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Show THE PROBLEMS OF MARKETING Insufficient Volume of Business Busi-ness Cause of Most Cooperative Coop-erative Association Failures; No. 4 (Contributed) Surveys conducted among the managers man-agers of fruit and vegetable associations associa-tions show that the most common cause of failure is that the volume-of volume-of business is too small. A study of organizations which have gone out of business shows that "insufficient volume of business" was the sole or a contributing cause of failure in almost half of the cases reported. The problem is one of the gravest confronting .the Dixie Cooperative Produce Association today. There is a certain minimum size' which any business must reach in. order to be on an efficient business busi-ness basis. What this size is will depend on a number of conditions. As a test of the relation of volume of business to the probable success--of a cooperative association, the fol lowing questions may be considered : Has the association sufficient business to enable it to operate as economically as private dealers? If: it hac not, then it Is not able to-compete to-compete with them or to perform services its members expected when they joined. Our association must, employ a manager and a oooksceper. It has office expense, telephone and " printers' bills and other items to pay for. The expense of obtaining; the proper advice, making surveys and getting organized and incorporated incor-porated is an additional burden on the association this year. These-things These-things have- made it very difficult: for the- association to compete with' private- jobbers who will haul small' quantities with the expectation of getting little more than a fair freight rate- for handling it. Until the volume vol-ume of business is sufficiently large to enable the association to discourage discour-age private dealers, or to obtain a cheaper freight rate by shipping in c carloads, and also to make the overhead over-head and operating cost smaller per-unit, per-unit, the management will be sorely-taxed sorely-taxed to demonstrate the advantage-of advantage-of membership in the association to those who look only to the inimedi--(Continued on page 3) THE PROBLEMS OF MARKETING (Continued from page 1) ate returns on their particular shipment ship-ment in determining whether or not it is an advantage to join. Members should, "however, distinguish distin-guish between operating costs and investments. Before long, the association asso-ciation must acquire packing, warehouse ware-house and storage facilities. Money put into these things, however, is not to be counted as operating expense, but as an investment. When farmers set up their own marketing organization organ-ization they must expect to put money into the business. It cannot operate without capital. t Has the association sufficient business to enable it to give the members improved service? Before it can be successful, the association must handle a sufficient volume of business to enable it to acquire financial fin-ancial strength necessary to expand its services, operate efficiently, meet its obligations promptly and meet new problems as they arise. After the California citrus growers grow-ers had been organized several years they expanded their services from packing and marketing their crop to buying supplies, acquiring real estate, advertising their product, offering of-fering advice and service to retailers retail-ers who handled their product, giving giv-ing advice to growers, and forming subsidiary companies to .manufacture by-products from their' cull fruit. These services could not be thought of until the volume of business was sufficiently large and an adequate percentage of the crop was handled by the associations. One of the problems of the local association is that it has not been able to pay producers for their product until it has received the money for it and settled all adjustments adjust-ments relative to the handling of all phases of the particular shipment. Anything left undone by anyone connected with the shipment tied the hands of the association until all question had been removed. Some producers have grown Impatient because be-cause they did not realize what the association was confronted with. Until Un-til the volume of business is larger so that deductions can be made to build up an operating fund, delays in payment must be expected. It is certain, however, that members would be more tolerant if they appreciated how difficult it is to establish credit and gain the confidence both of houses who furnish supplies and also of the producers who expect their pay as soon as the shipment arrives at the market. This first year the management is confronted with the problem of trying to establish estab-lish a business reputation with its creditors and to win the support of producers without any reserve to operate on. It cannot develop an adequate ad-equate fund for this purpose until the volume of business is larger. Is the volume of business sufficient to stabilize the market? That is, is the association's control over the supply sufficient to eliminate avoidable avoid-able causes of price fluctuations? The answer is an emphatis No, at the present time. Our association is suffering keenly from unorganized competition. It has no control over products which came from the same territory; it cannot prevent a particular par-ticular market from becoming overcrowded, over-crowded, or prevent an unstandard-ized, unstandard-ized, poorly packed product from being be-ing put on the market. Experience at the present time is demonstrating that having no control over the supply is having a demoralizing effect ef-fect on the market and on the prospective pros-pective customers of the association. They cannot place confidence in it because it is not in a position to remove their too-well-founded suspicion sus-picion that if they buy from the association as-sociation someone else will sell produce pro-duce from the same district to their customers for a less price than they paid the association. Until the volume of business is sufficiently large, the association cannot be justified in advertising the product is handles, because the money spent would bring only relatively small returns. If the volume of business is adequate, ade-quate, the association has a greater degree of bargaining power which it cannot have with a small amount of produce. The kind of customers cus-tomers it must find in order to be ultimately successful are not interested inter-ested in small quantities. They want carloads and trainloads and are offered only truck loads. The volume of business must be large enough to offer the growers and consumers continuous marketing service. The association must be able to sell the product of its members, not only when conditions are favorable favor-able and prices high, but also when there is a large crop and prices low. It must also be able to establish regular, dependable service if it is to build up trade. Our association does not necessarily have to compete com-pete in volume of business with a large-scale association to be a factor fac-tor in the market. If it supplies only one customer regularly throughout the season with the kind and grade of product he demands it has established es-tablished a valuable outlet, and in a limited way is a factor in the general gen-eral market. On the other hand, if it makes only an occasional shipment ship-ment to this and that market or customer, it is not establishing regular regu-lar market connections, and is not a factor in the market, except possibly pos-sibly a disturbing factor. If a cus tomer does not know when S supply sup-ply will arrive he cannot be relied on to take anything, whcre?s if he knew he could depend on a definite defi-nite schedule he would be glad to become a regular customer. The association as-sociation has hopes this year of running run-ning trucks on a definite schedule tc some of its smaller markets, but unless un-less the volume of business is sufficient suffi-cient to justify planning such a schedule, all efforts in that direction direc-tion will result only in failure. But there are limitations, even when the volume of business is considered adequate. The expectation expecta-tion that an association can fit the price received for its produce by withholding all or a part of it from the market, or by refusing to sell except at a predetermined price is generally doomed to disappointment, even if it controls practically all the business from its district. With a crop of a certain size to market under un-der certain economic conditions, the association can do no more than obtain the best price the market demand warrants. They may grade and pack the products in such a way that the cooperative brands are worth more than common stock and they may stimulate demand by advertising ad-vertising and judicious distribution, but the basic price will be determined deter-mined by supply and demand, and the association's quotations must be in line with this price. From this short discussion, it will be seen that even if no Utopia will be readied by handling an adequate volume of business, the success of the Dixie Cooperative Produce Association As-sociation will be very doubtful unless un-less the volume of business is Increased. In-creased. One of the most necessary and valuable services supporters of the association can perform will be in doing all they can to increase the volume of business done by the association. |