the cream of the parcel business continually and inevitably going to the express companies, the Post Office Department according to its reports makes a profit in its “parcels post” business.
Of course were the post office rate from New York to Philadelphia a real parcels post rate, that is, for example, 20 cents for ten pounds instead of $1.60, there would be 1,000 pounds of merchandise so sent where there is one sent today. People will use a parcels post when it becomes cheap enough to be an economic possibility, and they will use it enormously, as experience elsewhere has abundantly and conclusively proved. Until then they will use the fourth class postal rate only for the occasional cross continental parcel on which the express rate soars out of all reach, or for the small parcel under a pound in weight on which the fourth class rate is less than the express companies’ minimum charge.
The four vital arguments (the four great express companies) against a parcels post, once so succinctly enumerated by Mr. Wanamaker, and the other hoary arguments sampled above, have, however, of late years been bolstered by another—the welfare of the “small country retailer”; and round the great fear of a vague but very horrible something called “trade centralization” the battle for parcels post is at present being waged.
It has been taken for granted that the small country retailer will be put out of business by the parcels post with its low delivery charges—yet there are stores in Yonkers, Plainfield, etc., in spite of the fact that the New York department stores deliver in these places free.
Let us examine another aspect of this death-of-the-small-retailer-fattening-of-the-mail-order-trust-bogey a minute, and see whether a parcels post means really a more centralized basis of distribution, or a less.
Speaking very roughly, there are in the world two great tides of merchandise traffic: one of raw materials, of which food products is the most important, from the farmer to the urban consumer; one of manufactured products—to wear, to use, or to eat (as refined sugar or prepared breakfast food)—from the urban maker to the farmer consumer.
Surprising as it may seem the parcels post argument has dealt almost entirely with the latter tide: of the former tide, even more important, as I think I can show, very little has been said.
Let us look for a moment into our existing high cost of transportation, and therefore, decentralized distribution of farm products.
In New York the farmer sells his milk for—these figures are quoted very roughly and without elaboration but they will give my point—2 cents a quart. He sells it, usually, to one of two or three—there is considerable evidence that they all act in agreement as one—gigantic milk companies (of which Borden’s is the largest) which bring it into the city and distribute it. The ultimate consumer—again I give a rough figure—pays 10 cents a quart. The other 8 cents is the “distributing cost”; and in each case it goes, mind you, to two great corporations, a milk company and an express (or a rail-road) company. Is this that decentralized distribution that the defenders of the express companies in and before our Committee have eulogized.
Take almost any other farm product, strawberries, for example. The farmer, who grows them, gets 3 cents a basket. Then begins a long line of tolls: the express company, 3 cents; the commission merchant, 2 cents (he claims, and often with reason, that his “spoilage” is high); the jobber 1 cent; the small retailer—delicatessen store, corner grocery or street cart vendor—3 cents (it “costs 25 per cent. to do business” he says, and it does too). The ultimate consumer pays 12 cents a basket, sometimes more, sometimes, when the market is glutted, a little less. Here is 9 cents of “distributive costs” of which but 3 went to our friend, the “small retailer.” The rest went to more or less centralized distributing agencies. Now suppose on the other hand that the farmer could send his products direct to his list of regular customers in the city. It would be perfectly feasible with a parcels post. Strawberries, which the farmer would get 6 cents a basket for (double what he gets now) could be delivered at your breakfast table the next morning after picking instead of two or three days old in the triple transit of commission merchant and his storage place, jobber and his trans-shipment, retailer and his store, and finally to you. And for this infinitely better article you would pay only 8 cents (2 cents for the parcels post) instead of the former 12.
There are only three factors, the farmer, the government parcels post, and you! This is not theory: it is being done in England, in Germany, in Japan, and in almost every other civilized country in the world every day; and has been done for years.
And as for the mail order business bogey, it would not be a bogey in the country districts because every farmer would be running a little mail order business of his own, shipping his eggs and butter pats and comb honey and fresh fruit and vegetables by mail right to his customers, on their standing or postal card orders, getting enough for his produce to make small farming worth while, but giving the consumer better goods at a big saving. Cost of living! There is no other revolution in the methods of distribution that would make so much difference in the cost of living as a thoroughgoing parcels post would work. And instead of greater centralization it would be almost the ultimate of trade decentralization.
Or, let us look at the thing the other way round. What is the chain of trade from urban producer of manufactured articles to the country retailer and consumer? Is there any decentralized purchasing now except by mail? The farmer buys of the small retailer. But the retailer buys of the lesser jobber and he of the main jobber and he of the manufacturer; and this is true whether the product be canned goods or dry goods. Freight shipments in bulk can underbid single shipments by mail or express; and the present system of distribution, cumbersome and expensive as it is to the ultimate consumer, is nevertheless cheaper than direct single shipments at the present mail or express rates. The moment that you introduce bulk shipments into any distributive system you necessarily introduce a middleman somewhere to divide up that bulk shipment for individual consumers; and the greater the bulk economically shipped the more middlemen there will be between producer and consumer.
Now where the parcels post could afford a cheaper way of doing the distributing than the machinery at present in use, the people ought to have the benefit of it; but in spite of the obvious benefits of a parcels post it is not wise to jump to the ultimate conclusion. No one would be rash enough to say that the present system of retail selling is entirely wrong. Even if the flat-rate, “zoneless” parcels post were established there are certain kinds of goods—books, for example, in which every article is a “novelty” which must be personally handled before choice and purchase, in which a local retailer with a display is, if not essential, at least a great convenience.
But so far we have been considering an ideal, flat-rate parcels post, without that “zone” provision which is an important provision in the bills and proposals for a parcels post which are now being most actively agitated.
The zone system of parcels post proposes, roughly, a flat rate per pound and per additional pound within the limits of any delivery office (that is a service which involves no transfer from one post office to another) and a rate considerably heavier (but still much less than the present fourth-class mail or express rate) for delivery elsewhere in the United States. This would furnish the cross-roads store with a most convenient delivery system and furnish it at a cheaper price than its city rivals could secure it. The local retailer would have the advantage of the difference between the two charges. To give this advantage to the local retailer is probably wise from the standpoint of general public policy. The small retailer in the country does the public a very actual and very valuable service. To have a stock displayed for selection is often an assistance in purchasing; there are certain things which cannot in any case, be bought by mail; there are other things which may sometimes preferably be bought direct, just as most people like, occasionally at least, “to shop”; there is a welcome personal touch in retailing which is lost in the long distance purchase. For these and other reasons the retail store will remain, stripped of overcompetition and non-essential distributive agents, competing with the parcels post, not in price so much, as in the kind and quality of service. That is the way the small retailer in Germany had adapted himself to the parcels post; and although in his case there is no zone preferential to aid him, he has made good.
After all, there is the gist of the answer to those who oppose a parcels post on anti-centralization grounds. They speak as though there were but one factor in retailing—price. As a matter of fact there are many factors, and the best students of retailing methods consider service one of the most important. With a parcels post established the public would be getting value for its money in cheapness or service, as it chose; with the present express system it gets neither.