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Ole May, Manager California Lumber Merchant

Dear Ole:

The article by Jack Pfeiffer carrying the title, The MANUFACTURER versus the WHOLESALER (and vice versa) which appeared in your December First issue was very interesting to me and I am looking forward to his article that is to appear in your January First issue. It will certainly be of much interest to your readers.

I note that you have referred to it in your December l5th issue and that comments are invited. Presumably it is intended that the comments will come from strictly MANUFACTURERS andlor WHOLESALERS. Since it is extremely difficult to determine just who and what a wholesaler in our modern methods of distribution is, I am sending in my comments which will more than likely further confuse a confused situation that has developed into full bloom today, as I view our industry from where we operate. In my opinion our company is without a single classification as to operation, since we are RETAIL, WHOLESALE, and without intent have become a hnancing institution for many of our accounts.

You may recall an item appearing in your September fifteenth 1955 issue of The California Lumber Merchant, page ten, "OPEN FORUM." I have had occasion to re-read this particular letter for the sole purpose of trying to determine what progress had been made towards straightening out what I thought was a confused situation in our industry at that time.

Surely we can correctly say that a certain degree of progress has come about, if only in the matter of grade marking. It has not been a cure all for what was intended, but I shudder to think of where we might have been if grade marking requirements had not been made mandatory in many places, and particularly in my own trading area, Kern County. Providence has not supplied a MOSES to return us to the prosperity of the good old days, long forgotten, nor will prosperity. return, except an industry is willing to establish some rules for the guidance and adherence of those who expect to prosper by so doing.

How can any degree of prosperity, in a highly competitive market such as ours, come about, when the MANUFACTURER allows his representatives to suggest that the consuming buyer will be able to purchase his prod- uct with a TWO, THREE, FOUR or FIVE percent gross markup be added to. the carload cost of merchandise, out of which the dealer must pay his operating costs? It just cannot be done, yet, IT IS BEING DONE, as some have so sadly learned during the past year.

Any well financed dealer, whether he is wholesale or retail, will take low margin deals, but when questionable credit must be extended and even the minimum of sales and book work are required, there seldom is anything left except the possible, and most probable, prospect of the route to bankruptcy.

I will not venture an answer to the plight we have gotten ourselves into, in an effort to make that extra dollar. There is no segment of our industry that can point an accusing finger at the others, lest he in turn be brought out into the open for just what he is, but had hoped few, if any, had yet learned. It is my opinion, and probably a quite antiquated one, I presume, that MANUFACTURERS, WHOLESALERS, AND RETAILERS cannot hope for a profitable operation where each claims the customer, through the guise of it being an industrial account. There are many large industrial users about whom no one should quarrel as to how or where they should buy, but the piddling accounts that have been classed as an industrial account have really gotten deep into small retail business. Much of this industrial re-classification has been made by some of our largest and fine manufacturers to the detriment of all in the industry.

The old axiom, A BIRD IN THE HAND IS WORTH TWO IN THE BUSH, has been overworked. I believe. anC with much regret in the lumber industry. Anyone taking a look through the reccrds of The CHICAGO RED BOOK, or DUN & BRADSTREET, noting the paying habits of many in our line of business, can only conclude that we must be operating a very sick business, if profit is the motive.

Basically I believe the lumberman's trouble started with World War Two, when materials in our lines were difficult, if not impossible to buy. The small retailer, and that is just what we were, found himself in the position that he could no longer buy his materials through the few wholesalers that had been supplying him with his materials, and possibly wth a too long line of credit. To him, no source of sup- ply existed. He was not known at any level, except possibly the credit reporting agencies, and heaven help him if he did not show a discount rating. His plight was worsened as the war extended into years instead of months. He could not buy in the small market available for he lacked the government points as well as the under table payment required when you were really out on the proverbial limb. It also developed that many of his wholesale sources either owned or controled certain retail yards and there was no choice except to protect their investment and keep those doors open, while their loyal retail accounts dwindled down to a one or two man operation, or completely closed up shop.

Eventually, as it turned out, the retailer in his search 'for lumber and building materials found that he was traveling side by side with his o1d established wholesale supplier, each searching for the same car of lumber.

I was no exception along with the thousands of others trying to remain in the only business we knew. The alternative, go back into the military service, surely was now lacking in appeal as most o.f us had taken about all of this that a good civilian had bargained for. The sources of supply ferreted out by the more agressive dealers turned out to be the only life blood injected into a nearly lifeless business which had been neglected by the sources of yester-years, The friends that were made were valued not only in a business way, but in a personal way and have long been continued.

I-et's not point an accusing finger at anyone for developing this particular business MONSTER, more vicious in a competitive way than any lumberman. whether he be MANUFACTURER. WHOLESALER or RETAILER could conceive, and now all are at a loss as to what the next step should be. Certainly we cannot look towards our federal government in Washington for comfort in time of trouble, for it now appears a still more vicious MONSTER is, I believe, scrutinizing your operations more carefully than they have done in the past. This MONSTER not only devours your profits, but is attempting to learn by just what devious routes you travel in order to make them and to then determine if you shall be allowed to continue your operatiorrs without his interference.

I do not advocate that we openly, or secretly, violate the Sherman Anti Trust Law, or any other, but it would seem to me that if good common practices in business are a violation of the existing laws, that a very prompt change should be in order. The most likely alternative is that the one time proud owners of our many small, and some not so small businesses, will be listening to the bankruptcy proceedings when his name is called in court.

Fortunately many of these small businesses are very sound financially, but they are sick, very