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NOT TO BE TAKEN FROM THIS ROOM 





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UNIMASTTARIS 
ABERTAEASIS 





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The University of Alberta 

Printing Department 
Edmonton, Alberta 








THE UNIVERSITY OF ALBERTA 


AN INTRODUCTORY ANALYSIS 
OF THE 
WHOLESALE PLUMBING AND HEATING INDUSTRY 


IN CANADA 


by 


ROBERT FRASER BALFOUR 


A THESIS 
SUBMITTED TO THE FACULTY OF GRADUATE STUDIES 


IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE 


OF MASTER OF BUSINESS ADMINISTRATION 


FACULTY OF BUSINESS ADMINISTRATION AND COMMERCE 


EDMONTON, ALBERTA 


SPRING, 1971 











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THE UNIVERSITY OF ALBERTA 


FACULTY OF GRADUATE STUDIES 


The undersigned certify that they have read, and 
recommend to the Faculty of Graduate Studies for acceptance, 
a thesis entitled An Introductory Analysis of the Wholesale 
Plumbing and Heating Industry in Canada, submitted by Robert 
F. Balfour in partial fulfilment of the requirements for the 


degree of Master of Business Administration. 








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ABSTRACT 


This thesis is an introductory study of the Wholesale Plumb- 
ing and Heating Industry in Canada. More specifically, it is concerned 
with the future of the traditional middleman in the distribution func- 
tion, the independent wholesaler. 

The writer is concerned with the future of the wholesaler, 
and not the function as such. It is who performs the function that is 
of paramount importance, the assumption being that it must be performed. 

Self-awareness and survival are of paramount importance to 
the individuals involved in the wholesale plumbing and heating indus- 
try. As a result, this thesis, as well as being an academic study, is 
intended to be of a practical, useful nature to the industry involved. 

Information was collected through September 1968 to July 1969 
by use of a short questionnaire and through a series of personal inter- 
views by the writer. 

The industry as such has been subjected to very little aca- 
demic study in the past, and because of this, the conclusions are con- 
sequently subjective in nature. In any event, the thesis should pro- 
vide the initial groundwork for future studies. 

The major conclusions that resulted from the analysis of the 
information collected were: 

1. Patterns of distribution have changed since the 1950's. 
These changes were the result of the development of the prefabricated 
and mobile home markets, and the remodelling and renovation markets. 
Mass merchandising at the retail level is resulting in direct bypas- 
sing of the wholesale middleman. 


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Digitized by the Internet Archive 
in 2022 with funding from 
University of Alberta Libraries 


https://archive.org/details/Balfour1971 


2. The wholesaler should not integrate into retailing at 
this time, but rather orient a part of his business towards serving of 
retail accounts. To do this, showrooms should be established or up- 
dated rather than discontinued. The wholesaler must endeavour to up- 
grade sales to architects, home buyers and apartment builders. 

3. Pre-assembled packages are becoming a necessity due to 
the prefab and mobile home markets. 

4, A polarization process is taking place with the indepen- 
dent at one pole, and the large integrated wholesaler at the opposite 
pole. This development should not harm his interests, but assist him 
in the servicing and development of specialized markets. The indepen- 
dent wholesaler must decide where his market is, and then determine 
how to serve it in the most efficient manner. The wholesaler cannot 
perform all the traditional functions anymore, but he can perform some 
functions much better than can the manufacturer or retailer. 

5. Vertical integration has a very real future in the PHC 
Industry. The corporate system is most likely to appear, while whole- 
sale-sponsored voluntary groups are another possibility. Franchised 
store programs are also likely to develop in the near future. 

6. The independent, as such, will likely disappear gradually 
from the industry. Specialization, group buying and horizontal inte- 
gration will prolong their lives, but the traditional wholesaler per- 
forming traditional functions is fast disappearing. 


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ACKNOWLEDGEMENTS 


I wish to express my sincere gratitude to all those persons 
who contributed to the development of this study. 

I wish to thank Mr. James Dunn, Supervisor, and the other 
members of the Committee, Mr. P. Hugstad and Father Pendergast whose 
assistance is greatly appreciated. 

I also wish to thank the various members of the Plumbing 


Industry who took the time to entertain my questionnaire and interviews. 

















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CHAPTER 


Er 


LVie 


TABLE OF CONTENTS 


INTRODUCTION: THE COMPARATIVE ROLE OF WHOLESALING . 


DEFINITION OF TERMS AND METHODOLOGY ..... . 


Basie Marketing Ghannels*# .« « « « #34 & 
Factors Affecting Choice of Channel . . 

Dual *Channels*®orsDistribdtion . .... . 
Main Types of Wholesalers ......-. 

The Reoullepaiwholesaler@s. to . 2... 1 2 ew 


Methedologyme + OMG Fs et ee ek Hs 


A FUNCTIONAL ANALYSIS 


Assumed Framework for Analysis . 
How the Regular Wholesaler Services 

lshiGy (GUew cap itera AS oa coe ane ec ee 
How the Regular Wholesaler Services 


EES Spey syetbokowacs Sh OS ose ry eas 


EMERGING PATTERNS OF DISTRIBUTION. ....... . 


The PHOV@indUsteysine Canada © Gayeiaaet. 73 + 3 
The Canadian Institute of Plumbing and Heating 
Preha DECAL ON mmr neil seen oc, Boarohis las ae mne Onis eaan 
The Vertical@ Market System (3 “iu. <p. 2) aes 
Types of Vertical Marketing Systems . . . 


COEPOLA temo ys CMs So. Ps sc ss 


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33 


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; 
vpree 


CHAPTER 


ie 


VI. 


Contractual Systems 


Administered Systems . . 


The 


The 


inplvcations®, Nesp: 


"Bath Shop'' Concept 


ANALYS tt S e e e e e e e e e e 


QUES REO Stee .ursiee ce i) te. 


The 


The 


The 


The 


The 


The 


The 


Manufacturers’ Replies to 
Questions 1 and 2 
Wholesalers' Replies to 
Questrone, land. 2. 3°. . 
Manufacturers' Replies to 
Questions 3 and 4 
Wholesalers' Replies to 
Questions 3 and 4 
Manufacturers' Replies to 
Questions 5 and 6 
Wholesalers' Replies to 


Questions S)and 6,3, . . 


Manufacturers' Replies to Question 7. . 


Wholesalers' Replies to Question 7, 


CONCEUSTEON 95 7.) dsr. ste sss aemneeers 


The 


Emergence of New Markets 


Polarization of Wholesalers , 


WALAL « 


PAGE 


5) 


61 


61 


62 


67 


68 


69 


74 


80 


82 


85 


86 


89 


89 


93 


93 


98 






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CHAPTER 
The Vertical Market System... . 
Nopizontaliinterration.. 20 2s 6) 


The Future of the Independent . 


DUB UVOGRAPHY) s SMM Be ss Se fee, so, 0a ty ee ey tg Oy oye 


APPENDIX Wholesale Operating Costs Survey - 1967 . 


WALLA, 6 


. 801 


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TABLE 


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IV, 


Wholesale Trade by Type of Operation, For Canada, 


iTS foul ee ae 


Gross Margin and Operating Expenses as Percentages 
of Net Sales of a Panel of Reporting Wholesale 
Establishments (Incorporated Companies Only), 
By Major Type of Operation and Selected Kind 


of Business, for Canada, 


Profits Before Tax as Percentages of Net Sales, 


LIST OF TABLES 


LIS BECO LIOS ©. 


Sales per Salesman, Sales Compared with Last Year, 


1955etonl 963 


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eee 


1961 


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CHAPTER I 
THE COMPARATIVE ROLE OF WHOLESALING 


The ability of the independent wholesaler to survive in the 
face of changing market conditions has been a topic of major interest 


since the decade of the 1930's.1 


There are many different views regarding the position of the 
wholesaler in our economy. The manufacturer and the retailer in their 
eagerness to deal directly with @ch other have, in many cases, elimin- 
ated the wholesaler. The general public--the consumer-- approves of 
these developments in the belief that goods would cost substantially 
less if the "middleman's profits" were not included in the retail 
piEtce . 

Historically, as much as two-thirds to three-fourths of the 
manufacturers' output has moved through their ownvwholesale branches or 


directly to retailers and various types of consumers . 2 


However, few 
manufacturers have attempted to completely integrate and eliminate the 
retailer. While there are some notable examples of successful direct- 


to-consumer selling in such fields as apparel, housewares, and house- 


hold equipment, cosmetics and specialty foods, altogether they do not 


lror more information see: Warshaw, Martin R., Effective 
Selling Through Wholesalers, The University of Michigan, Ann Arbor, 
LOG Lae peel. 


2Edwin H. Lewis, "Comeback of the Wholesaler", Harvard Busi- 
ness Review, Nov. - Dec., 1955, p. 115. 












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account for more than one percent of all goods sold at retail.? 

While consumers' skepticism about the wholesaler reflects 
ignorance of the need for this particular marketing function, the 
attitude of manufacturers represents a basic competitive drive, speci- 
fically the desire to maximize profits by performing any or every 
function most efficiently. Thus, many manufacturers have found it 
expedient to undertake the wholesale function themselves in circum- 
stances like the Rollout 

1) where the produce has a high degree of style element or 
physicial perishability. In such situations, the closer the manufac- 
turer is to the market (timewise or in a number of marketing steps), 
the less his risk is likely to be; 

2) where it is necessary to design or modify the product to 
meet the customer's needs, or where the customer expects a considerable 
amount of servicing. In such cases, the manufacturer often finds it 
more effective to sell direct; 

3) where the wholesaler is not anxious to push the product 
because it is not important to him or may even be in competition with 
a private brand of his own. In such cases, the manufacturer can use 
missionary salesmen or other devices to stimulate the wholesaler's 


efforts, but this may not be enough; 


3Victor P. Buell, "Door-to-Door Selling", Harvard Business 
Review, May-June, 1954, p. 113. 


4edwin H. Lewis, "Comeback of the Wholesaler", Harvard 
Business Review, Nov. - Dec., 1955, p. 117. 






















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4) where the margin on the product is enough to support the 
cost of more concentrated or specialized selling. In such cases, the 
manufacturer may find that the resulting additional volume will offset 
the increased expense sufficiently to raise total dollar net profits. 

The so-called "elimination" of the wholesaler does not mean 
the elimination of the function itself. It simply means that the manu- 
facturer or the retailer has decided that it would be a good risk to 
attempt to do the wholesaling job himself. In some cases, he will be 
successful in reducing the expense of operating the wholesale activity 
and/or in increasing volume enough so that the cost per item handled is 
lower. In other cases he will not be successful. 

The term "wholesaler" is often used to describe the regular 
wholesaler, service wholesaler, and the full-function wholesaler. The 
U.S. Bureau of the Census defines "Wholesale Merchant Distributors" as 
follows: 

Merchant wholesale establishments primarily engaged in 
buying and selling in the domestic market who perform most 
of the principal wholesale functions - they buy and sell 
merchandise on their own account, sell principally to re- 
tailers or to industrial, commercial or professional users; 
usually carry stocks; assemble in large lots and generally 
redistribute in smaller quantities, usually through sales- 
men; extend credit to customers; make deliveries; service 
merchandise sold; and render advice to the trade. 


As defined by Dominion Bureau of Statistics 1969 Census 


Reports, there are five major types of wholesale operation. 


> Beckman, T,N., HH inele, andeR3De Bizzel leg wholesal ing 
(New York: The Ronald Press Company, 1959), p. 109. 


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Wholesale merchants comprise the largest major group, num- 
bering 22,434 locations with sales of 11,219,158,700 dollars. These 
merchants perform all the regular wholesale functions, as will be dis- 
cussed in Chapter II. 

Import merchants, with 3,762 locations and sales of 2,251,- 
227,100 dollars are next in importance to wholesale merchants. 

Third in importance are agents and brokers with 2,000 loca- 
tions and sales of three billion dollars. Agents and brokers are not 
full function wholesalers, rarely extending credit and rarely handling 
the goods for which they arrange sales. 

There are 90 merchandise brokers with total sales of over a 
billion dollars. 

Generally, agents and brokers will conduct a much larger 
volume of business per unit of input than will the wholesale merchant. 

Petroleum bulk distributors and co-operative marketing 


associations account for the remaining wholesale trade in Canada. 


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' se ‘J Be 
<einnno 


. 
OT. 
vib 
SL ie 
' 
Pd ry 
e &t 
iB USL 
Bo 
Tort 
ii 


ios 


uJ] off sektqoen eteeotem afaasiotww 














i hg ano rt 5“ of yep ¢ se gn bts , 
7 ad (he 
ae | 


7 
o4 


qox ody [is mrotreq edasioaam 


Wt sstqady me boaen> 
‘Mesol Cdl, € dtiv. ,3sesiots J Toqml rh 
PT 
ilonw of Ind 108) a , i ute ifcab 004, TSS : 
id Bn inoas 9 54° bttdT 
fees .atedfob nolIl fd sertd9 to esibe Sap an 
a ie) Fbos4 far e1oli fo toisome? Ifvt 
senlae® sgrext Yi 2 toe eben alg 
43 rd safbrnad n 02 sas stToOAT 
, lot tok 
no Db! atedord (ba reas .wihevenad 
tft Wy Sugai iW t9q eeonkaud To smlov 
o4 bre atosudiaseib Alud muslotisg : 
faas w anintemes 6d tot tniiocsn ano taetseean! 


TABLE I, WHOLESALE TRADE BY TYPE OF OPERATION, FOR CANADA, 1961 





Number of Sales 
Type of Operation Locations Amount ip 
S000's 
Total, all locations 30,855 19 S452 747-00 100.0 
Co-operative marketing associations 
and other dealers in primary 
products - 2 al le BO aud U9 Or 
Agency type 162 DasigOD. 7 Les 
Patronage dividend type 129 191,746.7 LO 
Primary Product Dealers, other 
than co-operatives 986 134 oe. 6x9. 
Wholesale merchants 225434 Me 21 LO 7 Dia 
Export merchant 113 7 Lo eda 2 od 
Import merchant 35 Oe PEC BP AS! Waar TILT EAB | LT .6 
Cash-and-carry wholesaler 96 PTA Uebel On 
Drop shipper or desk jobber 147 S05 70d 0.4 
Mail order wholesaler 47 175 402.4 0.1 
Truck distributor 259 42,702.4 OR 
Voluntary group wholesaler 81 478,926.0 Dis 
Rack jobber 65 16543151. OM 
General wholesale distributor 7 7908 TeV IGLOS 3920 
Agents and brokers 25042 Ph res he ese Oa UST A iets) 
Export agent or broker 33 er hees USM hal) 
Import agent or broker 350 29552730 Ll 
Auction business 88 239° 97.626 i ha 
Purchasing agent or resident buyer 24 045978.7 053 
Selling agent 152 TR NODES) 0.4 
Commission merchant 144 165,.099.3 0 
Broker (merchandise) 90 1,078,846.4 D0 
Manufacturers' agent le Low 720,595.6 Bed: 
Manufacturers' sales branches 767 1,40L£,460.4 Pst 
Manufacturers' sales branch 
with stocks 736 1,190,947 4 Gre: 
Manufacturers' sales branch 
without stocks 31 ZO pois 0 ‘bee 
Petroleum bulk tank plants and truck 
distributors Ae G5) 2, 009549059 10.6 
Salaried bulk tank plants 742 iyo la 023.0 6.8 
Bulk consignees 2,405 364, 243.7 img 
Tank truck consignees (without tank 
plants) o2 PAT Peell Oe 
Independent bulk tank plants 841 340, 985.8 Weed, 
Independent dealers (without tank 
plants) ns) Da, ODN a OF1 


i 





Bins 


[8@l ,AGAMAD WOT ,MOTTARRIO JO NAT Ya AAMT HUACHIONW: <1 













0,001 


re 


— 


eowooonoKra- 


‘Oke whe eee a 


m 


ee | 


* . 


—* . . . . . . 
“7 Pere OE Oh bs ee es fu 


2 


esine 
SanomA 
8 ooo? 


Q.f0s, 08%, 1 
{280 £aS 
Teah fel 


2.002 NE! 


Yel, Crs, 11 
£. Fes .c lh 
{,VGR—eics4 
LOOX cs 
£,c0e 08 

&, S08 if 
&,S00.,Sa 
0.982, 8%4 
[+.LES, df 


£,H0¢, 002.1 


bets wees 
6.866, 58 
8, €8e,8e¢ 
8, de ees 
¥.87e ha 
2.002,8% 


‘£000, c8i 


4.008, 870, 1 
5. 282,088 


008, 108.1 


ar ae 


O. THT, See, OL 









aA 
ire 


i - ? 





to aden 
atoki good notas2sqO lo sqyT 


“3 a 
anortsaol ifs - isto? j ey 


ytsming ai erslesb tedto bas 


avoitetoosée goitdsdtem, oviteysqo209 - 
~ atouboug : 


oqy? Yattsgé : 
sqya basbivrb Bt 
“soto ,2tsiasd sJoubord MY : 


eavissxraqo-oo madd 


ad ngy Tom _— ; 

tnsiorem Jog = 

Jnerovsm io | 
tolzesionw yures-bas- i 


reddoj dtesb to seqqitea qoml 
solsesiodw 45b30 Tipe 

sotuditaatb woe 
stoisestontw quorg yrssoulov 
raddol woeh 


rosudtiuterb eleeslodw Iarenkd i< 


etejord Sns agosgeé 
isdotd 30 Jnsgn stoqea y 
tajord, ta Jsgs J1ogml i 

eeoniend aolaiseh: 

yoyud joobiess 10 3Ifegs gmbesiomg — 7 
_ tesge gakllae : 

jnsisism okeeh 

(sakbtadozsm) aio 
insgs ‘atTetusoe® 









| | Hound t ' - , ah ; : 
wr : Hie, prays 7 a We 
= > 2 ¥ ws 


Ago) 
TABLE II 
GROSS MARGIN AND OPERATING EXPENSES AS PERCENTAGES OF NET SALES OF A PANEL 
OF REPORTING WHOLESALE ESTABLISHMENTS (INCORPORATED COMPANIES ONLY), BY 
MAJOR TYPE OF OPERATION AND SELECTED KIND OF BUSINESS, FOR CANADA, 1961 





Wholesale Merchants 


Kind of Business Net ~Profit. Gross Operating 
Before Tax Margin Expenses 


Toys, novelties and fireworks Sale 23.5494 20.83 
Automotive parts and accessories 4.12 26 a th 24689, 
Motor Vehicles 1345 14.00 WAAR S, 
Beer, wine and distilled spirits Ya OM 16403 14.02 
Industrial chemicals 2 ale 14.49 12464 
Drugs and drug sundries Teel 12eO 2 LOva9 
Coal and coke 1385 1s 9/, 10412 
Clothing and/or furnishings (General line) 2.00 15a 07 1317. 
Clothing, women's 132 18.73 7ead 
Dry goods (general line) 1281 17.44 15 263 
Piece goods iL Oe! 13.90 10-91 
Electrical merchandise 300 19.47 16.47 
Electrical appliances 1.49 Ly Le Dono2 
Radios and television sets and equipment 4550 2365 19315 
Electrical wiring supplies and construction 

materials 22/5 iD/e eo y/ 14.82 
Other electrical specialties 109 24.96 Tey oi | 
Grain aO2 1754 0.69 
Livestock 1.03 12855 11250 
Farm supplies (general line) 2419 24308 16262 
Feed, Hay and grain 1483 14379 12.96 
Confectionery 4239 18514 36/5 
Cigars, cigarettes and tobacco lf Gms 3.00 
Dairy and poultry products (general line) 228 12.74 12.46 
Frozen or frosted foods e214 $3.33 8212 
Fruits and vegetables, fresh (general line) 1272 13933 11563 
Meats and meat products daly 8.80 7269. 
Produce 298 Lite oo, 10.5) 
Pulpwood 1533 L037 9.04 
Household furniture 2207 13.93 16.86 
Floor coverings pe 7h 8) Lod 2 TESS) 
General merchandise 2236 18.47 16.09 
Groceries (general line) See On o2 6509 
Canned goods 1256 10.74 9.18 
Hardware (general line) 45 1S id 17.66 
Hardware (specialty line) 31.02 24.55 CAS SSYS) 
Jewellery (specialty line) 4.92 20% /z 21.380 
Leather and leather goods (general line) as) 14.94 1395 


[kei COMt ud 


‘ 7 


: ¢ on 
= ae 


TY 

























; ah 
(uA [QaAs # 


‘ade 4 


“nee ry wo 7 
J34AT A WD aKa Ta GO BAOATWIOARY 2A SACMATHKe ahi TAAYIO a 
- ‘* any v ay? ~ ae | aoa ve micah ee er ; a at 
ya o(¥ moO 2aTy fA 40D JOST AS i) SHOT). 2TUAMNC TIA ATS SIA! ST IOHW DAL T 
. A at & 
: f *% : weov Tarp aL WOLTARNGIO SO Wey 
[dt J A Awd J 907 ‘ Beant ay 40 Gui 4 CATO! ° \ Vidd i IAA ‘ i | agyT 
r u —— 
4 rs ot 7 
2inanot rf pad forts 
aa ate ~ , ae get or ane te a < a 8299 anh ti pit >, 
au i 1 mau BEC i j | } i a ’ 
26acneqxas TingseM x 70138 — 
j 7 
° fe ae pe .f tr. attowsyit bie asics isved .# 
Vea ’ a oy | wm KD 
Ss AC Tt .8S cf A FIOZEDO bag Bitseq sv isome vA 
“se = a a « . 
; , ’ 
> | Cc of A i ‘ t oe is miey TOIG : 
ee WAS 4 a in . 
cO.8 EO. oO. 5 YryT eS tee bins siz ite ¢ 72% if 
- - + << * , om 4. hee 
[d,S! va.+ sh aiboiaens Pine 
Ee¢ Oi S381 aakibnvs gato bie ad 
- af ‘aan e 
Sioa Veal : sats? oh 
Vt .€d. Wi «ted ‘ as fsa f ) tet Sf j ut IG\biS gntdaols 
[ati awe. Cf. 1 a not Ba 
« = a ; : 7 _\ ot 
ae Da | av] it ' L Srag), SP 
an of at 3 
: Jd «hw : a 7 hind 
Ci. i :s 10. STE A ee ee 
¢ / ef I ». Pi i a= ie aoe Lg a) I & « ait (228. a 
cl. co,es OC .4 mines bos alse aoteiveisd bas sotbes 
rol tjeno0> bos estiqguva gai 
S84 \ evi: - 
ve. €S 20.1 tilsitosae I solzies 
ed, | 4 o R 
(cr f r c ? ary tT 4500 eau 
~ eae Cu eA CV. 309 
8.8 10 AS [.s (oti! Isxuenag) asiiqqua ‘east 
a, 
P Si el. Geel ig bos yo ,BesT 
ev.ti As 8! PEt yV19ns [Joedeo , 
if & ‘ c a a FY . O20 8* i Gi 297335 ; ae | aisgt : 
os. $1 ay Sf ic. (anid [Lextstess) edsuborta " Livog bak viii E 
C1 .8 cé.% tes 2boo bsjezor1l zo fn 930%" . 
Pp A ae svi (oni! Intonresg) destt ,agldstesagav baa ed hui’ 7 
a) 08 .8 [isl alovberq Jaom bus @ieeM 4 
s . ** 3%) d p 
- Or ece.0s a soubor? 
a " A i 1 7 - 
ve..0) ce.r hoowgdu4 





£0.84 
= gual 
ADSL 
2.9 
eM 

1.85 


&, 
wet 
ee, 
» 80, a 7 
a te. 























rr + 
Studs 


wud blodeavoH: 
eanirtavon 2o0lF 

seibonedsism lars ro) 

. (entl Tats 9g) soixe ee) 
eboos “ ne 

Ba isso 











TABLE II (cont'd) 


Wholesale Merchants 


Kind of Business Net Profit Gross Operating 
Before Tax Margin Expenses 


Building Materials (general line) feos Le, 18216 
Lumber 1.45 AREY o: Lis 
Lumber and millwork Zeon ZO oo 
Construction machinery and equipment, 

new and used PS oW) 2570) Beso) 
Farm machinery and equipment 1286 ie 120 
Industrial machinery, equipment and 

supplies (general line) 1.33 Wee NS) 215290 
Metal working machinery Hogs Fb ZOe oi 24.06 
Oil-well and oil-refining machinery and 

equipment aeeeil) 14.59 Lie 
Miscellaneous industrial machinery, 

equipment and supplies Zi OD 23020 20.43 
Surgical, medical and hospital equipment 

and supplies Bn, 72 eh oe) 23.74 
Iron and steel (general line) 2226 15.01 12,735 
Structural steel if i ee! Ligdls fe) 10252 
All other metals and metal work (except 

non-ferrous products) Sh a7 fil PM lee SO (3.19 
Non-ferrous metals and metal work 510 395 DOD 
Paper and paper products (general line) Za 17.94 1203 
Other paper and paper goods SIRE: 19.42 LOnoy. 
Plumbing equipment and supplies Leod Ly ed ilsyae) 0) 
Plumbing and heating equipment and supplies 

(general line) 2559 Posy, 15.84 
Scrap metal Seale 2122 13330 
Waste materials (other than scrap metal) 4.18 27 Le 22593 
Miscellaneous kinds of business, n.e.s. Uae) 238538 24.06 


Vous 






























(b“4ac5) Ti Maar | 


atueds2a ofausfodW 
gnhisax 40%) Ford a 3Vi | ppomkes Yo ball 


esanagzd atgxeM xaT 910198 


















aL.at OS .S8 EL a (oni! Istsnsg) els ivedsM at a 
€r1.i1 82 SI chit 7. 
ae. Xt 20.08 ye. _ drowllin bab 4 
,jnamqiups bas qroni dos ae ine urs 
O&.LS » GOES e£.8 
ae.st . Sf.e! a3.1 jnomqivps bab ‘Cina ie 
bos tromqiups ,yaenine nae e 
de.tS CE. ES &3.1 (smti Ist9asg) 7 
a0. as VF ..08 lowes yt on tdsem 3 row le 
. bos yromidoen gakatast-lie tas Lishewas 
sce! G2. Mf Kes inatiqitps — : 
visnidosm fsiwdeubar en y 
Eh.O8 &S..€8 e8.S esiiqque bre Ja: . - 
inomqiups Istigqeod bis Tso tbam -¢ hes A 
ST. ES £9.08 Oe .£ ao igen ad 4] 
av. si o.z! ag. (antl fetsasg) leads baw a 
£270 OF. it 81.1 losta Taagoo 
tqsox9) Atow Istom bas elsism mente 
er, 81 pe. is ie.€ (atouborq avoyzai=nom 
“20.2 cc .¢ oe, trdw Isjom bre eledam avortst-aow 
€0,21 Ag, v4 re.§ (oni! [exsneg) eiovberg weqeq bie Tq 
Ve. al GA.er 20.€ eboog Taqig bas 199eq 23ee 
nee! PY .N1 fe. 2stiqqua bra Inamqtups wn ddim 
zoiiqque bas Jmsaqrops gafssed Sue gr tdaet 
ABLE! TE.8! £2.8 (ontl Eeyorse) 
06,61 Ss. is 8 AD le25m 1 
Ee £5 f1.V8 Bf.4 (istom qgetoe osfd weit) alstrotem Ss 
cela 2.9.0 ,2aentacd to abmid auoonshts 








ans) 

Table II indicates wholesalers characteristically operate at 
very low profit levels. In most cases, they rely on increased volume 
to hold up total dollar profits. 

It is obviously difficult for the manufacturer to perform 
the basic wholesale function more economically than it can be done by 
independent wholesalers operating at such profit rates. Indeed, if the 
manufacturer bypasses the wholesaler, it is likely to be for the higher 
profits that come from more aggressive selling, better control of ce 
tribution to capitalize on consumer advertising, to guarantee an out- 
let for his product in the face of changing conditions, or for any 
number of reasons rather than for lower operating costs. 

Large-scale retailers at the opposite end of the channel 
also are a thorn in the side of the independent wholesaler. Chains, 
consumer co-operatives, retailer co-operatives, mail-order houses and 
department stores, because of the types of goods purchased and the 
quantities involved, usually find it advantageous to deal directly 
with manufacturers. They have no need to buy from wholesalers, except 
for occasional fill-in orders or merchandise controlled by wholesale 
franchises. 

This, then, is the competitive framework within which the 
wholesale merchant must operate. His primary tasks have been: (a) to 
improve his methods of operation, and (b) to adapt his policies to 
meet the needs of his suppliers and customers. 

The decisive development in the American economy at the 


present time is the growing importance of vertical marketing 
systems in virtually all lines of trade. 





‘ 7 


#6 SiBtego Ylisottetaas opis atslacolody sosanthak fT SLdnT 





omuloy bassoront no ySor youd _eo2n> deat al  .alevel atiotg wol ytow 
ad bier yeattob Isjot qu blond oF 
| | ic 
@rolysg 63 yerutoniunem ody tot JiustA Eb ere? al 31 
yo snob od nso at mada el lankmonese atom noltonui sleeslodw sisad ei || 
$44 ti .besbol .astes 3itorq dov2 Js gnitetage aysleaslodw snabreqabm ie. 
zafgid oft rot 5d ot visit at 3B, raleseslodw ast esaeeqed “reausegivindie ‘I 
«ath to foxinhs tatded ,gnifise eviesstage stom mor] jemos Saad etd lot 
-ju6 ne esdnstevg oF ,ghiettravbes +smveno> no Ssilegiqee as nokoaid eet 
oak tot Yo .envitibnos gntansdo to soe? ods ni soubor abil 303 dat 
,21209 aniisisqo towol 107 asdd totes ep0e8e7 To x edemien 
fennsds od3 Yo. bas attenqqo “ht Js arslketver sfaoasoagtel = 
sented. .xolseolorw insbasqsbat edt to sbhke sdi me pair sis oaks 
bas esauod zsbto-lIism ,sevitsisqo-09 aslisist ,2avideyaqo=-00  Iomeenee 
oft bre boestoxug 2hoog to asqys sid io-seugssG (,257o2 2 area esegl 
yitjosrth Insb of shosgoinevbs +5 bott yileves ~bsvlovat 2otaiainelp 
tqscxe ,2TSlkeslodw morta yd 63 been on sve ysdT Latamioaiogem Ate | 
Siagoalody yd balloxtrions setbesdotem to atabro GF=ELGF Isnotense ad 
6f4 slodtiw pidtiw Axowsmbx2 svitktisqmos. oft 3} ,aodd qakdT : 
O39 €8) seed syed atant yxemizq ett . sd ereqo Jaum dasa tem ol sesLotee 
a) Btes air eal 62 (1) baw eae to abortion ati venga 7” 






hea: ~ ph peor ne ter: 


Bp Ae] 


Available data unequivocally indicate that: 

~ Conventional marketing channels are rapidly being dis- 

placed by vertical marketing systems as the dominant dis- 

tribution mechanisms in the American economy. 

- Competition--to an increasing extent--involves rivalry 

between these systems as well as between the individual firms 

or units that comprise them. 

There are, then, conflicting views concerning the patterns 
of distribution which we can expect to predominate in the foreseeable 
future in the United States and Canada. What future pattern distribu- 
tion will take depends largely on the industry involved, as will be 
outlined in Chapters IV, V and VI. 

It is the purpose of this thesis to study only one industry 
in Canada--that of plumbing and heating products distribution. The 
plumbing and heating industry in Canada (hereafter referred to as PHC 
industry) is characterized at present by manufacturer-wholesaler inte- 
grated firms, horizontally integrated or "conglomerate" firms, and 
"independents". For purposes of this thesis, the independent will be 
defined as a wholesale house owned and operated by individuals or 
groups separate from manufacturer or retailer control. That is to say, 
the independent is characterized in the "traditional" marketing chan- 


nel of manufacturer-wholesaler-retailer as a completely autonomous unit, 


where each layer of activity is clearly separated from the others. 


one: McCammon, Jr., A..F. Doody, and WR. Davidson; 


Emerging Patterns of Distribution, Report to the National Association 
of Wholesalers, Las Vegas, Nevada, January 15, 1969. 

















Cavs 
‘gary saeotbak yl fesoyviupsny 62 afd tava 


-2bb gated yibiqet 915 élenands gtitetram Fenotsmawiod “ 
_eth tnenimob oft es amoteye gnkscarom festizev ae hooelq 
Ymoroos asoitamA odt int anetasiosm soitudrs © 


yiievit eevioviat--tasixe pntessroal 6 od --nold i eqa0o - 


anvhi Feubivibni 313 ooswisd a6 Sise as anal eye sea noswicd 
fond setrqmos dads “ering a6 ij 


anresieqg os goinisanes eaweiv gntksottinos .f943 .9Te arent 


dw’ cofsud tsterb- te 


afdessesiot odd ot sdenimobstq 07 J98qx5 Th Sw fot 

; 
.vdbssatb nistiaq saudi JsdW -sbansd brie estate bstial odd “at ouput 

s¢ [fbw es -~bevfovnh vasteubni ofa ao ylegrel abnagqeb saad If iw on 


IV ban V .VI etaiqsdd ef beweisag 


, 
7 a 

yrdeubnt sao yind ybuta oF efeons gist to senqruq sda ek 31 nt 
ait .fotsidixntetb etonborq gnideed bus gaidmlgq to Geds--sbsaso ak i 


SHo re of bortotss xredteered) sbaos) ni yxdeubmk galresd bas art hdunesbey 
+630: 3aslseslodw-tsted>eiunsan yd JasesTaY Ie boskrotonisdo ef (yrdewbak i on 
bns Jemxtt “santomol anos" to besstgeini qilstoosFrod ,amtki boemg “7 
od [fiw tasbrsqobnt six ,etesd’ aidt to ese0qieg tow "es fsbnoqabrrgl 
+o elaubivibui yd betsteqo bos, benwo sauond sfaastonw B 26 porktes 
~ve2 of at gedT .foritoa rs{isiex x0 reTusostunsm mort oSsuaqee eqhoxy, : 
-nefo gnttedzen "'scoti tbata" ii ot bsstretoaredo ef saobroqabat sid 


,itaw avomettatus yIodeiqmo» b 2s rolistor-rsleesiodw-1sa0sontuasm to Law 





.@1si30° 93 mott botatsqse yitasto ai wivitos to revel dose sxsdw 
, 





ar 


4 
7 


Rt) 

This thesis will review the effect of past changes in dis- 
tribution on the independent, and attempt to determine how future 
changes in distribution will affect him. In other words, the main 
purpose of this thesis is to attempt to answer the question, "What 
future does the independent wholesaler have in the plumbing and heat- 
ing industry in Canada?" 

As well as being an academic study, the thesis has the ob- 
jective of being useful to the PHC industry itself. 

Occasionally, the writer will draw data from other industries, 
and from the PHC industry in the United States for comparative purposes. 
Unfortunately, very little academic research has been done on this in- 
dustry, and therefore, this thesis should be considered as an intro- 
ductory study only. 

The writer has included at this point some relatively up-to- 
date material on the PHC industry in Canada. 

The following information was obtained from the Canadian 
Institute of Plumbing and Heating and is summarized in their annual 
Wholesale Operating Costs Survey (see appendix). 

While more detailed information on profits before tax is 
shown in the appendix, the writer has used information from Volume 
Group 4 only; that is to say, wholesalers with sales over $5,000,000 


yearly. 





- K i a Le Vv 
{| | . . if | 






Ol... 
-atb mt esgnaid tanq 20 395349 sd wolvor stag baie | 
exwout wo silessseb 0 Jqmeaan bas <agbaagsbat oils no mohswehas 
ntem od3 , abtow Tedt0 nt amid apes Libw sodtatieaetd DB sagtate : 


gudW'’ .noktedup si) towane of tqmesie O3 zi ataods elds to snogiiq - 
-fesd bas anidaly odd ak sved saleeoloda 4asbnsgabit adj asob oxpsed 7 
"Sabsasd ‘ak gxrieubok gat 
<do sft end ataarlt oft ,¥buta oimebeos ns-gatsd es Iisw eh 
-taert yadeubsk JAY ass 02: ture gnisd to svigost 
peobiseubn® +orito mox? sasb wath IfLiw rssiaw sii .Vilsnoiasss0 
.B9 209 7Ug coe icaaias soi) eete72 bosinall odd nk yrs enbat OWT sat not) bam 
“Hr eras aa snob need abd Aste9eey atmsbsos. siaiil yrev fox ents tot 
~orint ob 26 botabtenco od bluvore etasdi eld ,stelsisdd bos  ettenb ; 
vino ybuts yi1otoee : 
Sean Yisyisslox snoa toioq eifs +s bebulonk asd toa itw sit : iC 
-&bsaned at yrtaubart oHa sdj no Istasisa edad | 7 
astbets) sit movt benkstdo esw nokdsemroink gaiwolioi sat 
Isunns asted3 ot basttamwve af bos gniissl brs gn Fam lt to lua ant i 
. (xibnaqqn, 392) ysviue 23209 gaisazegd slsaolom : 
ak x63 atoied si itotg a rotaamzoitnt bslistsh stom shidw ——_ s 
‘simloY mor} noisnrotnt beau asi Tsiisw odd .xrbiteqqs offs ects seniall 
23. tavo euler dliwaralezslodw yes oF at aadd pyIno + que 


YEAR 


1968 


1967 


1966 


1965 


1964 


1965 


1962 


1961 


1960 


p59 


1956 


PROFIT = 
% OF SALES 


TABLE III 


NET SALES 


100. 
100. 
100. 
100. 
LOO: 
100. 
100. 
100. 
100. 
100. 


100. 


00 


00 


00 


00 


00 


00 


00 


00 


00 


00 


00 


GROSS 


PROFIT 


alka 


EXPENSES 


Not Sufficient Reports 


1s 


ley 


16. 


17. 


16% 


ies 


16. 


Weds 


ims) 


iS) 


Page 


03 


66 


05 


ial 


28 


23 


11 


soul 


44 


13 


Ikebe 


13% 


135 


13 


13% 


Nees 


14. 


122 


U2 


wey) 


20 


22 


65 


eo) 


2/2) 


89 


02 


83 


60 


vie 


i rs a 


Te, 
aStOqoR Instoliwe Joi | 00,00L 
BE. EL gg, 2r 00.00! 
os.€r go, ar 00.001 
¢g.€r b0.0f 00.00! 
20.€f 20.81 00.001 
2e.€! [y.d! 00.00! 
PAL e4 BS.NE | 00.005 
Q8.S1 £S.af | 00.001 
$0.01 {f.af 00.608 
€8. ST L£.2f 00.00f 
08.51 | M2 | 00.001 


@d.€ 


Sf.€ 








a 





Le 


pPpaud 


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ai 


> 


& 


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YEAR 


1968 


1967 


1966 


1965 


1964 


1963 


1962 


19od 


1960 


1959 


1958 


TABLE IV 


SALES / SALESMAN 


cone eeere eee eee ee 


805,134 


TOM bese S MS) 


571,254 


548,342 


513,263 


454,085 


414,513 


469,279 


460,537 


Seis) ye) 


SALES COMPARED 
WITH LAST YEAR 


BAS) 


.00 


. 06 


aa} u) 


say) 


xo2 


2 


s Od 


eo 


0 


a2 


7, PROP LT 


eoeeeveeoeve eee ee ee © & 


Shy« 





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i 
i Vi Ja AT 
{ 
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TIWBAT 2 RABY TOAT HTIW AMBER IAS lea TAe 





a 


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713 

Table III indicates that, while not really declining drasti- 
cally, net profit before tax is quite low in the PHC business. 

The reader will note the gross profit has dropped consider- 
ably from 1960 to 1968, while expenses have remained reasonably con- 
stant. 

Table IV compares sales with net profit before tax. Sales 
have obviously been increasing five to ten percent per year over most 
of the ten-year period, while profits have remained stable and declined 
somewhat in 1967. 

Sales compared with last year drop considerably during this 
1964 to 1968 period. This period seems to be quite distinct in the 


plumbing and heating industry. 



















2 hs rr 
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CHAPTER II 


DEFINITION OF TERMS AND METHODOLOGY 


Basic Marketing Channels 


There are essentially four basic marketing channels: 
iB) Producer - Consumer 
This channel is simple and appears logical and econo-. 

mical. Actually, the producer's initial selling costs are greater 
than in the case of other channels. The producer assumes many of the 
marketing functions. This channel is frequently used where the opera- 
tion is on a small scale, large volume on a single product is possible, 
the product is highly specialized, the producer has a sales force, com- 
plete control over sales is desired, and adequate financial sources are 
available. Examples include a producer of raw materials selling to a 
manufacturer, a dairy selling cottage cheese to consumers at its fac- 
tory sales room, or a farmer selling eggs to motorists from a roadside 
stand. 

2) Producer - Retailer- Consumer 

Examples here include producers selling directly to in- 

dependently-owned retailers, affiliated chains, mail-order houses, and 
large department stores. The producer hopes to maintain a close touch 
with the market, enjoy the economies of selling only to relatively 
large buyers, meet private brand competition, promote sales aggressive- 
ly, reduce fashion risk, and minimize losses, particularly if the pro- 


duce is perishable. 


telenrads stijedvant ahead tu0t yfistinssss ote sa9nT 
temuencd - teoubortT (1 

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1978579 eth steoo sntiloe Letiint e'is0ouhetq oft .yifeudoA ie 


eft to yosm samuees taowbotq efT .efennsdo telto to sess afd Of mada 


-steqo sda otedw bees ylansuperi at Lomned> 2icT , -snoidonnt solseeee 


~sidieaoq at touborq sigate s wo ooulov syrsl .sIno2 [lemma & fo bent tai 
“moo ,9oT0? esisa s es testiburg oft ,bostInioaqe virgin at sania orf 
sts egoxloa Istonentt stsupsbe Bre ,batiesb el eslne ssyo lomjiaos siaig 
6 03 gmilise alsizsisa wer Yo wowborq s sbulont asiqmaxd .ofdei ieee 
-987 aif Jn eremienos of sasslo sgets0D Seah ais yitsh 6 ,tetTmonloge 


sbtebsox & mor! eteixojom o9 eggs gniiise 19mtet « to .moot asise yaeg 


baste 


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ar 

However, use of this channel requires a sizeable sales force 
on the part of the producer, the number of accounts handled is increas- 
ed, credit extensions may reach large amounts and transportation and 
packing costs may be relatively high because of smaller quantities 
ordered. 

5) Producer - Wholesaler - Retailer - Consumer 

This channel is followed by many producers of such 
items as groceries, drugs and dry goods products. To a small degree, 
the wholesaler may sell directly to the consumer. Among the advantages 
in use of this channel are more complete outlet coverage, low selling 
eos tuto eeoduceE (since wholesaler can distribute his costs over many 
items), small selling force required to call upon wholesalers, lower 
producers! capital required for marketing activities, and minimum 
transportation costs per unit sold. 

Weaknesses of this channel include requests by wholesalers 
for exclusive distributive rights in their respective areas, whole- 
salers' dislike of manufacturer selling directly to chains, necessity 
of the manufacturer having missionary salesmen to promote the product 
in the market, and belief by manufacturer that his product should be 
sold far more aggressively by the wholesaler. 

4) Producer - Special Middleman (functional and agent) - 

Wholesaler - Retailer - Consumer 
The use of special middlemen is customary in many mar- 
keting processes. They are usually paid on a percentage-of-fixed-fee 


basis, and do not take title to the goods. They buy and sell for others 


er “7 
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berehe 7 rt 

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asersaaybe, wild gocbh .tamvadon sdy oF yJduetib Ilee yom tsineoiodw wits . 
onktinis wot densa $siguo stolgmoo stom 51s Lonnedo ails to Sau al 
item Ysvo. ateos eff etutiaeth nen isisesiodw eonte) rssubesq od 3209 
trewol ,axeleesforw noqu Ifso o2 bstivper soto} gaifioa Iisma —tamege 
muminim bons ,2ortivisoe® anid sivas 103 betivpss [s2 iqso ‘seein 
-blee tinu req 212802 noiisdtoqgensTgd 

exslseelodw yd sieaupsr shuloni bonnes etds to. asarstdesw ; 

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elo 
or act in a capacity to bring buyer and seller together. Some act on 
a continuous basis for a seller, others on a job-to-job basis. In 
numerous instances, the middleman operates between the producer and 
the retailer thus eliminating the wholesaler from the channel. For 
industrial goods, the use of the producer to middleman to consumer 
channel is common; in some instances, an industrial distributor is also 
added to the channel. 

The most obvious advantages of this channel are that it is 
easily adaptable for differential use in different territories, the 
seller maintains control with the sales burden carried by others, 
field selling costs are in proportion to results accomplished, the 
seller need not be well known or possess a popular brand, specialized 
knowledge required in selling is supplied, and the seller has represen- 
tatives handling his line only. 

There are certain disadvantages in using this channel: con- 
tinuity of representation is frequently lost and complete dependence 
upon individuals, not an essential part of the seller's organization, 
exisite?. 

To show a list of all possible channels of marketing would 
confuse rather than clarify. However, it is well to keep in mind that 
an almost infinite number of variations to the above-mentioned types is 


possible. 


Factors Affecting Choice of Channel 


There is no one best channel for all product classifications. 


The seller usually has several different channels of distribution 






af... 

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Wels 

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shi 


available to him. His choice depends upon a number of factors: 


1) Nature of Product 
The nature of the product defines the type of demand and 
the characteristic buying habits that influence the channel choice. 
2) Geographical Dispersion 
Usually, the more concentrated the buyers, the more 
tendency to use few, if any, wholesalers, retailers, or middlemen. On 
the other hand, a wide dispersion of buyers frequently requires whole- 
salers, retailers, or middlemen who specialize in reaching these types 
of buyers. 
3) Size of Purchase 
Goods purchased in large unit orders or goods having a 
relatively high unit value commonly employ the most direct channel of 
distribution. 
4) Size of Enterprise 
For such reasons as economy, prestige, or control of 
market, a large manufacturer might desire to market through its own 
wholesale branch houses and retail stores, whereas such a decision is 
not feasible for a small producer. 
5) Financial Position of Seller 
The shortening of marketing channels, the assumption of 


marketing risks, and the maintenance of an extensive sales organization 


lceorge R. Terry, Marketing, Selected Case Problems (New York: 
Prentice Hablyel950), apra6l- 


rk - 
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sie ALO 
necessitate large outlays of capital. The seller who is not in a posi- 
tion to assume these financial burdens must use existent wholesalers, 
retailers, or middlemen who provide such financial services. 
6) Promotion and Service Requirements 
The seller may feel that his product requires specialized 
selling ability and enthusiasm to achieve a satisfactory sales volume. 
Channels may be selected with this thought in mind or new channels may 
be adopted for the same reasons. When technical sales services are 
required to sell a product, it is generally considered advantageous’ to 
have as few intermediaries as possible between the manufacturer and the 
consumer. 
7) Ability and Preference of Selling Personnel 
The choice of distributive channels is influenced to 
some extent by the preference of the marketing executives. The choice 
may simply reflect the wishes of the owner responsible for the produc- 
tion of the product, or it may be the result of many circumstances 


under which the producer has grown and developed. 


Dual Channels of Distribution 
Dual channels of distribution is a strategy which is widely 
used by manufacturers because dependence on two channels rather than on 
one promises greater long-run profits. The profits accrue from the 
peculiar adaptability of two channels of distribution to the market 
environment in which many firms operate. 
Sometimes manufacturer use of direct as well as of indepen- 


dent wholesale channels represents an intermediate or transitional 


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ep ihe) 
stage in a continuing process which culminates in the complete dis- 
placement of one channel by another. In these cases, the manufacturer 
looks upon dual channels of distribution as a temporary strategy whose 
aim is either the circumvention of the wholesale channel, or conversely, 
the abandonment of direct sale in favour of complete reliance upon in- 
dependent wholesale intermediaries. 

Channel change is, however, not ordinarily rapid. The ini- 
tial considerations which resist alteration in this sphere are the 
heavy investments of time and resources which manufacturers have sunk 
in their existing channels, and the magnitude of like investments re- 
quired to build new paths through the structure of distribution. Hence, 
evolution into or away from dual channels is a long-term adjustment to 
the marketing environment. 

Specifically, the use of both the direct and the wholesale 
channel by a manufacturer enables him to adapt to the variations of 
different market segments or different geographic areas with respect 
GOR 

ls) the coverage and availability requirements of diverse 
kinds of reseller outlets and final users. 

Manufacturers of convenience goods especially are con- 
cerned with the need to have their products carried by all retail 
stores in which consumers expect to find such items. 

However, in the retail field, it is customary for large 
stores (or organizations of stores) to assume many of the wholesaling 


functions. Typically these stores purchase directly from the manufac- 









Ls er 
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| 7 

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| 7 
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Py 28) 
turer in wholesale lots, thereby gaining the wholesale margin for them- 
selves. Smaller stores who require less than wholesale lots generally 
are served through the wholesale channel. 

In the industrial market, the number of users is less 
than is encountered in the consumer goods market. As well, they are 
usually more concentrated geographically. Hence, coverage require- 
ments are less stringent. 

Under such circumstances the economics of order size 
and buying habits of the industrial users probably explain the use of 
dual channels by manufacturers. The function of purchasing is one 
example. If in carlods, the chances of direct sale are better. 

2) The provision of different kinds and amounts of promo- 
tional effort or the exercise of varying degrees of control over the 
selling process. 

If competitive conditions are unusually severe or if a 
large amount of pioneering work must be done to gain a foothold in a 
new market, the manufacturer may use the direct channel, (possibly in- 
cluding the use of a specialized sales agency) to provide substantially 
more selling effort than the wholesale channel candeliver. Those 
products which are complex or technical in nature require specialized 
selling and service normally available only through direct sale. In 
some cases, for a product to reach full maturity (that is, approach 
full scale distribution), it requires the services of two distinct 
types of channels. 


3) The adjustment of revenue and cost considerations to 


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the demand characteristics of the markets served. 

This is simply providing more thorough coverage of the 
market available. Also, two channels may do the job more cheaply than 
one. This is accomplished by allowing the manufacturer to perform 
that portion of the total marketing task for which he is best quali- 
fied, and at the same time, allows the wholesale channel to perform 
(that "part *or “the *jobein which*it *is*most effective. 

The survival and continued vitality of the wholesalers, des- 
pite persistent efforts to supplant them, attest to two significant 
facts: 

Ee) the marketing services provided by the wholesaler are 

necessary, and 

2) to a great extent, wholesalers have been able to cope 

with the changing demands of their customers. 

Wholesaling, like other activities in marketing, is dynamic 
and is ever subject to change. The alterations that have taken place 
and that concern wholesalers are actually the reflection of evolution- 
ary changes and developments taking place in the entire economy. Im- 
proved transportation, better packaging, growth of chain stores, rise 
of supermarkets, and the development of the mail order house may be 
cited as examples. 

Main Types of Wholesalers 
Wholesalers can be classified according to: (1) size; (2) ter- 


ritory covered; (3) ownership; and (4) type of goods or services ren- 


2Warshaw, Effective Selling Through Wholesalers,p. 8. 






WS... 

-bovnae asia tig inion | 

add 30 sgetevoo Mguotodd stom gribivesq ciqmia et ettt —_. 

exrig viqeets stom dof oda ob (ea efoaneia owt 681A _ofdethawm, sae 
iripttsq oF tstutoetvnam sea gatwoble id bee hiqaoose al etay .SmO- 





-tlevp dod et ed fotdw cot Jess gaktedreg into ada Yo molatoq nents 


mxolxeq ot Isnnado slsesledw sdt ewolls commis OMTEe oft ts bos - bed? | a 
S sytiooits Jeom al 44 dotdw at dot sf3° to t%eq Dems 7 
-asb ,exefeeslonw oft to vitiastiv bseutisnos has Isvivivs sat ; 
tnestiingte owt ot teotts meds toslqque od adtotis 4asdetersq Sieg 
oh: 
axs tefseslodw sf4 yd babivotq asokvise gnisodram sdf | {I ae | 
bis ,.vrsessosn = 
9qo3 03 Side nssd sved etoleeslodw ,Inotxs Ssstg Ss oF (8 - 
.exemotevo thed3 Jo sbrismsh gaignsdo edd Atty - 
otmanyb el .antisiism nf asitivitos tefso- sdk Vgnkiseafoaw 
7 


s2sfq node3 sved jadi enotjetsiIe sft .sgnedo 0} tostdie Tove oP Oe I 


-noisulove to mottoeltet ed3 Yfleuios stn exsleesloiw azsones Jedd Gee 2f 


“mI .xmortose stitae sf ot soslq gnidat esnemgolevab bre) eegneis gee - 
: 
sata debi area to daworg “Brigeyoeq er ey a u 





eee 


dered. Thus, wholesalers may be large, medium or small according to 
annual sales or number of customers; they may be national, regional or 
local; they may be independent, manufacturer-owned or chain store 
owned. 

The fourth classification warrants fuller discussion. Ser- 
vice wholesalers are those who perform the complete marketing services 
of a wholesaler. They may be classified in turn as general merchandise 
wholesalers, general line wholesalers, and specialty wholesalers. The 
general merchandise wholesaler handles a number of unrelated lines or 
goods such as groceries, hardware, and furniture. The general line 
wholesaler confines his stocks to a few related (or, more commonly, 
one line of) products, such as groceries. The specialty wholesaler 
carries a limited number of items in any oneline of goods. 

Limited function wholesalers, as the name implies, provide 
limited services to their customers. Among the more important types 
are: (1) cash and carry who handle a limited line and do not extend 
credit or make deliveries; (2) wagon jobbers who generally carry 
limited assortments of fast-moving items, frequently of a perishable 
nature and typically sold on a cash basis by a salesman operating from 
a truck; and (3) drop shippers who handle bulky items such as lumber 
and coal purchased in carload lots, do not store products, solicit or- 
ders or take title and have goods shipped directly from producer to 


3 


customer. It should be noted that the preceding classifications are 


3George R. Terry, Marketing, Selected Case Problems, (New 
WORK PCeiL Cogha ld al 950). moO 


es, ** 
63 gtibyooxs Itsme 10 ovbbem ysg7sl od yam sslcialalial eeudT 






to isnotgas ,fanokyen od yan yey yetemozeus to Medewn 26 solee- 
93032 alsiis to boawo-tstudopiunsam cinubaagabet od veo yes > rh 7 


| 


92 .nobeeuoeth tollui etderiny sobnoiliedels Azo sat et Ta 
| — 
asolyrsa yatiodtem s95tqmos oft ortéixsg of; saadi ots axaleasiodw Soke) - 


seibaxdotom Istonog ae ds0t at bekttecslo sd yam vod? .tafeeelodw 2) ae 
aff  exeiseolodw yaistosqe bas ,ersIneslodw satl Sasoneg .eroinesiadw 
to serkt botelsoia Jo xedmun « aelbasd tolsaciodw selbnadotem fexsoeg, 
ontl Isveasg odT .sx0tinswi bes ,syswbted ,eskyscotg 2s fote sheagg 
(vinomnos stom .to) besetlor wat 5 oF adtszove atid asmbinoo zsleselody - 
wsisesionw yalsiosqz sift .esixsc0%g en dove ,edgubomg (to Sati emp 
,eboo io saifend yrs ni smett to t9dmum betimtl s eelrras 
| wbtvotq ,aotiqmt omen’ sis en ,eTolseslonw aoksanut betimid 
z9qgv1 instioqmt stom sid goomA .atemoddus tied’ of ssotviee batimk= 
bn33x9 Jon ob bas anti besimi! s slbned onw yates bas daa (1) oe 
Ytiso yilaxonsg ondw exsddof onogaw (S) yestteviteb slam to 2ebagm Pe 
oldsdaiteg 5 to ylinoypayt? .emstt gatvom-tus? to éipemiteass botkeahe 
most gniisieg tisueslb2z se yd aed fess. 6 oo blow vite iqys. bes scuten i 
radmut es. dove amas yalind, of bred aie eve qorh’ ee oe 7 


iJ 





Ae) 
broad in nature and are intended only to suggest major py peeta 
The Regular Wholesaler 

According to one author, "The most important single type of 
wholesaling institution in the marketing structure in the United States 
is the wholesale merchant, who is oftentimes known as the regular 
wholesaler, service wholesaler, full-function wholesaler, or merely 
the wiolesaleron More will be said concerning the regular wholesaler's 
functions in the next chapter. 

There are, then, many alternatives open to the manufacturer 
in distributing his products. PHC products manufacturers use, or have 
used, all of the channels described. 

Me thodology 

In order to determine future patterns of distribution, the 
writer has used two main sources of information. First, the available 
literature has been studied and useful material drawn from it. 

Secondly, primary data have been gathered from knowledgeable 
persons in the industry. A short letter requesting certain information 
was sent to ten wholesalers in Ontario, Quebec and the Maritimes and to 
four in Western Canada. There are a number of reasons why such a small 


sample was used, and why a longer questionnaire was not used. 


4Por more information see: T.N. Beckman, N.H. Engle and 
R. D. Buzzell, Wholesaling, (New York: The Ronald Press Company, 1959), 
oh tees 


ST pide peal 0O% 


2 
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aa3022 botta ofd at sawtourte gotisatem onda nt aordusisaant gutioeslodw 
smlugey orl ae nwond somitess toe et ofw ,scadoTam sfeestotw ofa ae 
yiorsm to ,ysleeslodw nottsnvt-Ifut ,zaisasicrw soivrse tolsaslotw 
e‘tsisasiodw islugex sd) gatazeonas bkee od Iliw stom “" sofageihorw sift 
ysiqais xen oft nt enotioma 

yeaiviosivunem sly od neqo esvissnresis yoem ,nshad . 338 s7enT aes | 
aver 10 ,9eu eiszuiJosiunsm adsuberg OHY .ssoubotq etd guttudbyaeie Wt 
.bedtisasb aleanatis $H2 Yo Its. .beaw 

edd ,motjuditieih To anis33sq stutut srimrstsb oc +tS5bt0 ni 

ofdsilsve edd ,de7t% ,oottamtoint Yo esotnes. nian ows Bsay eed 2990eR 
~34 MDT? aweth Isizetam [utsey bas dbobbure teed asd enivererkl 

sldsagbelwond mort botstase ossd over Boab yremizg ,yIboads? : 
aotzeerrotnt nieixes anigeeupet rettef trode A .ytteubar offs at anowieg 


ot bow eemttizaM oft bas osdovl ,ofzetnO mt atsIsasfotw 1+ oF Jose gee 





Dingle & Howe vile sboeses 26 xedmuc 5 ste sted? .eborisd ataaeew Ae ESE 
sbeaw som 2ew srignnofsesup segnol * velw bie bead 2nw slqmee 









aioe 

1) The writer has had some experience in the industry in a 
family-owned firm. Wholesalers in Western Canada would not feel happy 
about answering questions posed by their immediate competition. There- 
fore, only three knowledgeable persons in the Company with which the 
writer is associated were consulted. The writer acknowledges the 
possible bias this could introduce into the analysis. 

2) East of Winnipeg, ten to twelve persons were the maxi- 
mum number which could be expected to reply. These people were chosen 
carefully as to their participation in the industry trade association 
(The Canadian Institute of Plumbing and Heating), which is currently 
considering the same problem as is this writer. There was no use send- 
ing a letter to persons who had not thought much about the problem be- 
forehand. 

3) From talking to various members of the industry, the 
writer determined that most persons did not appreciate answering for- 
mal questionnaires, but would prefer a short series of broad questions. 
The industry, being made up of only two hundred and fifty wholesalers, 
would require a large percentage return of those sampled. This would 
not be possible. 

Possible biases could have been introduced because of the 
methodology. However, there was simply no other way to collect the 
necessary data, short of interviewing the persons themselves. The cost 
of this would be prohibitive. Possible biases include intentional mis- 
leading data because of the competitive aspect of the writer's company 


in the PHC industry. 


_ 


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sors: 


i =; 






















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t 9 q 7+ H f dence | ' 4rian ca tbsaed 9 J 
¥J3 i> ei Mote 32£0H DAG ganic sjutrsani osthsaad ame) 
oe. 7 
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<301 30 im: ax jon bib anoaxsq Jom tsdd beataisieb’ z29 
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a4) 


Letters were also sent to four manufacturers, two of which 
have manufacturer-owned wholesale branches. A comparison of responses 
on the subject of the future of the independent would provide some in- 
sight into the problem. 

Finally, some information was drawn from short informal in- 
terviews with knowledgeable persons in the writer's company, and from 
the writer's own personal experience. 

A description of the functions of the regular wholesaler fol- 
lows in Chapter III. The plumbing and heating wholesaler is discussed 
with reference to his functional activities dealing with the manufac- 
turer, the retailer, and the consumer. As well, from time to time, 
the writer has drawn comparisons with other industries in Canada and 
in the United States. 

Chapter IV contains a discussion of vertical market systems 
and their current state of development in industry generally. A des- 
cription of the present state of the PHC industry in Canada is inclu- 
ded. I have included at this point in the thesis a brief discussion of 
terms used in Chapter V; thus, the discussion includes a mention of the 
conglomerate, the Trade Association, the art of prefabrication, and 
the "Bath Shop" concept. 

Chapter V contains a summary of questions asked and a con- 
densation of the replies to them. An analysis of the responses to each 
question is included. 

The conclusions of the writer and suggestions for further re- 


search conclude the thesis in Chapter VI. 




























2g 7 ° 
dordy to ows ,2Tesut5niunsa wok of Jnse ova otew srssted 


‘geenoqaet to nagakseqmos A .agdsnead sleeslonw behwo-ve1u9 54 Iumant 
<i omoe sbivoxg blow tnobnaqsbot sAt Io smd) silt to Asetdue ota ie ; 

-mafdorq Sid ond aig be X ; 

-ni “lensotot 4xod2a mos2 aweth esw oolismrotal om Oz xvifantd =? ) 

mort bac .yneqmoo 2'tettrw adi nt enoersq sidpegbsiwoml Wytw ewe ivred 

.yoostteq¢xs Ienoeteq nwo e*3ed baw sae 

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beasuoetbh at toleeslorw anitesd bas gntdmolq ad? TIT 29dqem0 mh ae 

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,omta oF Smit mor ,Ifow 2A .xemuenoo ond bos ,aelintsy sit _— | ; 

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, : 







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ao) i) = “. ‘y 










CHAPTER III 


A FUNCTIONAL ANALYSIS 


As mentioned in Chapter I, one of the purposes of this thesis 
is to be of some use to the PHC industry. As the regular wholesaler 
operates between two parties - the manufacturer and the retailer - I 
will analyze in some detail the functions of the PHC wholesaler and his 
importance to each group. 

While each wholesaler traditionally performed all of the 
functions summarized below, there has been a shifting of either part or 
all of some functions to the manufacturing or retailing levels. This 
will be further discussed in Chapter VI. 

The functions are discussed in order of importance to the PHC 
wholesaler. 

The points to be discussed below may be summarized as fol- 
lows: 


TD) What the regular wholesaler does for his customers: 


a) assembles goods for them from many sources of sup- 
ply; 
b) maintains a reservoir of goods from which they can 


draw on short notice; 
c) extends credit; 


d) guarantees goods and adjusts complaints; 


lReckman, TON Nie bne le ands. De buzzellye Wholesaling. 
(New York: The Ronald Press Company, 1959), p. 127. 


2 : _ 


itt -AOETAHD ; ? 


aray TAWA SIAVOTTOMUG A 






sian? atta to e2eadogiwq ed} To ono _I 4torqbdD nt beaotjaem 8h ‘eo ; 
yelevstodu telugox aid ah .veteubot DAY oft od sey smoe To ad OF ai i 
tT - xelisie: os bos tortosiunem sda + eetiteq owl, coseded sotezego | 

aid bos relwesfeodw OHI sdt to evobiomrd sid Tasaat emoe ai esgiens Likw » 


;quomg doaw of sonsrtegat 


alt to Siu bomsotteq yifsnotsthsss ,eleasfodw does ITM 9 a4 an 
to dtaq wefltie io geistide se osed 28d sigdd ,woled, basivemmye ano tioaut _ 
aiiT .elavel agntifete1 ro yniwtonwanm edi oF anoljonu? somos io Is. os 
- 
.IV ssdqsd0 ni bowsupetb sedjawa ad Like a 
a 
SHS odd of Sonstuoqmt Jo 1ssb360 mt baasusekb sue sagkyomut siT - q 
-fo3 as bositeemue od yom wolad bsaevoetb sd os ad@iag aiiT “ 
‘yeaah 
zn 
‘@temotevo 2id 103 es0b saoleevlodw antego7 srt asdW (CE — - 
“qua to 299702 Ynam ctori mods toi aboos asidmeeas . (5 oul ‘a : 
. i) 
xq , aw ; 
nso ysis fotdw mori zhoog lo Thovises: 6 ents3n tam (d o> at 
jeataon ea no ona or on 


Ragen rare 


| hse 8 
in 7 





2) What 


b) 


a ay, 
renders advice and assistance of various kinds; 
makes possible a faster inventory turnover; 
makes deliveries; 
buys for them in economical quantities; 
anticipates their requirements; 
the regular wholesaler does for his suppliers: 
provides storage facilities and ready stocks near 
points of demand; 
establishes and maintains connections with custo- 
mers to whom he sells their goods; 
cultivates his territory; 
aids in stabilizing production; 


plans distribution in his territory; 


Assumed framework for analysis 


Beckman, et al. outlines several assumptions that must be 


kept in mind as these functions are discussed: 


First, for the retailer, it is assumed that most retailers 
operate on a small scale; that most stores must handle an assort- 
ment of merchandise from many manufacturers; and that mgs t retail- 
ers have limited financial resources at their disposal. 


Characterizing the plumber and the mechanical contractor as 


retailers in the PHC industry, the above assumptions would certainly 


apply. Even the largest mechanical contractors are small in accepted 


terms for judging business size. Furthermore, the retailer does not 


maintain much of an 


requires it. 


2tbid., p. 


inventory himself but purchases material as he 


12S 


tS... 
seboil avotrev 36 osnds2teet bre soivbs atebast (s 
s¥evartud yrotouvil tazast a aldieacq eam ( 
inatasvilsh esdem 86g 
yaslibinsup lestmonoss nt madt sot eyud: (d 


ratnemed) Oper Leds god eq totina (i 


reveiiqghe vif 101 22eb reinaplodw isfgges ods jstw OS 7 
than wloote vonox bos esitki fos? sgatois sebtvorq (s ss 
tbrismsb to adiniog 
-onuD dtiw anoftosnno> antuantsm bas eodatldsteo (d 
;2boog tioda siise od motlw od atsm : 
ivtosinisa aid assnviatus (5 7 
-cottsubotq gaistifdede of abies — (b = " 


‘Ytosizvrss eid mi noisudigteib saniq (s 


ataylans toi Arowsms xt hemyenA - 


ad eum ted enoliqmueen Isseven asatiduc ,[k to ,ahanlosd 
+bseeucsetb ste anoktonua Seeda en boim ot tqad 

ateltnisy teem daddy bomiess et 431 ,15itesox off tot ,devit 
~Jg70286 ne sfbnosd taum est0d2 Jeom tsd3 ;sleoe iiems s no sferaqo 
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-{seogeth tisdt 42 esowoxor Istouentt bedimt! svei ews 


ap Yossaxshoo Ibolnsloom sea bas isdmuiq off goisizedosasdd 


Yiniejye> bivow enoliqmeesn svods sda i aubat ORY old ok areliaten ; 








ah 





Dee 


An exception to this is the large retailer, such as the de- 
partment store, who typically buys direct and operates on a huge scale. 
Second, for the manufacturer, it is assumed that most 
plants operate on a small scale; that in most cases only a 
narrow line of products is manufactured; that financial re- 
sources must be devoted primarily to manufacturing; and that 
the products must be widely distributed through many retail 
outlets.3 
In the PHC industry in Canada, there are two large, integrated 
plumbing supply companies, Crane (Canada) Ltd. and Emco Limited. Both 
maintain extensive manufacturing and wholesale outlets, but because of 
the necessity of wide market coverage, both use independent wholesal- 
4 
ers. Crane, for example, began in 1855 developing a formidable branch 
house system. By the end of World War I, the company had fifty-five 


branches, and by 1930, two hundred and ten branches .> 


However, according to the recent experience of Crane Ltd., 
the largest manufacturer and distributor of plumbing and piping pro- 
ducts in North America, the independent wholesaler is far from finished. 
T. M. Evans, Chairman of the Board at Crane, notes that ''During the 
early 1900's with its slow travel and lack of independent wholesalers 
to effectively cover the country, company-owned branches seemed logi- 
cal. That certainly isn't true today. A well-structured, independent 
wholesaler organization can sell every neighborhood and hamlet in the 


aahint eee LS 


3tbid., p. 128. 


4.0w Crane Found the Key to Profitable Distribution," Sales 
Management, 84, (March 18, 1960), p. 124. 


Faislek ise aA 


SIbid., p. 126. 


gS ‘ee 
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-Sleoe oguil 6 fo ebinTego bas, d297th ayud. yl isaigyd: onw  ox088@ rv eg - 
Jeom te43 hemuees 2) ti .tstISetwoeM sit 109 ,broasd 


6 yloo seeea tana nt gad3 ,olooe Taman no stetaqo niasig 
-ot Istorent? dal) ;bewdiobiviten et etoubory 96 otil worree 






tena. bie ener tray kycem o3 Yibteming heibvsh ed taum esd mee | 2 
[isier ynen dguetd betuditieth ylabiw od dem at cuboarq 4d a 

.a7aftuoe € 

. 


betergsier ,sgtsel awd. ots sigs? abated ob yateubit OF odd aT 
Ajod. .besjimid oom bot .bId (ebsmed) sana) ,aslnegmos viqque grbdmule 
io S20h3ed Jud ,atsisuo sineslodw bos agntivizeinnam sviesiiedxe oteinlem 
~[easl ony Snsbisqshal sev nied Sgetaves Jstvam abiw to vilaesoen sed 
fonssd sidsbimiet « aniqalsveab c2e8l- atensasd .Siqtexe vot ,sra7 * oe 
svit-ytti? bed ynsqmoo oft ,I veW blaoW 30 bas say ya ‘MSIBYR saver 
© uadonerd os) bre bethavd ows one! ve bos a, 
«bad sns19 20 sonotrsqye tnoost sdi o3 gaibrooss ,xdyowoH 
-o%g ‘Hoiqkq bos Pens To sojudiwdelb btn tsiusontunem tessts! ody 
-bofielmi? mort tsi 2f t9lsa5lodw gasbasqabnt sft <BoivemA dytet ot etoagb =F 
edd gnisud" Jarly esion ,.3a87D 3s breoh 8A to mumtbadd ,aneva .M FT 
ataleszalonw ansbdsqubat jo Aset bre Laverd woke 231 rigitw e000! <itae F 
~tgol Borsse aaranerd bonwo-~yesqnoo , verano sd} aesos Yiovissetis of « 7 


Shabasqehnt bedusourtI a Lfoy A .YBhod Suvi d'het yleles+ss gedT . Seo 


sii atiteliad bos boodroddgten eer figa abo oottsstnegao ‘tolseolody 





bie] 
His feeling is that the local man knows his market--knows 
how to get the business there, and knows the best financing channels. 
Furthermore, Crane feels that its primary business is manufacturing and 


not distribution. 
There is, of course, a problem in finding the proper whole- 
salers. The company feels that " . ..a strong independent can do a 


better job of profitably distributing Crane products in one area, while 


a company-owned branch might do a better job in another e™ 


Finally, it must be assumed that the wholesaler operates 
with a reasonable degree of efficiency. The validity of this 
assumption rests on the active competition of wholesalers 
with other channels of distribution. 


How the Regular Wholesaler Services his Customers 
1) Assembles Goods 


The marketing process ". . . begins with conglomerate 


resources in the natural state and ends with meaningful assortments in 
the hands of onsen ee @ 
"In the perfectly heterogeneous market, each small seg- 
ment of demand can be satisfied by just one unique segment 
of supply. The function of the market is to match these dif- 
ferent segments of demand with the corresponding segments of 


supply. The market is cleared when the ras is completed 
and each segment of demand has been satisfied." 


derpratmecran 176) 


o etdeesuns Wroe, Dynamic Marketing Behaviour, (Homewood, 
Eilinois eR iehand bee Dewin, wlnc..!, ©1965) “p. (26% 


Pre, pee 


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oltdw ,seta sno nt etoubotq one29 gnisudiajalb yldssiiorg Jo dof xs7d6d 


Yi Suttons ni dot tetted s ob tdgim dotread bsawo-yoaques & 
astaz4qo tafseslodw sdi tad? bamrees od taum 31 yyllsakt 
atds to yttbilsv elf .vonsinrtts 16 setgsb sidamoaser & ditw 
atelsaslodw io aokstisqmes svitos aly no eiest noliquueas 
-notsuditjath Yo el ipa xsdso ditw 


ayomoieu) aii “goo Tyree tsisesloriW rsiugoa sts wel 


ebood sohiteaet (i 
steyvamolgnon diiw enigead . . ." assaciq gattoddem SAT 


at elmemsyoees Iuigninssem datw ebno bas state Taawden sd of seomosey 


Bi avomyenoo io ebasd ee 


-g92 Ilema dose ,dgitem avosnsgorstend. ylaosixsq |f3 nr” 
jnemg5e oupinu eto Jari yd bstietsse 5d mss betas 140. ae Pr 
-3ib sesrt dojem ot ei 393 teg sdt Jo wokjonu4s ont Iqque io 
io strange gitbnoqassico sat Arte boomeb to cee aasisi 
besoalqmos et eoabe ‘odd naw. heteels at tod stlgque - . 
“ -bolietise cost esd biamsb Jo doomgse dose bee ; _ 


) 43u 


eon — 





nee yeh! 
This is, of course, overly simplified. Rarely, if ever, are 


markets in the real world totally cleared. 


While the PHC wholesaler may perform all or some of the func- 


tions described in this chapter, the basic function he performs is that 
of sorting. 


" , . . sorting is the decision aspect of marketing whether 


seen from the standpoint of the supplier or the consumer. The supplier 
assigns items to classes which are to be treated in different ways 
thereafter. The consumer selects an item into her assortment in rela- 


: , 10 
tion to what the assortment already contains." 


"The assignment or selection which constitutes the act 
of sorting is always made with reference to some collection, 
or set, of goods. The farmer starts with a mixed lot of 
produce and sorts out the saleable from the unsaleable items. 
The central market assembles, or accumulates, goods of like 
grade and quality for convenience in distribution. The next 
step of distribution or dispersal to the ultimate market in- 
volves |allocation of goods ... Finally, there is the char- 
acteristic action of the buyer of putting unlike things to- 
gether to form an assortment. The name for this aspect of 
sorting is assorting."1! 


The following table shows the relationship among the 


four aspects of sorting: 12 
Breaking Down Building Up 
Heterogeneous Collections Sorting Out Assorting 
Homogeneous Collections Allocating Accumulation 


10tbid., p. 34. 
llinid., p. 34. 


l2tbid., p. 5. 

























ot, + 
ats ,28v9 Fi ,yioren .boidetquie yiisvo , sends to) 6k phar 
.betesfo yiietos Slow Inst sd ak edad 


eon? 44) Yo same vo Ile midireg yam relaaolodw ORY offs sl bay . 7 


. 
os 


_ \\ ee 
fedt at emroiieg of Gotti onv? S¥asd sd , sedge atdi of hadimoesb andy 


an 
-achitoa Igo 


} 
radisdw grivsitom to. Jooqas soiatssb sdj ab gnitade., » .™ r A 


v 


— 


iailquse off  19mtenos ati vo aailqahe oft to tGioqbaese sd> moxr)k sees) 


ayGw Soeseliih or besratt, 5d oF ots dofilw esaesfo oF gies aermgiess 


-pfoa oF Joasmivceas 184 otnt matt os edosise ssamienos sdl ,tetissreds. | 7 d 
os 


'lantsonod ybseiale tJnomsxoees of2 Jstiw os aokg 
; » 


jos sdj estustidenos doidw noidoslea a6 Jasmngicae oT” 
-aotiosiloo sce of gonsiaioys Gilw sham eyswis 2i antsitce 26 - 
to tol bexim « dtiw ettéje Torrre] sqT .ahoon io ,t98 to = | 


-eme32 sldeeleeny ofa mort sidssise ont Joo eae0e hue soubor 
SAtl io eboug ,godJslotiook so! asldinsses Jsdazem tetins> sft - 
ixsa off ,jtoksodigteib at soasinsynés Yok yitieup Bak sbherg 


“nk doxvan sdamijiu ofa ca isexsqeth yo mobipdizdetb to gaze 
tea oft al ssid .vilentt . . . shoog lo nekiasolis esvigv . 
-~o3 agotdd sirinu gotstirg to +o¥ud odd Jo notes otselyetss ’ on 
id, Josqes ei tol Ssmen siT .toomd2oeesR ME mao? 63 tSeAddeg 
iv ambaxogas ai gouiszea ; 


sid gnome qitlenotisis+ offi awole sided gatwolla?: sit 


Sf antyaea to a3 59qee wot 
qil gatbi ra awol gtidtcexs } io | - 
goistopes IW gniszo0e enotsosiloo 2evosnsg0tsi 9h 


af sepa ears gntasoollA . 





Silt 

In the PHC business, the wholesaler breaks down a heterogen- 
eous collection into more homogeneous groups. He also breaks down a 
homogeneous supply into smaller lots. 

The collection which is the result is a building up process. 
In the act of assorting, the wholesaler builds up a heterogeneous col- 
lection or assortment. For example, simple installation of a basin re- 
quires’ the *basin®itself > water supply; fittings; taps, solder, flux, 
etc., all from different manufacturers. 

In the act of accumulation, the sorter builds up a homogeneous 
collection, or aggregated supply. (For example, pipe in various lengths 
and diameters). 

Of principal importance to the above discussion is the con- 
cept of searching. 

"Searching is a form of pre-sorting which can be carried out 
without the necessity of performing a physical eee: 

Searching locates items which belong in specific classifica- 
tions. The wholesaler locates a number of manufacturers who supply a 
given product. From comparisons of price, quality, or any other perti- 
nent factors, a decision is made on whether or not to handle the pro- 
duct (i,e., the sortingseprocess). 

While the PHC wholesaler searches for goods available from 
his suppliers, he also searches for customers to buy his goods. ‘''The 
double search is fundamental to the whole process. The supplier deve- 


Trp peo 







BGvas 


ere eieond salsa ot aa: 
s nwob assy osfs of .<quozg evostegomol sxom‘odnt aokeset Tas’ a 





.@a9907q qu gntbftud 5 el sivest sft et doithy notisetios sit” 
«fod ewoomsgoteist s qu ebfiud yYolseslodw dt ,gritzeeas to Soe) ara we 
-9t nieed s 26 nofislIsient sigmte ,slqmexs vol . imsirivoses To sottosl 


puwid, -tobloe .eqsd .egmFsdti oylqque tetsw , esti dhesd ofa esthip 





o 


 ayoTdI on tunem jasrstith mot? is ,, 39s 


pe 


avositegomon & qu ebftud roses sft ,natspiumusds lo 368 403 aT 


a 


aiigoo! evottav nt sqiq .slqmexs toT) .elqque betsgstggs 10 nokiosties 


.(avedemsib bas 
-no> of2 ef no¥esudeth 9vods afi oJ s9nstdtogmt Lagtortrg 5. — 
<anisiomses to Sqn a 
two betris> ed mao Astle gaisroa-erq to mrol © et guédo ws?” : if 


; 


a 


uy, -ixoe Isoteyvdq s gnipfrotiaq To ySheasoan sit tvonisiw \ 





-hobitees!s oftiosqes mt gnoled dotdw amet? 2edndol ankdoxese 
& Yigqgue ofw atetitosiuagm to 19dmun s esdncol tefeeslodw sfT .snekt 7G 
“ij19q 2aflto yon x0 ‘YJilsup ,sokaq to encelisqmoo mort toubotq mavig | 
-d%q Sd3.efbned oF ton 20 Malick no sabes et nobaiosh # arene doen 


1 o areas 
ee i aaa oa 





732 
lops more elaborate search methods than would be possible for the indi- 
vidual cone unena es 

The large retailer can still be a thorn in the side of the 
wholesaler, however. Search methods of large retailers can be skillful 
and thorough. 

This function is without question extremely important to the 
PHC wholesaler, as will be discussed in Chapter VI. 

The manager of an Edmonton PHC wholesale supply house esti- 
mated total suppliers in Canada of plumbing, heating and related pro- 
ducts at two thousand. His branch regularly maintained five to six 
hundred active charge accounts. 

Furthermore, manufacturing is concentrated in Eastern Canada 
and the United States. Unless the retailer wishes to perform the func- 
tions of assembling and stocking merchandise, direct purchase by retail- 
ers is clearly impractical. 

"Direct buying would necessitate the establishment of direct 
contact with thousands of manufacturers in order to select several hun- 
dred of them as regular sources of supply doe 

2) Maintains a Reservoir of Goods 

The storage function is a very important function the 
PHC wholesaler performs. Firstly, he maintains a complete assortment 
and volume of both regular and emergency goods that can be tapped by 


or et 


tO eckman, @trala,ep. 134. 








Sty. 
-Dbnl ada toi sidiedog od blvow neft abodism dothsa etenodals, oxem: 


a 
eft io sbke sd ot axolt « ad PPPs mas seltetes egtsl sd? 9. age 
{yiilide od mo dteliatex-syael To: eboiom fis1ss2 - .taveworl ates 





42 of tostvoemt clamerdKs solsdesup duodite el rotsoaud aidt ui 
| TV teaqeld al beeavoath od iLtw ae .xeleeslodwiy 
-ide9 saved ylqque sinesfodw SHY cotnomba as to teysasia oAT <8 
«vq batadey bas gotoead ,getdmolyg to shanad nt etekiqqua Intod Badam 
nhs od avii bantasotem ¢tsslegey- dames ait -basevois owt 3s, sta0b 
.etovooos saueds avigon botbaud 7 
S 


abanms) migzesd ol basetaaspnod ai gokuydostucem ,stomsrontant = ; 
7 


2 


-gnu? $03 orrolteq 63 asdetw xslintey 4543 eeelnt) .asdns@ bed Pod ea) be, fl 
-lkeset ‘(¢ sessoseq Joatib .sehbaadorem gnluooie bie griidmeeass to aneks 7 
- Isgbiossedt? vlasels shpat 

. 


doe7tbh to Joeedeiliates sila ststiaesoun bivow gatyod josrid" . 7 

~ad igyover toofer 03 aabyo mi etowwdostunem lo ebmeanodd ddtw th, D 
Oly Tonia to #9DtHOS alias ee mpd aa dale 

| abood,  xiwwisaed n entamnkey {8 9 4 

end notisavt saneiseqmt yrov 6 ai morsonut oges0%e off? “te : 

| sew agaianaceaialaa pene 1" Pear shear: 


Ze 
a. cringe ot chery 


om 7 4 


Saige ys) 
his customers on short notice. Reserve stock enables his customers to 
keep their inventory investment to a minimum. Not only do they avoid 
expensive storage facilities, but the risk of the retailer being stuck 
with obsolete or overpriced stock is virtually nil. 

"Because of the scale of his operations, the wholesaler can 
Operate economically a warehouse which is flexible, not only from the 
standpoint of changing seasonal requirements, but alsowith regard to 
the special requirements involved in the storage of certain kinds of 
eeedamuin’ 

Some observers have felt that, with proper timing, bulky 
items such as furnaces and bathroom fixtures could be purchased direct- 
ly by the contractor. This is, however, very difficult. While the 
contractor can often determine approximately when he will need certain 
products, rarely does he employ personnel in sufficient numbers to in- 
stall everything quickly. Hence, there is always some form of handling 
and storage necessary. On-site theft and damage can be tremendous even 
over a short period of time. Furthermore, the products usually are 
delivered by the wholesaler to the job. Again, because he is a special- 
ist in his field, the wholesaler can generally do it cheaper than could 
the contractor or manufacturer. 

3) Extends Credit 

Extension of credit furnishes a much-needed form of 
financial assistance to his customers. Very few PHC wholesalers oper- 


ate strictly on a cash and carry basis. 


case w eee ae, 





















| | ree ye? 
| vt ae i di 

' : | ‘ i : i 5 - 
. i} f ins 


i 7 - 
o$ ayeniadevo etd esidans Aaote svaseoH .osivon Jxone no e1sines er] — 
: 
‘biovs yads ob vino 20" .nwmtato c oF Josateayal Yuotnownk eketd Gea 


' 


fete od4 sud , ssirtiftos? sgeteva wie 
vo—TT 


lin vyifevd+Hy et abote- bastiqisve x10 stsloedo daa 
a ‘ - iia 
ass tolaesfodw sdi ,anoltistsqo aif to since od to gaunos8” 
‘De 4+ he ee SS 8 DE wv OS 20 Law AD si ie , J J . J 
a4 - = 


‘ ; - 
dd3 any? vitro ton .sidixeld 2] dotdw sevodetaw 6 yiisoimogess sastage 


’ a , ; —— nn oth binmedin & ’ — 
oo btaestT Ativoe! tnd 6 |. eb aomeTt tups LBNOSESS BOLSARNS TO tq boqhaad 
’ ‘ 
3 2 ba! { igHny avi~ oy frase aj name. j (pet igiosae 
4) Cia Hib’ mM 39 2 OHO Us VSVLD IIAaMSTLU POT 3 rq 
Da gy 
* 
| wy ' a 
‘ ~ «a {tats Isqgo siw . 7% 2i3sVvies oO SIMoS 
a t t a . +> arn 7. Ty. ie te Lora 
=5 i AST cr DI ) STi rt moo twas: SSOEMIUG ¢ noua 
- ~ + i o . | _ sive 
. ' esa iii Lid yao" gat \ ¢ ee! z¢ OE ati. en> 
a — >. Far be t ee Pe oe . \ andy ka t othe ff a 
ALEITSO oss ta 1 od nenw vistemixo IGQgs S30 S1T3 1390 Asg26 > 7 
. 4 


=i of eysdmirn mtokiive n lantoarsq vol qnte af a30b yisist , Bovbotq 


j 
— P 2 7 om Foci er rant — 
ar tltbnase mio0i smoe v , 829hI SOon5fi “YAs9DTUP Bo 3IVISV 
; L a . 
1 ie 7 s a . . “ 7 
ac9ve euabnomests od as: sgemseb bone 3324dd sate-00 .Viedesdor Sae70 
‘ » , 


<Stomisdaiwt .smis to botteq tzofe 







“Isiosge &s af ed sauvssed .clngAk .dof sid o3 rsisaslorw sia ya bar 


biwes medt toqeed> ti ob yilatonss nao 1sIlpaslodw odd  -bIett afd av 





il 
i*e 








-TSivIsbiuMeMm to tod .STIKeD s 


” g8bexd ebnsaxa (e 
hobsen-toum 5 sedetomi tbr to nobstsaxe : 


- La ’ 4 - ; - 
- ee 4. ‘ 





_ to mm eu 
~ — = i 





. 34 

The credit function can be costly, however, and bad debts to 
a company making one to two percent on sales can be disastrous. 

In the absence of the wholesaler, there is no doubt that 
some credit would be extended to plumbing contractors by the manufac- 
turer. However, a large number of plumbing contractors would be re- 
fused credit, partly because of low volume of purchases, and because of 
the distance separating buyer and seller. Securing necessary credit 
information, keeping in touch with local situations, and collecting 
accounts over a long distance would be extremely difficult, if not 
impossible. The wholesaler's proximity to the trade makes it possible 
for him to perform the credit function with a minimum of expense and 
effort. Rather than establishing his credit with several hundred manu- 
facturers, the plumbing contractor need only establish it with a few 
suppliers in his area. 

4) Guarantees the Goods and Adjusts Complaints 

The wholesaler will usually guarantee the quality of the 
merchandise he sells. "The retailer depends upon the wholesaler's abi- 
lity to measure the quality of the goods and to investigate the guaran- 
tee made by the ace ener oe 

This service is very important where the merchandise is of a 
technical or mechanical nature. The wholesaler becomes quite familiar 
with the problems of the plumbing contractor and knows the best way to 


handle them. The PHC wholesaler will "collect" damaged or defective 


wi athat iyo AER 
















_ -_ . 7 Ps b) 
P : : _ : 2S ve 7 ! 
S - — 
j ‘ 7 4 7 7 > a — 
- - 7 ny Ss si 

_ : 
MU i . . 

f - ea So ; - 
od etdeb bed bas .tsvewed ,viae6o sd neo sokvon? ¢tbew eff . . 


» 7 i 
«ROW 268hb od ono gelKe no Jnos73sq ows OJ ane, girlanm (ase 22.6 


7 

5 

-aelucem odd ved atotostanioo goidaviq of behreixs oad bluow J9bets aiee 
% . > 

a, 


> 
a a , r , > py tt a 
“687 90 Bittow etodosatoos anidmulaq 3 Tecnu da atel & .78 WOsa 19% aide 
e. 
+ 7 ees ee gees ~ 
: 1<HE , Te lov i to gs@unosd yilotaq \rhsto oe 


S 
tibsts vyee iM wettwase7 tac ioe bts tovid anitereqes sdandalb a cy 


oniys [op bie sobtsuate faeool ns fovos ai griqas eased 27 


L 
f ry . on idl ad - - . a , yr 
; t sd4 of viimixote 2's olodw ad? sslddtes 
7 f ¢ Oo mumintin a iti . t arb 1 mtotisy of 
“whem shrewd lerave tie #hhaty oft on »} Leet 64 ends. sere 
unem baxhewd J itiw tibow 2kd gnidaiidstes neds 29hdes 


-~fG! a © fos IfoCnWwW Si nod Hoag: ISITAS ST di : .el{sea sf oe tbrado 


“fara, Si) sgsgivesvat of bos shoog sda io vitlaup, sAt<s railed on at < 





: oy 
- b74tusoB lone sts ee viens ; 
Z 















- 
& to et sekbnedoyem ona stotlw Jnstxoqimi ytev at sasivess etdt re 
; ; . : ; 


- iS 


ay up gamoasd talnestony oft am Bn {69 inodosm 10 feot doed 
rea : oe 
Sih a sit ase ely ah ts . ; 





ieee 
goods for claim to either the manufacturer or common carrier. As well, 
he will explain the terms of guarantees to the retailer or to the re- 
tailer's customer, if need be. 
5)) Advice and Assistance to Customers 
In the PHC industry, the success of the wholesaler of- 
ten depends directly on the success of his customers. Hence, often 
the wholesaler will devote a great deal of time and intelligence to 
building up the retailer. 
For example, the PHC wholesaler concentrates his extra ser- 
vices on quotations, engineering advice and job scheduling. 
Manufacturers also develop many merchandising, installation 
and service techniques for their products and use the wholesaler as a 
communications link in passing them on. 
6) Makes Possible a Faster Retail Stock Turnover 
"The speedy delivery of a large assortment of carefully 
selected and reasonably-priced merchandise by the wholesaler makes pos- 
sible a more rapid rate of stock turnover for the ates ae" Most 
plumbers can therefore operate with a minimum of stock, and they can 
immediately obtain any item needed from the wholesaler. There are 
usually six or seven major supply houses to choose from, and each car- 
ries certain "specialty" lines. Hence, there are very few products a 
plumber cannot obtain on short notice from someone. Furthermore, the 
wholesaler is willing to order any merchandise not stocked and has the 


knowledge of where to obtain these goods. 


18thid., p. 136. 















a - — ~~ AM 
' MU i 7 an) _ - i 
var 7 i" i iw 
. | i 7 
- - 
7 i 7 te le i r | 
i i ; 
: ! - 
Cli d. ; ' 
ifew 2h  .asiates nommos ro 1auitont toriam si ‘torltbs of misis rot shoes 
) y a 


-~o% od of tol selisder sf4 0% eSecnntaug to emzsd if ni pel gre. ihiws on 


aie 7 


.of basa Tk , Tetons e@u> ~~ ae 


- ore 4 ry 4 ie te Foe bre buf ‘2 
eT6Mmote,) oF sonetet 22h, wie SIIVDA en 
am ~~ oo f tes oe = ona — a . “ Fs ' ae =— P nat 
= oC fg es ilonw i LO Bes 00% 9nd eV 12 ubnd SHY Ss a ii ; 
é 
c 1) SsOno t ? tts eae +e aoc * > é t rlAanavrth ehe 
? t- I & " o 1 10 2 pe Pee 8 he Gc y av Sti 
} sonagiiias: nit jo Jssb 3 oveb If 
, 
-TSlis397 ono qu 
| 
~—- ~ tA e f r 
If +f 73c5 Bf 2453 n130 ile i! LOnw J ms e +lon BS Io. 
+ Foy hve i 
rt 2 } : me } Ds ¥ rt i ,Bforastous 
> a: 
- : ~ 
; aot fant .2akeibosdotenr vi: [uveb oele atstuson ters 


2 resin tA che as _ 3 4 4 b ~~ « > : , 
26 Wsisesiciw ony sey Hoe ejovdooyg aiedd tol ssephedoss solves One — 


odd guteesq ok Sat! anotesctammes 


: a P pus yt er Ee t a 
~80q foam tolseslioiw six vd sethaandorvsm bast q-vidsnosaes boa botosiog, 


TT. pw bee eo | eo }. 4 4 4 f 
mea xsn3 brs .A50F2 to mumtstn & ditw oiprego syotezeds dao exedawlg 


$t5. srasiT »t6leealonw sid mor} bsbsenr msi yoe atstdo (i976 rbemmt 





7383 apn Sas mort savgd> oF evaeved ylaque ropem neves ro xh vifaven 
§ - , Q 










5. 2 sibs Wei yis8v sus sxedd .sonsH .eeatl ' ‘Viiskosqa” hss 399 eo8 
} ; - 
: = 
ie ail .oomes midst cae txode no ckesdo.tomtin ods 
5d ia liad a . ae ive i me 


_ oe 










waes0 
7) Delivers Goods Promptly 
A plumbing retailer can get his orders filled and de- 
livered by most wholesalers on the same day they are received. If he 
is any distance away, say at a country point, the goods are normally 
shipped the same day. 
"Prompt delivery service rendered by wholesalers is respons- 
ible to no small degree for their success Ming 
Interestingly, the PHC wholesalers in the cities of ete 
and Vancouver do not perform the delivery function as completely as do 
other major centers in Western Canada. Wholesalers in Winnipeg, Saska- 
toon, Edmonton and Calgary deliver most goods requested by their custo- 
mers. While observers have suggested reasons of geographic size and 
complexity of the area as determinants of whether or not to perform 
this function, this writer feels that a more realistic reason is the 
local competitive situation. As long as customers are satisfied with 
picking up orders, there is really no reason to add an additional and 
costly service function. 
8) Large Scale Purchasing 
This is a function of the wholesaler closely related to 
assembling. ''Large scale buying enables the wholesaler to effect eco- 
nomies which the forces of competition compel him to pass on to the 
retailer. . . in the form of reasonable prices, considering the ser- 


; 20 
vices rendered." 


19tbid., p. 135. 


201bid., p. 133. 

















et. '* | : : 7 
: * 
Lf aay 7 : 
ylaqmoxrd ebood eroykisd «(N 
aes fa) | , : — 
-9b bis bol Pk? azrsbro ald 45g neo xaslks391 gatdmolq A 
. | | 
ef 42 .bsvissst ots gaia yseb smee orld ro arolsesiodw deem yd botow 
- 
¢ifemion sts eboog sit ~intoq yitnvoo's Js yee yaw soaateib yas gh” 
1X rae 
.yab omse off beqqhds 
i 7 va 
P . ' : m t : writ 7 
-soqzst al etelaeolade yd botebas: wdtvise vrevilob ‘tqmor 


7 st 

geaoove tisdi vol sereasb linge on oF off Ek 
antes to esiztto sdt al etafseslonw OHT odd .visnisesresal 
oh es yietsliqmos an corionv? yrsviieb ola mroltsq Jon ob TayuooREY bas 


i 6-ot © rr ior 5 r , nA nee he). ae es t eo} oof Cre . eek mee t 
“BAZBC .B¢ TUiw id isle eslodw ~SD8065) OTsiaesw of atosne) TOE sm Ss 


: -gieuo rredd yd bedesupst ebaog saan tevitsab uyfsD base nodeombha 009 
brs « tiga 16 snoenex bade@oumwe i atavzeedo sirdW — ems 
mroliitsq ot jon sasiteadw io et iImysgsbh es sste sd 20 yiizelqmep 
di ef noaeay stistiasss siam tAnd ules? s93iyw etdd .nobtonvt & 
ny rt vs T3t9 3 ISOs > fF: im BA sI0L38 ire svisiiapqaos In 
bas Isao ks nb bbe 63 no + of ost et stedy .,erebte qu said 
aofiont soivree, yl 
jitaado wy siso2e seared (3 


o3 badaiat vise 2019 t9feeslodw sid to nolsonui es ak elsif 


_ Ne 





“0328 396i29 o3 telsesforlw ody eoldtns gaived olnsz sgzad” . -aniidmeses ,) 
. mS 

no 26eq oF mid fax mon mols t3< vghto? to eso%03 sia dotlwee eek 
‘ i? 

















a7 is : 


Pe ora. aBphabisaos aati oldaoaeeas to ma03 sdtimt 


ee a : Bois 










Li ) Jsht e393 






aes 
Characteristically, in the PHC industry, few products are 
bought ein huge quantities (i.e., carloads). Those that are all have the 
common characteristics of being low mark-up, high turnover, bulky goods. 
A wholesaler with a number of branches naturally has a competitive ad- 
vantage over one who is limited to one or two branches. Purchase price 
economies often take the form of "rebates" at year-end. Very often 
the manufacturer will establish a minimum order quantity for a given 
period of time, and grant rebates on an increasing scale after this 
quantity is surpassed. Freight economies are realized as well, in that 
carload rates may be substantially below LCL rates in cost per unit. 
9) Anticipates their Requirements 
"One of the first functions of the wholesaler is to anti- 


cipate his customers' requirements and be ready at all times to fill 


their needs."2! In essence, this is simply having the right merchandise 


at the right time, at the right price and in the right amounts. 

Anticipating requirements is a continuing process, the whole- 
saler theoretically at least providing the communications link between 
retailer and manufacturer. 

Some wholesalers have expressed great concern about the in- 
roads that chainstores, lumber yards and other outsiders were making 
into the plumbing and heating Wepeksg 7 Their success has been attri- 
buted to the weight and skill of their merchandising in all of its 

Serial, Sp lech 


22 \iMenona Wa," s Merchandising Concepts," Supply House Times 
VII, December 1964, p. 77. 


1 a 
sis atovborq wei ~ytdeubnt OH odd nk Cleottedsesoeredd 
otf? sverd Ife ore deft seodT .(ebsoftas,.s.1), solatameup sged ak iene 


ie 
.eboog yilod .ravorma datd .qu-sizem wo! anied 20 eobtelzesssrads, semgiOa - 
2 
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' 


soitq sasdoved .aororstd owt to eno o3 batimil eb odw sto tev0- sgeaae! 


neato yr19V .bns-isey 36 “ssdedet" lo moi sdt sdss neste asimonags — ea 


fevig s tol yiitraup wbro mumittin « datideses Miw somos eee oe if 
aid} tetis sissa gnieseront os mo asisdet Jnbtg bos , omit to bobteg ’ 
den3 oh ;ilow as besilset sts esimonons idatet? .bseesqive ab yeioeemp 
,iinyv xsq Jeq5 at estex JD) wolsd (i leiinssedua od yem estat beolaes ng 
stnomsitvpoA arhagdt @oteqiotinA «(2@ . an 

~f3ng ot et weleeslodw sit Yo ecots>mu2 4arkd 2d3 Jo snd" = sat 


[fri of aemrs ffs 2s yvbnet sd bata eiavemstivpss ‘ axomos eu all stegko 
oabttigiosem tigis ofa gaivead viqmia eI eida ,sonsees al 1S abewa thos 
etauoms ilgts ofa ni bos s5itq adgiz ors 38 .amts 3oghe ees 1 

“slow sia .#20903q gdivitiijnos « et etmonsrtupest aniseq?s tind ’ 


saewasd Ack! enotisoataummos sid xctbitvorg Jessi ts yilsotietosda 2efee ro 








19% J oRivdem bie rothaser 

+h add Iuods ntsonoo jsoig bseestqxs sven etsieeslorw omoe 
§iiism szew axsbteduo, todto bas abray, todmtr! estodamtsds: todd shion af 
+$YI98 Weed sad 2290002 ston? ‘- alton gnitsod bas sade. a9 ot | 


i. dete eecaisra ited 10 i es os! 


* / : aA i | a “ a - F 






Persie) 
ramifications: display, advertising, location, store traffic, payment 
plans, Bee 

Because the plumber would rather have his merchandising done 
for him, some PHC wholesalers have developed expensive and tasteful 
showrooms in an effort to stimulate consumer demand. 

Many variations in this type of merchandising are being uti- 
lized. Exonomy Supply of Wisconsin, for example, has a unique idea in 
the industry. No one may enter their showroom unless accompanied by 5 
master plumber. And no master plumber can get in unless he buys a key 
tome 150. Min *fhact it: isvcalleduthe: ESCO Key: Club Sheen 

Shirley-Onstad Company, located in Fargo, North Dakota, han- 


dles in their "living center", draperies, carpeting, objects d'art, 
fireplace equipment, boutique items, lighting fixtures and a modern art 
gallery.” The success of this operation is demonstrated by the fact 
that since the "living center" has been open (July 1967) between 25 and 
30 people a day visit it, and the company reports fully 90 percent are 
buyers. Fargow NADY) ds <arsmall) city of 50,000 tpersons. 
Unfortunately, some Canadian wholesalers have been reluctant 
to adapt to these new developments. There are practically no showrooms 


in Eastern Canada at all, and very few in the West. 


a anadeas mes. 


OMe sternite Launches New Showroom Concept", Supply House Times 
VI, January 1964, p. 28. 


ion Ernst, Jr., "Shirley-Onstad's New Living Center", 


Supply House Times, X, February 1968, p. 38. 


.- 
22 
25 
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a 

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ww 


f 
otf Rsot90 OR (fu advooes* vrisomn od Bos a Tee . 
giitu \jeqat yisqnos od? bos ,1t sietv yeb\s efgqosg OE 
aa 
anon: hi) AP Sn «aba oof - . Jet : a F 
-ano#tsg 000,0C to vito Meme so af ¢.0d .W ,omxeT . stoged 
trajouts? mesd sve exelesoiodw nstbsannd omoer .vlotenusrotnil 


shoniwede 


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fa 


Ps) 

To fill this gap in the East, there has evolved in the past 
few years "the bath shop concept", where individuals may purchase 
practically any item befitting the bathroom at retail prices and have 
it installed should this be necessary. More will be mentioned concern- 
ing this phenomenon in Chapters IV, V, and VI. 

Closer to home, the Canadian Institute of Plumbing and Heat- 
ing launched in 1963 the very successful Award Home taaema wih s 
program is designed to increase and upgrade sales of plumbing and Weare 
ing equipment by influencing the real source of these sales--the public 
and the builders that provide homes for them. It is an entirely Cana- 
dian campaign keyed to this country's special apoblenep tea 

"The need for such an effort has been increasingly evident in 
the past few years . .. wholesaler profit margins have dropped sub- 
stantially in many parts of the country. If allowed to continue un- 
checked, this situation would lead to all-out price wars, wholesaler 


‘ ites 28 
bankruptcies, and eventually to a manufacturer crisis as well." 


Some plumbing contractors feel that the entrance of whole- 
salers and manufacturers into the retail market has harmed them. How- 
ever, as will be further discussed in Chapter IV, retailing operations 
typically use licensed plumbers to install the product. Furthermore, 
because the retail shop is a merchandiser, sales are often upgraded 
thereby benefitting all parties concerned, including the consumer. 

*7Tbid., p. 34. 


Ba ta p. 34. 


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a 


. 40 


How the Regular Wholesaler Services his Suppliers 


1) Provides Storage for the Manufacturer 
While the writer has discussed the advantages of the 
wholesaler providing storage for the retailer, he also renders a valu- 
able service to the manufacturer; namely, that of enabling the manufac- 
turer to transfer the storage function to the wholesaler. The whole- 
saler can generally utilize a given amount of storage space, labour 
and equipment to greater advantage than can the manufacturer. Of 
course, any manufacturer with ample financial resources can establish 
his own warehouses when and where he chooses. 
2) Establishes and Maintains Connections with Customers 
and Sells to Them 
An established wholesaler provides the manufacturer with 
a clientele of relatively permanent customers. He does this through his 
own sales force. The typical PHC wholesaler of the 1940's and early 
1950's did not put much emphasis on the sales function. This was due 
to market conditions at the time. "In the residential plumbing market 


. . . the contractor has more technical knowledge than the salesman."2? 


However, as the market in Western Canada developed, the principal custo- 
mer of the PHC wholesaler changed from the "plumber" to the ''contractor' 
This person was concerned more with the mechanics of big buildings, 
apartments, schools and office buildings. New products began to enter 


the market in greater quantities than ever before. The sales function 


29unger, "Cash _ and Carry", p. 64. 


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began to take on more and more importance. Increased competition 
forced the use of a better-trained sales force. As wholesalers became 
more interested in the large contractor market, price cutting became 
the rule rather than the exception. Quicker communications became 
necessary between the wholesaler and customer. 

At the present time, most observers feel one of the central 
problems the PHC wholesaler must solve in the very near future is deve- 
lopment of a stronger sales force. '"'Order-takers,'' as one spokesman 
called his sales force, are no longer sufficient. 

Very often specialist help comes from the manufacturer's 
agent. As mentioned, in designing commercial hot water heating sys- 
tems, the manufacturer's agent will design and quote the whole system. 
The wholesaler than adds his markup to the quote, and submits it for 
bid. If he gets the job, he then performs the regular functions of 
storage, assembly, credit, etc. 

Some PHC wholesalers do not feel this method is adequate. In 
Edmonton, one wholesaler this writer interviewed mentioned many jobs 
he had lost because the manufacturer's agent just couldn't handle all 
the work. Hence, this wholesaler is now in the process of developing 
an in-house specialist in this area. 

Because of the wholesaler's general reluctance in the past to 
sell intensively, the manufacturer often makes use of his agent as a 
missionary salesman. That is to say, certain retail customers are 
cultivated directly by this person. Some by-passing of the PHC whole- 


smer-occurs at this point. 
















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~42 


3) Cultivates the Field Intensively 
Because of the geographic dispersion of the plumbing 

retailer, it is physically impossible for the manufacturer's salesman 
to cover him adequately. In country sales alone, the PHC wholesaler 
may do 25 to 35 percent.of higutotal business, melemis sbyi thar cimecthe 
best position to judge the optimum frequency of calls to these points. 
The city trade is widely dispersed also, and may include thousands of 
outlets. 

"As long as great distances separate manufacturers and re- 
tailers, as long as many manufacturers are relatively small-scale 
operators and produce a limited line of merchandise, as long as many 
retailers are located in small communities and in otherwise inaccessible 
places, and as long as large numbers of retailers operate on a small 
scale and buy in very small quantities, so long will wholesalers be an 
indispensable medium for translating concentrated production into wide- 
ly diffused retail distributionsl © 

4) Aids in Stabilizing Production 

I will not dwell on this function as I think the advan- 
tages of stable production schedules are obvious. Suffice it to say 
that the PHC wholesaler can generally communicate to the manufacturer 
his needs for the year, the times he will need the product, and the 
quantities. 

Further, '.. . in critical times, the manufacturer who 


sells through wholesalers does not feel the curtailment as sharply as 


30peckman, etral., p.« 145. 

























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10 abris arom abuionrt m one OB. 5S: 7210 V¥ sO Ig ; =) 6 raw vite oe : 


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ad yYoom ae gotol es ,sethoeioten io ontl bstimil & soubotg $a6 exosezego: 


[~ 
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oe 


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ra aa 
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dite tard sKtvnem ods yesmbd iestytte hi... * 
s - = — ala > ae eo am 28D > ne - . i. - +‘ 


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« om 4, am od Pb ae 2m! eid 


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ree 3) 


if he sold directly to retailers. In other words, the wholesaler acts 
as a shock-absorber, and the producer has additional time to make ad- 


fietmentael a 


5) Plans Distribution in his Territory 
According to Beckman, accurate market analysis could be 
a problem were it not for the aiel eaciseg While this statement is 
true to some extent, most PHC wholesalers are not too concerned with 
comprehensive market analysis. However, in the field of sales fore- 
casting he must plan ahead, and can and does communicate this informa- 
tion to the manufacturer. 

Furthermore, in an informal way he receives the bulk of com- 
plaints should a product not be performing up to expectations. PHC 
wholesalers pass on this information rapidly to the manufacturer in 
most instances. 

The wholesaler theoretically attempts to channel the proper 
merchandise to the proper locale for the manufacturer. "Unfortunately, 
the typical wholesaler, although in a position to appraise the market 
scientifically and accurately, has not taken full advantage of his 
opportunities. His neglect of modern techniques of marketing research 
has been one of the contributing causes of his unpopularity with manu- 


facturers.''> 


> sassicl p. 146. 


Sereda tao 


Sits p. 142. 
























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_ 









22 44 

It has been suggested by industry observers that if a manu- 
facturer does own his own wholesale outlet, he must be able to operate 
this outlet profitably. That is to say, the wholesale outlet must pro- 
vide an adequate return on investment. 

AGTthis "pointy; ites pertinentetomote the concept of iverti- 
cal marketing systems does not fit well into the Theory of the Firm. 
Costs are allocated differently in an integrated company, and for tax 
or any number of other reasons, it may be advantageous to show iorte 
or no profit from one sector of the firm. 

Therefore, it may be erroneous to assume that manufacturers 
who own their own wholesale outlets must operate this outlet on a 


profitable basis. 





cr ee a 


F } ; , 5 
-utiam 8 it dedd avavxcedo yateubat yd betesgguea need end at i 














: " 
eis74q0 64 side od deuit od .doltuom ofrestady awo etd mwo @90b reiu39 53 
: 
-orq daum deltuo sleslodw oft ,yea oF at todT .yldetitorqg Jeldua ele 
. > 


,desmigovnl ao tude 93 supebs ns Sbt 


é . ¥ ' ° * * 
-iasev to S@6onao 3d) aton 64 toonliteq ei +41 ,agieq eid 3A 

mrid sna 36 waesdT sf ogni [ow Jit you asceh emradey.2 onli sina Isao 
*o2 108 bea. .veeqmoo badetgstol ang ot vitnerestttb betssolle sta ageee 


stagti wode o2 avoegetoevbs od yam 3] ,sdoasst yedso to tsdmm yaRrgs 


mtit sis to 1t0399e sho mort Ifie%, on Bp 
7 











27TStujJoniunsm tdait oovegeasn of evastotie od vem Jt .sTereTSenT 
Bp no telsuo eld sinteqe sevum afslsuo slnasliodw: tige tied3 seo of 
. alasd sldesibtore 7 





CHAPTER IV 


EMERGING PATTERNS OF DISTRIBUTION 


The PHC Industry in Canada 


Within the confines of this thesis, it is difficult to give 
more than an impressionistic picture of a major industry in a big coun- 
try. Therefore, the writer hopes the reader will be tolerant of any 
shortcomings in this account. 

From a marketing standpoint, Canada divides into five basic 
regions, each with its own distinct characteristics and considerable 
differences - British Columbia, The Prairie Provinces, Ontario, Quebec 
and the Maritime Provinces. 

The writer has included in the appendix a summary of national 
averages of expenses and profits as percentages of net sales for 1966 
and 1967. Also included in the appendix are similar figures for the 
Maritime Provinces, Quebec, Ontario, the Prairie Provinces and British 
Columbia. 

Generally, the financial health of the wholesaler in the PHC 
industry is deteriorating. However, in order to discuss his health, 
we need a vantage point from which to look objectively. 

Relatively speaking, the plumbing and heating industry in 
Canada very closely parallels that of the United States. Business en- 
vironments are quite similar in the two countries, with corporate in- 
come taxes between 50 and 53 percent, and the Central Mortgage and 
Housing Corporation being much like the United States' Federal Housing 


Authority. 

















MY AAT eAHD 


WOITUATATEIC TO BMUAITTAT OWIDAIMS 


wbarnd mi as Sonbirl DAG oAT — \ ' 


oyig oF Jivfodd2tb at 4) ,aisedt ‘ald? If sentines sa oid 


-nuos aid 2 Ti yuteubrt sofsm a io sitdolq ditetcolbsesrqel np ned? ete) 


‘ 
ys lo tnprelo? 2d Ifiw tebsst efi argo rettuw of ,stotetedT sg ; 


.jnvooss ebla tt ngnamoas song | ay 
i 


oiesd ovij ojnt esbivib absnkD ,ickoghtsie gnissiasm 5 mort — 


j j 
sidstebranes bas esotiatyosostads toniterb nwo att ddiw doses .gfolkgem 75 


osdev) ,ottsiiO0 ,2e0ontvortd oftta7t oft ,sidmulod daiticd + esoreseaaee 7 
.e2aonivertd smitityve efd bam 
fenolsen to Ytemnue #.xbbiegqge sit nt bsbulont ead. teditw ofT a 


deLI tol asis2a jon to esysdnsotsq es atiior bas esensqes To asReisyvs 


edd toi asiugil islimte ste xtbnaqqs sdd mi bobulont oelA -.YOO@E Gan 7: 


1 





fatiixné bas asontvord sitisyTy oft ,oftedeD .ssdsvO .2eortverd sale ivalt 


ekém tea) 


ONT of3 at aslsesfodw sit to dala Istonsnt? odd .yffarensd : 
“7 

(Wtlesd etd eewoeib oF tsbuo mt ,t9evewoH .goltotolrsteb et yuteuienk 

fc in) 


YLavitosido Aeol o4 dotdw mori ifttoq sgetnsy 6 beet wo 


+ 





«AE YTSaubnt grtteod bre gakdmtg odd pgntdsage yloviveled 
iH iG .a0m9% badbad sila to 4ef3 aloliaxeq ylseofo y 


7 
a 
‘= 
=) i 
7 7 
® _, 7 
; : : a bs 
‘37 snd 1S. mire # ive 
“ aes ee a * 
es 7 
- 
fi ae WF 







a ‘ @ 
o 


~~ 7 
515 
a a 


Seamnte . 
= 









a ee 





; Ps) Ce a 
a A ee "e. 





- 46 

The wholesaler sells the same products, often under the same 
brand names as in the United States. He performs the same services and 
has the same problems of excess competition and declining profitability. 

In Chicago, there is an organization called the Manufacturers 
Clearing House of Illinois, sponsored by manufacturers, which for pur- 
poses Of brevity will” be referred to’ ‘as’ MCH in’ this® thesis.” Tt i's 
their sole business purpose to keep widely informed on the financial 
health of more than 4,600 plumbing and heating wholesalers in all 50 
states," 

The information the MCH uses comes from two sources: the 
wholesalers themselves, who provide basic facts about their corporation 
plus recent financial statements; and the manufacturers, who provide 
the wholesalers' paying records. 

While the following information was obtained from the Ameri- 
can PHC industry, industry observers” feel it is generally applicable 
to the Canadian scene as well. 

The following information was obtained from an article in the 
Supply House Times which presented a tape-recorded interview with 
William Nagel, President of the MCH. 

The first question concerned the "state of the Union" or 
rather the general health of the PHC wholesalers, as they headed into 


1964. 


lRobert Taylor, ''Financial Health of the PHC Wholesaler", 
Supply House Times, VI, February 1964, p. 45. 


2Tbid., p. 46. 


1m 0 Ye Se 






















i. 
ogni 6dt tebow asa to .atouborg omae eft elisa tolaasiodw off , 
bes «voivies sere scf3 anrro)teq 6H .sade0e betial oft o} es emer ret 
VIifidetHexq g@tnifioeh bas abbatieqnos assox%s Yo asisldotq smee ody 
aistusob wom ads boifes noitestaagioe ns et oyedd -Ogeotd) nt a) 
-tuq fot doidw ,etotutociuasm yd “betcenoge ,etootilt to savol guitsef? ' 
at a7" .aluedd et4d nik HOM an ot bSerretex od Iftw yi iverd Io asaeg + 
istomar st sat no bomrotnt ylsbiw qsedt o3 seszsuq eeotteud slow riedy 
Oc ifs af atalsesiodw grttesrl brs gatdémviq 000,4 matt stom’ Is Adie 


i} 
Ey asseve 7 


"iu 
= 


* 
: 


sia 7299TvGe OW) mod esman soem HOM ‘nits noijearteint sdT 
noijstegzos Teds Juods atoed ofend sbivorq ow ,eovioamendd etoleeslony 
shiver ondw Letomdopturem sit bas -2jremeteye Istonent? ansceF Siig 
-tbtooot goiyeq ‘erslsealodw odd ay 
-~FremA sii mort bantsido esw nottmmrta? sntwolilo? ers alird ’ 
Sidsobleqe yitersnes' et +% feod Sayavisedo yViseubat .vwieubsal OWF mee 


5 
_Ilaw as eosos aantbeasd sd oF 


aid ai sloitts ns mort bentsido asw fokienrtotat gatwollo? sAT ¥} 
djiw wsivvasnt babtoxe7-squd 5 besnoretq dobdw zamiT ven vigqque : a) 

-HOM sii to toohiestd . Joga mot £220 : 

Bis) "natn edd to steta” off4 bontasaos nots eamp daxti sdAT wr 


cdtkebebsod. yo 20 ,=70funefotw ONG. aM) Io d2lued texowdy ods 








. a | 


Ws 
’ 


2 bY, 

There are generally two extremes to this question. At one 
end of the continuum we find the view of continuous profit shrinkage. 
Wholesalers maintain it is becoming more and more difficult to make a 
"decent profit". Conversely, some wholesalers--but more usually con- 
tractors and suppliers--say that wholesalers are "crying poor, but 
living rich". This viewpoint maintains that complaining is part of the 
wholesaler's nature; that he does it to throw those who would tamper 
with his profits off the track. 

In reply to this question, Nagel said: 

Statistics show that 1963 continued a trend which began 
immediately after World War II--the diminishing of the whole- 
salers' ability to pay their bills on time. This has been 
at the rate of 0.6 percent per year. In January 1946, 98.42 
percent of all manufacturers' invoices to wholesalers were 
being paid within the terms of sale. In January of 1964, 
87.5 percent were being paid within the terms. 

As you look at these figures, you see a steady constric- 
tion of the wholesaler's ability to pay his bills, which is 
a relatively accurate gauge of his financial health. 

General terms in the industry in Canada at present are 30 days, 
which may or may not include a discount for prompt payment. In sub- 
stantiating Nagel's claim, interviews revealed that where discounts are 
offered (generally 2 to 3 percent) for prompt payment, they are taken 
advantage of. Thirty day invoices are generally paid when due to allow 
the company to maintain a good credit rating. However, the wholesalers 
interviewed revealed that there is a trend well established in the in- 


dustry to "dating". That is to say, special arrangements are made with 


the supplier to pay for purchases in 60, 90, or 120 days from date 


> Taylor, Financial Health, p. 46. 


Te... 

soo JA .tiebkieoup etd? od gametixs ow yliexeneg, 918 ot9dT 

-sgednizde 1J20%q) avounitnos, to wetv oft bal aw aunnhaso9 oka 0 bag 

8 stem 03 Iluotttb som bis prom gatmoved at a) mhetatsm ereleestodh | 

-oo yisuay stom jud--erelsaslotw aioe  elostevaod ."2ite2q dmeosb™ 
gud .teoq goiyto" oxs ezelseshordw tad yae--enellqqus, bas atespaT, 






eds io sais at gnintsiqmos teddy aokatoien alae aad aid? ."debe gabvit a 
sequae biuvew ow s2eond wotdt of at agoh of dsd3 jotvden ae’ teleesiodw | 7 
a 
tosis oft Do etiletq abd diiw 
‘bise fogs .cotiasup efda o3 yiqsa al ole 
neged dotdw hae1d © ‘bayrttno> G8Cl ted, wode aokieises? 
-slontw sd3 to gaideiatnib sha--If tsW bilacW x9378 ylotstbemmt : 
aosd ead 2tdtT .omti no ailid «iad yoq of ytilids ‘exoipa ist 
$3.80 ,ddef yxsunesl aI .tesy sq Jusnt9eq 9.0 to sist si ts 
sviw crsisestody os agstovai ‘etsxuicsiunem [is Te Jasoteq = on - 
P0Cf to wieurel al 9st to emret ort niivtw bing goied 
-eortes oft otdtiw bisq anfdd atew 3asonsq ¢.48 “a 7 


-9i74efo2 ybesde e S98 LOY , 2a0"Nsta seedd ts Aool voy aA 
at doigw ,allid etn veq of ytilide «’wsiIsacfernw afi to rok 
. -fiaiaeti istonent? atd Io sguag staiooss ylovitelez s 


-eyeab Of sis insaetq tse share) of yrteubat sid ai aries [s29neD ~a 


-dua nl .dneoteeg 2qmomq +O} Jnvooeth « sbulont tou yam to yam dokdw _ 


e%8 einwoveth otorlw tedi boltevart avolvirsdme ~ithatlo a' lags gulisiianis _ 
a3 


noises sie you) ,3memysq iqtotq 761 (me0teg € of § qlerensg). baisito . 
wolls oa atrb aril bing xilesonag. ais esvicvet Ysb yinidl .20 sgatoevbe _ 
nae sama .Tevewoll vantian 2tbex> bog 0 ohninkap 90 iene ait G i‘ 





20 48 
invoiced. In return for these privileges,the wholesaler agrees to buy 
a specific amount of goods. 

When a business operates at levels of 1 to 2 percent profit 
on sales or less, and characteristically turns over a tremendous amount 
of material in a year, terms involving payables become critical indeed. 
For example, one industry leader commented that various large manufac- 
turers had decided to forego 2 percent discounts for prompt payment. 
One does not have to be a mathematical wizard to determine the devasta- 
ting effect this could have on the individual wholesaler. Manufactur- 
ers, have however, apparently been persuaded not to pursue this line of 
thinking for the present. Most persons interviewed seemed to feel that 
pricing adjustments would have to be made if manufacturers plan to in- 
troduce this policy in the future. 

In analyzing the financial condition of the industry, we must 
look at other considerations over and above payments to creditors. For 
example, poor location due to lack of market analysis, or due to mar- 
ket shifting can hurt not only the business concerned but the industry 
as a whole. Consider, for example, the cities of Edmonton and Winnipeg. 
One plumbing and heating wholesaler is currently adding space to his 
warehouse in Edmonton because of the huge demand built up in the last 
two years. This is an addition to a building not yet three years old. 
Previous to this, the company was located just north of downtown Edmon- 
ton in an old building which was too small at that time for existing 
business. For one reason or another, future market conditions were 


not forecasted accurately and hence, "extra" building costs over and 






yud of ssoage telaeotody od , days Tivizg eugilt tel rmier al -bsotowal 
7 -eboog to Jasons oti ivog# 6 7 
sitoxg tneoteq S07 bo afevel dn astarsqo aeewtaid’ 6 net wh 
jnvons awobewoesd .« reo ends Yitasijelsssoerero bre , axel 20 aslae fo 
-beubot Isoktstxzs omooed eeldaveq Qoivioval emred pase 6 nt Inbistan 26 4 
-on ump egtal evoltey dads hstieemnoo tsbas!l ytiewbat sro , Slqmeaxo to% 
| SeanyRg Jqmoxg Tei atnuosahy tnsv1aq §$ wget? of bebkosb bed etetes 
-63¢5Veb ‘ts sition eat ot haste fpotaseriiam o 28 64 oved dom eebb Sat 
-wwiosiunet .isleeslodw Inubivibut stia oo oven biuos ekdzs gostte galz 
to eall afta suetwq ot dom bebanttreq asad eitneteyqs  tavevod oved .eTs 
ted3 les3 oo basse bewebvisinl anvareg Je0M .ineesto Sit Dot gatdabde 
-at of nelq svetutostunso 3 ‘sham sd of oval blyow edasmievihe grisigg 
-9¥oiut sit nt yobiog aida sowoboa? 
Juuis ow ,yxseubni 944 Yo mobethaos fetonentt eff gotsyiana ot 
YoU .erodibers of einameq svode bap travo atotsarshbienop tadio te dook : 
“tem oF sub an ,efeyians Jodzem to ass! ot sub nottasel req , elqmagh i 
Ytiavbat sit iud bentssn99 geanteud sly yico ton sien neo ghkitide geal _ 
<gsqtnaiW bas notnomba Jo astuto wits ignsxs sol ,rsbietod ,siodw sae 


aid oj sotge gotbbs ylinszw2 af releaslodw gatsasd bas anidmstq sat “4 7 


Jasl edd nt qu t0ivd baemsb agud a4 io sauec0d nodaomba ae seen de tew 





above "normal" were incurred. 

Conversely, in Winnipeg, plans are underway to build a new 
but smaller warehouse than presently exists, because management feels 
there is not much room for expansion in that area. 

As Nagel says: 

There is nothing wrong with rapid expansion per se. At 
the right time, and in the right place, it’ is safe and 
sound, even with a minimum of capital. The real trouble 
lies in expansion which is ill thought out and poorly exe- 
cuted. Then it is not the fact of expansion, but rather the 
method that is to blame. 

Other problems include misuse of capital, such as building 
expensive offices when cheaper ones could be purchased or rented; and 
"piling all your eggs in one basket". For example, many wholesalers 
allow themselves to become enamoured with one or two large accounts. 
It is not at all unusual in the PHC industry for large contractors to 
fail, taking a myriad of businesses with them. 

Another problem prevalent in this industry concerns owner- 
ship. Many wholesalers are independently owned and operated. Indus- 
try spokesmen feel that this is a detriment to the campany itself be- 
cause, they feel, it is more difficult to attract outside funds than 
it would be in a publicly-owned company. This problem is further com- 
plicated when we realize that in many "family-owned" companies, the 
money is just not there to buy out retiring or deceased shareholders. 


If what surplus that is available is used for this purpose, it leaves 


little to "plow" back into the company for expansion, be it in terms 


S Taviete Financial Healtne oO. 92). 






Qa... 
| boron sew" Lenton syed 

woa s blitud o4 yewasbay sxe enetq ,geqingiW or pgleereyned) 9 9 7 | 
vise} Srremey sntcn sausoed ,atuies elinosetq ned? weostdund Aalitanie Jie 
.s516 tadd mi apketeqxs 102 moox doum ton at srekt) 


tayse Iegsk 2A ad | 
: 
4A .82 78g nolansgxs bigest ditw gaorw goidson at stedT tA : 
tee et 31 ,o9ntq idgis edt At bre <omitT tdgts orld 
siduoxt bae1 oiT .Latiqes lo momtninm s dctw aeve ,bovoe 4 
-9%9 yitoog bus Juo Jdguons [Lt 21 fotdw noiefagee at ask 
of3 tedae% jud ,sofeasqxs lo tos2 og Jon si +t fodT .bsduo me 
.smsid ot gt dads hordem 
gitbliod as dova ,Isditqss 20 Sgueim sbuont aniston 1930 ‘ 
bne ;botnsa 10 bseedoteq sd bivoo asno +sqnors notw esottto svkenequa 
oy 
eteisesiodw yosm ,slqmexs 207 ."'39aeed sno ut eggs awoy fs gatiie® 
.23fuqo008 sgtsi ows to and fiatw bstyomens smoosd oF ssvioneneds wolli 
-s@ 
OJ @10J5e7INbo sgxel 193 yrseubal OND SHd at Ievatav [le da don af 3F 
many ditw esgesnkeud to babtym « gcties £908 | 
“Istiwo anasoqo9 yssJeubol etda at saslevetq maldatq zsr30nA 
-atbol .bstersqe bas bonwo yfsnebasqebn! ots arslpeslodw yoeM = epkde ; 
ah 
-od lisesi yoeqnps oft of Jnamtsteb «5 et etd} tadi Jes? lean ath ven 


neds abowt sbisjuo tosis46 of aluokitth s1om ek +t «last wears saan > 


ow | ; ia 
“moo T4H32u2 ef mildoxq aid't “Kasgmo> si ha -~Yiotidug s mb sd a 


sits pti: haath ‘oem i mae shiney ow nsdiy 
_ tau ae . 


- te ne ioc 


Yo ‘or 


» 





a ee) 
of inventory, fixed assets, or wages. 
Many of the problems outlined previously are not unique to 
the wholesaling business, nor to the PHC business. However, all play 
an important role in survival for the industry and suggest basic poli- 


cies a business must adopt in order to survive. 


The Canadian Institute of Plumbing and Heating 


a 


As mentioned, all industries have certain problems wi thin. 
While many problems seem to remain unsolved, there is often in each 
industry an organization whose prime purpose is to analyze and suggest 
solutions to member firms. This is commonly known as the Trade Asso- 
ciation, and in the PHC industry is called The Canadian Institute of 
Plumbing and Heating (hereafter referred to as the CIPH). 

The CIPH was founded in 1933. Besides serving as a link be- 
tween manufacturer and wholesaler, it is also an effective line of com- 
munication with the Federal Government. It is extremely important 
that communication leads to mutual understanding and solution of govern- 
ment and industry problems. 

Promotions affecting one or more segments of its membership 
are another important function of the CIPH. In addition to the Award 
Home Program mentioned in Chapter III, the CIPH has established the 
Sales Development Council or SDC, whose purpose is to foster good 
salesmanship in the industry. 

"Almost missionary in its concept, SDC first 'trains the 
trainers' (representatives of member firms). These men are then sent 


back to their home locations to pass on the basic principles and tech- 


Oi. 
.esgsw 19 ,atseee boxdt yrommevatsie 

od suptay ton ax ytarro tvatq hoaklide ansidor odd to viel | 
velq fin ,7SvQWoH .seormrbeud ONG ert od Ton ,sesmbacd gat iaesloriw odd 
~ffoq shead teaxygue bas yrtavbal ot 407 Isvivste nr ofot ans2rTogmb ity 


ovivae of asbyo of tqebs tevm seontand & Beko 


gnhiinsi boa paldmutd Yo studidant metesmed odT 
ea nen 


wotds fv ausidezq aindtss oved esiodedbnt Iie ,benolacem- eA 

Hoes of nssto eat srs Sopa oinmes o3 mesa ameidong yoam ol iW 
Jesgyus bins ssvlans of et sacqtug sitkiq saonw fortasiasgie ts yrteubak 
-ozeA abexT sla es nword! virtommoo af atdT .enrh? adem of anoigelos 


to stuvisanl mothers sAT bolles ai yateubot OWT 4dd nt baa yaokaees 


.(HTIO oft es of botx9291 ted tesisd) gnitesH Soe guides 4 


“ad Watl s an anivise eobresd ,f€@! ni bobnvod aaw BYID ont 
“m0 to sniil svitissits ns oreles at at .telsastiodw bas yoru o5iwnem gee 
tapjtoqmi ylamstyxe el 4] .Jneumaevod Iexrobst offs titiw aoksesiout 
-areveg jo roljgutos bons gntbreievebnu Isudum of sbusl soltsotngmmos Per 
-emeldorq yTavbar brs sem 
qidetsdmom e?i to etnemgse sitcom to sno gmbitostts enckjomeyd «= < } 
biawh od? of notaibbs at Histo silt Qo molionu? tonizogmt teijome ota 


oi? betfetfdases sari HIG: oAd pat qq sit emai ae ROsF by 








Ae 
niques of effective salesmanship to others at the wholesale and retail 
levels in their local industry community." 

CIPH has also organized the Business Management Institute 
(BMI), a course which provides intensive training in management con- 
trol practices. This course is offered each year at the University of 
Western Ontario and is conducted by Professors W. G. McDougall, J. B. 
Washington, and B. Little of Western, and J. G. Preston of Boston Uni- 
versity. In May of 1969, twenty-three students from fourteen Reeds 
companies were eraduated.° 

The CIPH also works closely with the Canadian Standards Asso- 
ciation--the major testing body in Canada--towards determining or re- 
vising plumbing and heating standards that can applied across the 
country. 

The Institute's annual budget, about $130,000, is gathered 
from wholesaler and manufacturer members in varying proportions, de- 
pending on annual sales volume. 

The general reaction to the CIPH among the PHC wholesalers and 
manufacturers in Canada seems to be one of increasing enthusiasm and 
support. One complaint found by this writer in Western Canada seems 
to be that of a feeling of "being left out". With the greatest num- 
ber of members being located in Southern Ontario and Quebec, control 
tends to be centered in those areas. 


In order to overcome this problem, plans are currently 


-Fanning, Award Home Promotion, p. 123. 


Cneating, Plumbing, Air Conditioning, June 9, 1969, p. 2. 






tas 
frais: bas ofoestodw oft 35 2t9dI0 09 ‘qidaonnasl ee) ovites ite, to ssuptar 
"vi taummes yatenbot Lapel thedd of alovel 
giu3i2enl JnemsacncsM ecentavi sid bostnagro oats zed WAID it 
-—109 tfanapgensm ak grintexd ovbansint esbivotq dotdw sein B._ (EME) a 
Io yYilbersvin odd 3a tesy doss bszstie el sexvoo abil .¢ankioetq foams ; rs 
A .t ,flegueded .o .W eroeasios9 yd betoubnos ai bos ofrvesno aieaaee | 1 
~tn modsoh to modee7T .O .L bas .aTsd acy jo oftdhI .2 bos ,notgaidenW 
isimom nesdrvot mori vtnobhbute sstda-vinows .@d@!l to yam al es 
.bejsubatg sTaw ph ingtenal 
-ouaA Weatnin eae actbans) sd3 diitw ylosolo <ayeu o2ls, A9D0. st 
-51 10 guinimisitsbh ebyswoi--shansD mt ybod anItess 2zoLem sij=--nengero 
oy geots6 betiqqs ns9 sedd abraboste gnidssd bas seine gntetv 
7 
(ieee 
bavodseg 21 ,000, 0C12@ tuods ,togbud Isuqns 2#*stusidadt oar 
-ob ,eforisoqetq gnivisy ot aredmsm +S7v35Riuhism bos toleestede Mowe 
.omylov asine Invace ag gnttbasq 
bie erelsaotorw HI soft gnomes HITD ott ov notsoset ferenag anT re - 
bas mesleudins goatessionk to et ed od amsoa sberso tt etetwdos tere : 
eosse sbsnsd nzasesW mt isttw etda vd banot Intelqmes 9n0) 09a 
“mon desyse1g siz fiIW ." tub) sts aie 10 Qnifset » sem 7 “a 
Side (Dadsuo bre orreano rsd nk ‘ba2 8901, horse 


Rete btw pec te os 
ve? are a : eS 





Acard 
underway to decentralize the CIPH into provincial regions. This pro- 
ject has just been initiated, however, and the writer has no informa- 
tion on its progress to date. 

However, at the close of 1968, membership in the CIPH numbered 
113, consisting of 49 manufacturers and 64 wholesalers in 506 locations 
throughout @onaden. 

According to General Manager of the CIPH, G. Dixon, very few 
wholesalers or major manufacturers of PHC products in Canada do not ae 
long to the Institute. This would be some indication of the representa- 
tiveness of the CIPH as "the spokesman" for the industry. 

The trade association exists, then, to provide service to 
members. The types and ranges of services provided depend on the de- 
sires and relative affluence of the membership. 

As one would expect, future patterns of distribution are a 
major concern of the CIPH. Presently, there are two prime areas of 
concern to the CIPH, that of prefabrication and possibilities of verti- 
cal integration. 

A short discussion on prefabrication follows immediately, and 
finally, aspects of vertical integration are discussed. The writer 
feels the latter of the two is most important for the PHC industry, 
and has included a discussion of one aspect of vertical integration, 
that is, the prospect of the wholesaler entering the retail field of 


business. 


7The Canadian Institute of Plumbing and Heating, Plumbing 
and Heating in Canada, 1968 Review, Montreal, L960, (pe 91. 





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Ss, 
Prefabrication 

Prefabrication is not a new development. As early as 1624, 
the English brought a panelized house of wood to Cape Ann for use by a 
fishing fleet and the house was subsequently disassembled, moved and re- 
assembled many eee 

Early in this century the''mail-order house" became popular 
on the frontiers. Sears, Roebuck Company claims it sold 100,000 houses 
in 40 years. "This was usually a precut house, but the production ae 
these houses was important since it pioneered techniques for the pro- 


duction lines, standardization, md price packaging in the home manu- 


facturing industry." 


At the present time, thousands of companies in the U.S. are 
participating in the prefabrication industry. These participants in- 
clude mobile home manufacturers, sectionalized home manufacturers, 
home manufacturers, traditional builders using some preassembled com- 
ponents, on-site fabricators, component manufacturers, and building- 


material suppliers. 


There is little point discussing the above for purposes of 


this paper. Rather, the writer will attempt to outline how prefabrica- 


8 Battelle Memorial Institute, Columbus Laboratories, ''Final 
Report on the State of the Art of Prefabrication in the Construction 


Industry to The Building and Construction Trades Department, AFL-CIO," 
Columbus, 1967, p. 15. (mimeographed) 


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tion is affecting and is likely to affect the plumbing and heating 
wholesaler. 

The 'traditional' method of construction was quite popular 
prior to World War II and was used for both residential and non-resi- 
dential type structures. All the work is performed on the site, with 
no preassembled components being used. 


The combination of rising labor cost, increased demand, 
and the increasing role of the component manufacturer has 
caused a rapid decline in the use of the traditional method 
during the past decade. Currently, only a few builders use 
this method and they are scattered around the country in the 
less populated areas. 


During the next decade, Battelle feels that this method 
will become virtually extinct, leaving only two methods of 
construction that are applicable to the entire building pro- 
cess. The impetus for this change will be: (1) rising labor 
cost, (2) larger and more efficient builders will start to 
dominate the industry, and (3) manufacturers will continue 
to become more efficient and offer larger multifunctional 
components at less cost than those achieved by using on-site 
labor. 


As a result of these changes, builders currently using 
this method will probably have two alternatives to consider: 

(1) use rationalized traditional methods, or (2) quit the 

building business. 

The rationalized traditional method merely implies the use of 
some preassembled components with the traditional method of construc- 
tion. 

In relation to the plumbing and heating industry, then, the 


tremendous pressure to reduce on-site labor means "unitized" bathrooms 


and kitchens at the very least. ''No matter how much the trades resist 


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ity OlLetie codes restrict it) this factory packaging is bound to grow 
and the advent of plastics will speed the peneeeen 

In the past, the market was almost entirely a matter of local 
wholesalers supplying local plumbing and heating contractors working 
for local builders. Some observers have suggested the plumbing whole- 
salers are not maintaining their place in this revolution. Rather, as 
a group, they seem to be ignoring it, hoping it will go away. 

This development does not necessarily leave the wholesaler 
shut out. ''Though there will probably be some concentration of the 
factory-built housing industry in the future, today it is highly frag- 
mented with several hundred producers, many of them making only four or 
five units a week . .. the industry is widely scattered and probably 
always will be evar a 

"The typical producer does not have the volume or capital to 
buy direct, or the space to store inventory. He needs the services of a4 
wholesaler, and a number of plumbing wholesalers have developed a good 
business serving his ee epi 

Prefabrication, then, could have a tremendous effect on the 
marketing policies of both the manufacturer and the wholesaler. The 
wholesaler would do well to seriously explore the effect of this pheno- 
menon on his business in the future. 


eer er i aie Supply House Times, October UICCe ie 


amide po) 130, 


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The CIPH will, no doubt, be instrumental in the gathering 


and dispensation of data concerning this aspect of distribution. 


The Vertical Market System 
15 Bie : 

Some observers feel that the decisive development in the 
American economy at the present time is the growing importance of ver- 
tical marketing systems in most lines of trade. 

Historically, goods and services in the American and Canadian 
SCOnOMLES | smu. 

. . . have been distributed through highly fragmented net- 

works in which loosely aligned manufacturers, wholesalers, 

and retailers bargained aggressively with each other over 
price, severed trade relationships with impunity, and other- 
wise behaved autonomously. Furthermore, most of the firms 
included in these conventional marketing channels have 
operated at a relatively small scale and performed a pres- 
cribed--but often uneconomic--set of functions. 

In the conventional marketing channel, each layer of acti- 
vity is clearly separated from the others. That is to say, manufactur- 
ing organizations traditionally performed the functions of product re- 
search and development, mass media advertising and distribution pro- 
gramming. Wholesalers performed the functions essentially outlined 
in Chapter III. Retailers performed a particular set of functions in 


promotion and physical distribution that were clearly differentiated 


from those performed by wholesaler and manufacturer. 


+ MeCanmon et al., Emerging Patterns of Distribution, p. 1 


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sokotai/ 
The resulting concept of role separation was further 
reinforced in two ways. First, separate ownerships were 
involved at successive levels of the distribution process. 
Second, trade moves discouraged firms from performing func- 
tions historically reserved for other types of enterprises. 
(It was considered improper, for example, for wholesalers _to 
engage in either retailing or manufacturing activities.) 
According to McCammon et al., "'. . . the concept of functional 
shiftability has replaced the concept of role qepeeyieton, Hence, 
", . . functions historically performed by one type of firm have been 
shifted to another type because the latter can perform the delegated 
function at a lower cost per unit." 
Conventional marketing channels, then, seem to be becoming 
economic anachronisms. 
"Clearly, significant economies can be effected by reposi- 
tioning, integrating, and synchronizing marketing flows from points of 
production to points of use--and at the present time, vertical market- 


20 
ing systems are the mechanisms used to achieve this goal." 


Types of Vertical Marketing Systems 


Vertical marketing systems, then, may be defined as"... 


professionally managed and centrally programmed networks that are pre- 
engineered to achieve significant operating economies and maximum mar- 


ket impact. Stated alternatively, vertical marketing systems are 


l7thid., p. 2. 
18ibid., p. 3 
19tbid., p. 3. 


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rationalized and capital intensive networks that are programmed to 


: : : 5 F Zh 
realize technological, managerial, and promotional economies." 


There are essentially three types of vertical marketing sys- 
tems. Following is a short definition and explanation of each. The 
future implication of each to the PHC industry will be discussed in the 
following chapter. 

Corporate Systems 

The corporate system is in essence the vertically integrated 
corporation. Vertically integrated corporations are, of course, not 
a recent phenomenon. Singer and Sears, for example, both had integra- 
ted manufacturing facilities, wholesale outlets, and retail stores as 
early as the late 1800's. 

However, '' . . . despite these early precedents, vertically 
integrated corporations did not become a decisive or pivotal factor in 
distribution until the mid-1950's. Since that time, they have experi- 
enced rapid growth, and today many distribution networks are partially 


or fully integrated corporated aon eee 


In the United States, 


Sherwin Williams . . . now operates over 2,000 retail 
outlets; Hart Schaffner and Marx owns more than 200 stores 
jee Lay ce EOOUEehains OW -ODLdail pls COL? OU gpeL cen lmotmtnel se 
requirements from company-owned manufacturing and processing 
facilities; Sears reportedly obtains 50 percent of its 
throughput from manufacturing facilities inwhich it has an 


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equity interest, and Holiday Inns is rapidly evolving into a 
self-supply network that includes a carpet mill, furniture 
manufacturing plant, and numerous captive redistribution 
facilities. In short, these and other organizations are 
massive, vertically integrated systems. To describe such 
organizations as 'retailers', as 'manufacturers', or as 
‘motel operators' is to oversimplify and ignore the reali- 
ties of the market place. 


Census of Business data indicate that chains with more 
than ten stores maintained their market share throughout the 
1930's, 1940's and 1950's--accounting for approximately 20 
percent of all retail sales during this period. 


In the 1960's, however, the market share held by firms 
operating ten or more stores soared to 30 percent of total 
retail volume. And if present trends continue, by 1975 
chains with ten or more units will have twice as large a 
share of the total retail market as that which they held as 
recently as the late 1950's. 24 


Consequently, the corporate system in the future is likely to 


have tremendous impact on markets and marketing. 


Contractual Systems 
There are three principal versions of the contractual market- 
ing system; wholesaler-sponsored voluntary groups, retailer-owned 
co-operatives, and franchised store programs. Without dwelling on the 
technical differences between these modes of distribution, suffice it to 


say that " . . . voluntary, co-operative, and franchise networks have 
L tet 25 
significantly increased their market penetration in recent years." 


Operating economies and market impact that cannot be achieved 


Sissy p. 4. 


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-gutisditem bos ajedzem no tongmt avobhagerg oved 


' Wes 
amoieye isl IsAI7IAOD  paeell 4 


-Jedzem Isutosyanos sii to enotessv Iaqkonisg ssads sxe sre a 
beawo-r>liciay ,aquotg yasinvioy bet0sdoqe-tsigeslodw (moseye gat q 

aa ao gntllawh syodtiw .amstgomg stode baztdeasi2 bos Sov IIB TSGO=09 
’ - aes 7 i 








of Ji solTive ,sotsudiaselb to asbom sesty ndswiod aasneay Tb Lenknatoat. - 
syed alzowd oc seddones2 bits /evitszago~o9 exsineloy 5 «44 Sats oo 


C8 “ae stunt nt aokisnsansq Peay ea tails ppm 
bovstdn 36 Santis deity i ih, ban ‘nee anit 





ect) 


through independent action is achieved by firms operating in voluntary, 


co-operative, and franchise networks by "pooling" of resources, (i.e., 


common advertising funds, merchandising programs, sharing of computer 


and warehouse facilities, and combined purchasing power). 


While many of the retail stores in these systems are rela- 


tively small enterprises, they operate on a highly sophisticated basis. 


"The reasons for this sophistication are self-evident. To an 
increasing extent, contractual systems are tightly programmed, 
well-financed networks that are administered by professional 
executives who rely on integrated management information sys- 
tems to co-ordinate operations ."'26 


There are no aggregate statistics on the relative impor- 
tance of contractual systems in the eonomy. Consequently, 
estimates based on fragmentary data must be developed for 
each line of trade. 


In the grocery industry, for example, 50 percent of all 
food store sales are now generated by outlets affiliated with 
voluntary, co-operative, and franchise groups. In the hard- 
ware field, approximately 40 percent of all stores in opera- 
tion belong to voluntary or co-operative groups-- and since 
these outlets tend to be above average units, it is likely 
that they account for 45 to 50 percent of total hardware 
store sales. 


By extending this technique to other lines of trade, it 
is possible to estimate that stores affiliated with voluntary, 
co-operative, and franchise networks currently account for 35 
to 40 percent of total retail sales. When this figure is 
added to the 30 percent market share enjoyed by chains, it is 
apparent that roughly two-thirds of total retail sales are 
generated by oytlets affiliated with some type of vertical 
market system. 


oor ides De Js 


seria pp. 8-9. 






08... 
veadculey af gntseteq wast? yd dovelan «b aotiomisibbasgsbat ton 
.+9.h) ,seSww6ee71 Yo "antiong’ vd ailrowasn ondtonéa® bens povise79qo-08 Dy 
tetuquos Yo gubaete , ame7g07g gnterbrod vom akin gate tovevbs moaned | 
.(t9w0q gotasdosug benidmo> ban ,a9bt hits.) eaodepaw bow 
-alet sis amsteys eesii ci asroge Ihsier edz to Khem slime 
,etaad basjnotiabigoe qidati ane Sisxaqo vad vaseltqrotne Iitme ylevis 


te ol .insbive-ifse ss5 nolivobvetiqne eidt 102 ancenst off” a 
ebaomnteosy yiodsid ars aosteve Levioctinas Juehee ROleso tony iF 
feroiers3oiq vd bots) sinimbs. gfe, Jak) seésoyiar bsohenst-I lew 
-ny¥e outyamiottil MHémogntan hedetesari an vfet one aoviavosxs 
OL” anofietego stan fbro+es ot emt | 


-togmi svitsie7 sdt no estietinie sitystanb on crs oyedT % 
‘Viinsypsenod .ystoroedt ni amsduge Tavtostiqes lo samed ; 
10] beqoleveb od Jeum pteb yistremgssi oo boxed estamttas 
.Shstd to satl does 


ifs to Jnsarsq OC ,siqmaxs vot ,yttevbAl yrsso%g sit at 
d3ty beterlizis etsisue yd bSievegog wen sis asina stode boot 
-bred edt eI .aquotg e2idonett bos jovivexsqo-o9 ,yreaduloy 
~srago o2 esioge iis to Jasgisg 0) yistselxotqgs .b39ld stew ) 
sonie Bue --aquots sevissyeqo-00. 40 yredAnioy oF gntolisd nmoly 
Qistif af 4i ,atinw sgsrsyp svode 4d oft bist stelsyo sects 
wipvbtad. iatoi to dhso1sq N¢ of BA xo Ynuosos yvods tara ; 
-a8is® strote a 


Ji ,sbevd to gent! tedtc o2 oupindset) eidd gothnatks va (‘va * 
‘XteInulov fiiw botabitis. asvote tad stemitas ot sidiaecg eat : 
®6 +07 Iiwosss yidesrivs alrowien 4ctdonsi? bas , widereqos65 i, ; 

uf otugtt efAs sedW .esfsu Dksiss [soa 36 tasoteq OF G3 a 
et $F yaninds yd bayotns stele todvem dnvotaq NE ont ot bsbbs a ae 
seb seine Itsioy fates lo ebrtdi-ows yfdgvor tedy 4 ; 
isottrev Yo Sqv2 smoa iv boseilstte arsiguo yd & io on 


; ms 2y2 J5)irem 
7 : ‘ 7 





ROL 
Administered Systems 

The administered system affects a particular line of mer- 
chandise in a store rather than the store's entire operation. Compre- 
hensive programs for a specified line of merchandise have been developed 
both by manufacturing and by wholesaling organizations. In manufactur- 
iieeehcartyroodsa ss, . . has been so successtul,, . ©) that 1£ milk, eges 
and butter were taken out of the dairy case, Kraft would have 60 percent 
of the remaining volume "128 

Within wholesaling, success in use of administered systems is 
found in many lines--drug, hardware, sporting goods and phonograph 
records, to name a few. 

These programs have been successful because the suppliers 
recognized and understood the economics, the operating pro- 
blems, and the merchandising philosophies of the retail out- 
lets. Likewise, the retailers recognized the vendor's pro- 
duct, promotion and distribution capabilities. In addition, 
of course, these programs have been successful because the 
vendors and stores involved developed a joint plan in which 


goals and methods of achievement were carefully spelled out 
by both parties in advance. 


The Implications 


The managerial implications of vertical marketing systems may 
be described quite briefly. 

Many vertical systems are evolving into self-supply networks. 
"As this trend continues, a rising number of independent wholesalers 


will be confronted by diminished sales potentials. To put it another 


28ibid., p. 7. 


29tbid. EEO. 





. " shoot Stet \gat 
msorsg OF sved bivew tissd ,seso qrieb sii to tuc welee stew tedaed bre A 


BS smi toy pndademes eis %o 


eggs ,Afim Ir tend) . . , dudeesdoua oe aged asd , 


ai emadieye botosainimbs to Seu ak enysowe , srbfeaslorde ody iw 
dq wYgORrG bas aboog  gntitege ostewbaril .gutb--eenti yom at bawok 
wei 5 oman od ,ebtasst” 


-6%q ghitsteqo 93 .aximenooy ot boosereban bas bax tngossy 
“suo {tet9z sid to asbiqosol tq ai lebhostorem ofl ban ,amplid 
<01q x! r0bmey of% -bosirignse7 etal ksio4 add , sbhwsahd etal 
TOtsibbe oY sesksitiduges . noktndtaeth bus noLiomnig etoub 
ofj seusosd fulasuooue mysd svg empzpotq sesd3 .pewon ta 
Hobdy ni nelq.antot s buqelevab bovievot, asxoge bre. ¢ } 
300 ‘bolisqe yvituists» sraw Insgavaditos 6 aboddsm brs 2 a 
.sofevbe al asliteq diod xd on i 


sootinotignt ae 

Ys ametaye goissdien Ieoittsy 3 enditast iat fettagensin: oa - . 
wv fiedwd aap seca a ie 

abet Se ec ln eage A axn! amos aye Loto aov 


atsifgque sit sevazad lutesposdea need syn ameTgoiq agent ye y 





shone 
way, 'outside' suppliers have only a limited role to play in an economy 


dominated by self-sufficient distribution dompisver. val 


The "Bath Shop'' Concept 

A form of vertical integration which is being watched closely 
by the PHC industry and the CIPH is the possibility of the wholesaler 
entering the retail business. 

The term "bath shop" has been brought up from time to time in 
previous chapters and will be discussed further in Chapters V and VI. 

In this thesis, this term will be used in a broad sense to denote the 
concept of merchandising plumbing and heating products at a retail level 
to the final consumer. 

More specifically, the term may also be applied to the actual 
retail outlet performing the traditional functions of the retailer 
Cie. nes Bath: Shop!!):. 

American-Standard, for example, spent in 1962 in Canada " . 
several hundred thousand dollars in trying to give the plumbing contrac- 
tor what we thought he needed... Pe As well, the Canadian Institute 
of Plumbing and Heating has introduced programs such as the Award Home 
Program mentioned in Chapter III. American-Standard also supported the 


W 
e 


Mechanical Display Institute in Vancouver - «. because of our desire 


to see the plumbing contractor become a better retailer.""" In 1964, 


30Tbid., p. 9. 


31ponald F. O'Neil, ''The American-Standard Concept of Distribu- 
tion", (paper presented at the annual meeting of the Canadian Institute 
Of Plumbing and Heatingy Digby, N.S., July 1, 1969); p. 5. 


32tbid., p. 6. 


SO... 


aanpaes "gous 30g" oifT 


Yiseols bsiotew gated at dotdw aolsexgssai Isotiaev Yo mot A 





t4isesfodw odd to yailiddeeog sfY ei HITD off bae yrJavbak JHA mS : 
seantend I[tsior sy guivesns 7 
at emia 63 Smid mort? qu drdguotd coed esd “gods died" mist off 7 
-EV bos V atogdqbdo mt tefaw? boasvoeth sd [ftw brs at sdq Bro avo tvesg 
oft Stomeb.o3 sange beoad # ak boar od. £080 mrsa aifdd ,eteeds abd of 
level iftsjsy 8 38 etoubosg gettsed bis gautdmifq gabelbuadsseam to Sqeonea | — 
remeron Inet? ada.es) : 
Jetitos sia ot beliqqs 6d cele vam moi sit ,yilsoltioeqa stom 
tolleis? oc “s anotjoavi Iscoisibsts afd gaimtolyeq Jsi¢uo Tiggey 
("qos dei off" 5.5) 
. " shank ai $d@l ai teeqe .ofqmexs toi , bankaad@-oasivoma 
-on79n09 goidmulg off evig o9 gnivta ot eisliob boaavods bstbavd Pemewen 


7 
fe,, | - fh 
. . « Eshesa of sdguoeda ow danw wee * _ 


Sjudtdani oerbeasd »83 ,ifew eA 
smoH DiswA of9 28 dove awnspore beovborint esd gotineh bes pod Yo : 

t a a 

ait badtoqque Oals brabisste-neolssmA =. TIT totgqelld ai —. eazgort a. 


Y seveponsV oh odubbs wad cxlgate oe 





463 
American-Standard opened a bathroom planning center in Toronto, which 
kept retail hours, but did not sell retail, rather maintaining a policy 
of distributing products through traditional channels. 

Showroom visitors were advised to buy the fixtures they 
had selected and have them installed through their nearest 
plumbing and heating contractor. We enjoyed excellent traf- 
fic through the showroom and our staff found that it was not 
too difficult to 'sell-up' on plumbing fixtures and fittings. 
They sold colour. They sold superior quality. They sold 
beauty and classical lines, not just purely functional items. 

Rather frustratingly, we found, through follow-up sur - 
veys, that these people hag.,not ended up with what they had 
selected in our showrooms. 

Observers>* feel that the distribution of PHC products to the 
new residential housing and apartment market, and the commerical, insti- 
tutional and industrial building markets, is relatively sound and 
straight forward. 

The manufacturer's major cause for concern in the distribu- 
tion of his fixtures and fittings lies in the area represented by the 
modernization and replacement markets, a vast, yet saidly neglected 
and stagnant potential volume of business representing millions of 
dollars. 

There are some extremely interesting statistics relating to 
this market. For example: 

In 1968, almost 300,000 bath tubs were sold in Canada. 
If we assume that 200,000 of these were used in new con- 


struction--based on 165,000 completed dwelling units plus 
hospitals, etc.--roughly 100,000, or one-third of the total 


oe eane ma The 


Bietnads, D« = 


2, 
dobiw ,otse10T: ok tejaso gntanelq mootiisd 5 benage, 
yotfoq 6 gnintaialsa sodany -itsges Ifee s0n bPb dod, emod nese 295 = 









ia 
salsntiads Isaolkd hers greats etouborq galivdirteth 30 7 
Yodd eswwixi eda yud oF beshvbe Stow stgrtaiw moomworte, . i wi 
Juoxsen ated dguotis baliqount moda aver bah betostos bed ; 
+fs1i Jnelieoxs beypiis aW 109 5839 MED gaticad bus aridnulg . a 
Jon ebw di Jeds baus? tied « we Gas, mootwode of squvonwis ott ) o@ , 
.ag0i37!i bos esxwdx}) gotdewlq wo ‘ygy-Ilee® of 9fuo)2?tb. cag : 7 
bios yet? .yiiisup soireqve bhloe yal .atuoled bloe yeat 
. ames t {sootsonud yfotuq savt 20m ,adntl fsotenslo bre yivesd 7 7 
-1we qu-wolfot sguouds ,bowot ow ,vigniinatew?i Tediad a, : af 
bed yodt Jadw dgiw qu bebos son phed Siqoeq saed3 jadi .eyev ry 7 
. -amootwods wo at badoalee . 4 
“ * yy \ : ' 
oz o3 atouborq ONY to moltudivtath sid tad [559 HE revesedd © ag 
i. an : 
-Itanit ,{sottemmoo of? bos dedi em Jronttteqce bas anieverl istiasbleet wsa 
« ~ 2. -oriaa Jie 
boa bavoe yisvidalsr af ,efedram galibliird Istateubat Bos Iseoksed ve. 
: 
. brawrod se : 
-vdiagath orld mo} mis0no2 to? seuso yo am #' 1970330 IuAEM sad - 
aaa yd betneeerqot seve odd ot o8tf egntto!2 bas sevesxt2 afd Yo notd 7 
- 7 
betosfgen yfbtes Jey ,iusv « a0 5ixem Inemsoniqey bos soltesiasebomr : 





io anotfiim gatinsesiqer esantard to smylov Istrnsdog insegste baa 
a 
erelreb | 


. > ‘an 
of gotisies eolsabiese galvesissni ¢loitssixs smca sxe aoedt rH aa 
, ¥ a : 








55304 


must have ended up in the modernization or replacement mar- 
ket. 


About 500,000 sinks, of all types, were sold in 1968. 
Assuming a sink per housing start, that means about 175,000 
sinks went into new construction. The balance--325,000 or 
roughly two-thirds--obviously went into the replacement 
market. 


Almost 500,000 closet combinations were installed during 
1968. At least 200,000 of these were installed in new hotels, 
apartments, schools, and homes, but that leaves 300,000, or 
about 60 percent, which must have found their way into the 
modernization market. 


- . - we are being safe and conservative in concluding that 
roughly half of the plumbing fixture and fitting market is 
replacement and modernization. This is extremely significant 
- . . because it means that in Canada, half of a fifty million 
dollar .. . market lies in the area of replacement and mo- 
dernization. 


. . Based on surveys our company has carried out, and gen- 
eral market intelligence, we have concluded that only . 
60 percent of these products reach this market through the 
so-called "traditional" channels .. . A very significant 40 
percent reach the consumer by way of department stores, 
building supply dealers, and other retail outlets. 


The problem facing the manufacturer, then is: (1) how to most 


effectively move his products to this market; and (2) how to increase 


the size of this market. 


To try and train all of Canada's plumbing contractors in mo- 


dern merchandising is impractical. For one thing, do all contractors 


want to be retailers? Secondly, the manufacturer himself is rarely 


merchandising oriented. In other words, does the manufacturer know 


enough to teach anybody anything about retailing? 


What the above indicates is that manufacturers feel they must 


ood jee eke 









BOL. 
“18m Inameasiqat to dolsesha1sbos SAd Bt qi enna" 


I _ 


co twak 


Bal af blow orsy ,24qy? Tin to Pars 006 
O00,e%f suodé anno gett deta gate toil 139) in 


2 O00,28--sonsied sil .eltourtenos won | andere 
soome: oifyat oft ots) Soew eleuwivdo--abrk j ik id 
gntawh belindant srvaW anotsentdmos Joel. 060,092 teombA a 
-aisdonw wan at beifetent stow stsd3 io 000, Ons. Jeesl 9h .BdRE a 
70,000,008 gsvnet a6d3 dud .eamed bas  aloonne Pec urs : - 
att ot) ysw thers bate? overt Jaume Hobe pisses 08 1uode 


2 ST anr dotses tirabont - 


Jed53 gnibuloanas 1: svitavrercos boa S3ue gnbod sxe sw. y 
ak istiem gotaiii bos swrixti gitdmitq si io fen qiitigier 
jrssi3ingta ylemstixo ab ehiT ,wotdesiovebum bis iodo 
aoiitinm yi2tai a fo dled . absense) ot daddy ehism 4t saukosd . 
-om bas imomsselqox 40 no%s |r ni geil dotzem . .. telie 
<acisesh 


-neg base ,2vo bebtsen ead YRaqmmo we ayeviwe m6 boat... - 
- + Mino 2673 bobulonds oval sw ,sonsati taint $oAsem [ets 
efi2 dguowds so%rsm eid doeo7 aicuboeta sasha Fo dnso19q or) 
OX tnesitingte yteeA . . . alsnieds “Panots thevo! bol las-az 
e297074 Inamiagsqsb Jo yew yd rsmpanhos Ssd4° doosr tneoteq ; 
-239Ituo [ister xsddo- bas (276 fe5b Migqqve sobbikad : 


Aeom oF wod (I) iat asi2 , to ww3setunam oft gniced maldoxrq sdT 


Ssasoront od wo (S$) bos ~tedism atdi oF atoubotq sid svots iota aetts 
,todtrom eins 36 vnke odd : 7 


_ 
-om mf #*ois5e sans eres a'sbated io ifn alaxd baw Nw or ° "ee Wht fei 


atodoossqes fis ob .gnidt ano 10% “eget ae ae at eared 
bese. et Magid +833 as ed penne, paetige: od 02 7 









205 
be constantly alert to the changing patterns of consumer need and ad- 
just distribution policies accordingly. 

Chapters V and VI will analyze and describe what patterns of 
distribution are likely to emerge as a result of the above. 

However, at this point, it might be worthwhile to describe 
the attempt of a Western Canadian PHC wholesaler to enter the retail 
field. 

The bath shop concept was envisioned by this company as Beige 
a useful vehicle for the marketing of plumbing products currently hand- 
led by the average PHC wholesale house. Prime concern, however, was 
the merchandising of better quality toilets, taps, basins and bath 
tubs. 

A substantial amount of research was done by both the writer 
and other members of the company. 

Briefly, the company concluded that it would be more profit- 
able to cultivate merchandising to these outlets, rather than attempt 
to vertically integrate into the retail business. 

The decision to approach the problem in this manner was 
based on the philosophy that the company involved was principally a 
wholesaler, and, for the present at least, entrance into the retail 
field would be a costly manoeuvre at this time. 

However, it should be emphasized the company is still looking 
seriously at this form of integration. 

The initial research of this company indicated that existing 


shops did little in actual sales of actual plumbing goods, but rather 






ee... 


-bs bie bse tanitado> to af7asd ng jnndate ant iibiee ‘ | 
| ‘Vightbres 98 dich Pen eee ae oy 


to sn75i3eq Jedw Mitesach bite fang tiniis ee av baw ¥ zreaqndy 


-evods sid to tives? Bo 26) axioms: od (ied Sth dotsearsaett 


adivoesb of sfidwdtaow ocd. Jaggi it..dhlog aid an , tevowoll o 
ii 
fisjez aft x93n3 oF 1elseslodw ONT methead fredeeW & Ta aqttod ae. ona "3 
| bist 
gutad es yfteqmoo 2int yd benoiaives eaw tqsnteo gale disd sat 7 
- 
“baad vidtneyes 2ioubox¢ siitdarate to ghissliem off 102 slotdev Ivisau a > 
enw .1TSvewon (fAisonmoo emitd. .sancd ol eves SHI sgsieve ada yd bel 
djed bos Steed ,aqed ,adeliod varianp 39349d Yo atteibnsdorse fd 
~ edes 
ysdiyw. edd’ Htod yd sn6b enw dotasadt. 30 Jovoms Istinstedud A _ _ 
“Kangoo ond to ated: 1940 bas 7 
*t2767q atom od bivnow dt isd bobu Tones vatgmos ats .ylieiw 7 


.Jgmetis edt yeas: .etesligo oasdd od anistimedssem Ssveviaiva es oats 


te 
-avomtaud Ipeist add coal siaxgo tnt vifeotyrev 03 a 
as 


ebw Tenohm atds mi moldaig silt fosotqgs Gi fick atoab edt > 0 


7 a 
& wAtatioutsa aw bevlovit Yasqutos Cy om +ed9 eagose Ling, inh no. — ; 


 ) aie 
Iistex only. o3nt sdrestda Tasel J8 35es7q oid, 10% bre rat 


~ om pote se eae Utsee 
fay Le ., ; 





200 


concentrated on the accessorizing and decoration of the bathroom. 
However, one cannot disallow the figures cited earlier in 

this chapter by Donald F. O'Neil. Further research would prove, I'm 

sure, that building supply dealers anddepartment stores account for 


much of the home renovation business. 







aD... 
meotised oft to nobsatoseb bas gatsbroas¥Oae « ; 

ft aelives batho eetvatt od wot Teeth Joni. Ge xSvawel 
m"T ,svorq bluow doissass soda tut | ; hren'o UF bienod yd wedges ; 
16% ahvodde: s0169 8! Jeondaegasbaw trekday Kiqqhee pater tad Hale 


CHAPTER V 


ANALYSIS 


As mentioned in Chapter II, responses to several questions 
were solicited by letter from both manufacturers and wholesalers of 
plumbing and heating products. The letters were uniform in nature, 
with only the introductory sentences varying depending on the writer's 
personal acquaintanceship with the addressee. The few manufacturers 
replying were approached in person on the subject by the writer, and 
were very eager to co-operate. 

While two of the wholesalers replying, of a total of seven, 
were from within the writer's company, five replies were received from 
individuals whom the writer had never met. In addition, the General 
Manager of the Canadian Institute of Plumbing and Heating, Mr. G. H. 
Dixon, was kind enough to reply. Following are the questions asked 
of all potential respondents: 


1) Have patterns of distribution changed significantly 
since, say, the early 1950's? 


2) What factors or conditions have caused these changes? 


3) Many wholesalers are, of course, still independent in 
the traditional sense. Will they continue to exist as 
such in the future? 


4) What changes will the independent have to make in order 
to remain independent? 


5) Vertical marketing systems are one alternative, several 
types of which are possible: (a) total vertical inte- 
gration of manufacturer through to retailer; (b) whole- 
saler sponsored voluntary groups, retailer owned co- 
operatives, or franchised store programs; (c) manufacturer 
control of a particular line in a store, rather than 


V ABT PAHO 


2Te YAMA 





anoliesup: Inisvoa ot asenoqasr, , TI teaqudd, ak beagitnam. eh 


Suis of aioiiau sasw exsatel sAT’ ,sdouborq gaizaed Baa wideadald i. . 
a'ysdiuw ans po gotbasqch goivrey eesnstase yrotoubo7jJe) ody Yio dt kw : i 
ieemitawih wot odT ,Ssenatbbs si2 aw qidesonsttl Apes {stoatsq 
bie ,issivw sdt yd Joafdue edd so acetoq of betssorqqe Sine gnivigqes , a 
5462 9q0-09 od 19489 qrsy s330 

teyss jo [pyo) 8 io ,yniyigss exsineslody sit 29 ows Sie 


rét? havienet srow avilqor svli ,vosqatoo a s463ts~ sit nine Bowe eee a 
eQabg ' 


p- 
fetsns) edt ,notithbs ol .19m teved bed redtsw odd modw Sea eee ie 
-H .D .2M .gattroXd bons goidmuld,io sjudatseat metbeaso Sad 30) eee sy 
betes acokseasup of sis gokwollot .yviqey of dauons bate eee eee : 

:2insbaeqest Ielinsgoq He 26 | 

‘neat 

yisnsckiingtes begnedo coisudisseih to enisi3éq SveH (f . iT : 

Se 'O2Ol virco oft vee ,d5nke . 2 

Sasgnada geod) bsaino sved anokiibtios xo avot>siytedw (S » . “ay - 

os & - i 

At jasbnoqsbot lisa Stiues to,se eyothaslotiw yaeM. 9 (€ si - 

@e Jatks: oF suntaaos youd Tiiw ,srase {snodd thet ori : be“ 
Seauswa ads ct) foue | 


tsbxe ni aden os aver apshang shee, oils she a9 ne el, ay ow Le 





eke e OO, 
control of the store's entire operation. Would you in- 
dicate what you think the relative importance of each of 
these vertical systems will be in future wholesaler op- 
erations in the industry, and your reasons? 

6) Horizontal or 'conglomerate' integration is also evident 
in the industry. Do you see this as an alternative to 
vertical systems? 

7) What future do you see for your own company in this area? 

A complete copy of a "typical" letter is included in the 
appendix, along with a list of respondents and their respective occupa- 
tions. A total of twelve replies were received from nineteen requests, 
for a 63.2 percent questionnaire response rate. 

The presentation of results in this chapter will take the 
following format. A summary of manufacturers! and wholesalers' replies 
to each question will be presented. Following this will be a compari- 
son and analysis of the two sets of data, 

It should be noted that, while most respondents answered each 
question individually, some responses were received in paragraph form 
covering the topic in a general, broad way. The writer has taken the 
liberty of editing these responses as necessary. 

Also, some respondents included copies of speeches and arti- 
cles which they felt would be helpful in answering the questions. These 
have been treated, for the most part, as individual responses. 

Questions 

To facilitate ease of analysis, replies to questions one and 

two are combined. 


1) Have patterns of distribution changed significantly 


since, say, the early 1950's? 
















i 

ai voy biuoW .netisreqo evita ae’ efode od do fordao5 
io doss Yo sonadteqmi svitafex sit daids voy tedw S3ea0%b ; 
-go roaleesfodwommtul at of fLiw amedeva Ieolttev oaeds : 


Tanoansy twoy bos ,vadegbat oy at eto ldate 


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saedy ,anadiesup sy gunivewens af Intelad oi bivew 2feiewady dotdw: asl: ‘ 






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2) What factors or conditions have caused these changes? 


The Manufacturers' Replies 


Perhaps the best way to begin analyzing responses to these 
two questions is to quote one respondent's definition of a plumber. 


The word "plumbing" comes from the Latin word for lead 
which was the material originally used to distribute fresh 
water and to dispose of water-born wastes. Because of the 
potential dangers to health, codes for plumbing installation 
were established and the plumber was the person charged with 
the responsibility of designing and installing the system to 
comply with the code. The plumber thus made the sale, de- 
signed the system, contracted to supply the material, and 
make the installation, and to provide maintenance for the 
System once it was installed. The traditional role of the 
plumber has undergone many changes. Other agencies have 
taken over most of the sales functions. The design of the 
system is frequently done by an architect, engineer, spec. 
writer, or by the code itself. Plumbers by their activities 
divide themselves into three general classifications and 
generally describe themselves as mechanical contractors, 
rather than as merchants or retailers. The three general 
classes of plumbers might be something like this: 


(a) The major mechanical contractors who sell only their 
ability to do the job and of course, price. They quote 
on and install what the architect, the engineer or the 
spec. writer calls for. Rarely do they sell or market 
products in the sales sense. 


(b) The apartment/project plumbers who contract high-rise 
apartments, town-house projects, etc. and who do not 
sell or market plumbing or heating. They sell price. 
Actually, there is little incentive for them to upgrade 
their sales or the product the owner/builder calls for. 


(c) The service/repair/renovation plumber who handles moder- 
nization and replacement work. There are a very few in 
this class who do a creative job of selling and yet it 
is in this area of our industry that I feel there is one 
of the greatest opportunities for both volume and profit, 
and this leads to a statement of a major industry 
dilemma. 


Industry Dilemma - Lack of Creative Selling 


Into this sales vacuum, some new agencies are moving. The 






Rea. ~» 


Teeynots saots beeues savas. BAOLDHbH oS to Brotosa Jen (3 
7 = - 7 


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od SW tasd oft sqartret 





easild o2 esahogast yatsylans, Wigod 





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~* 


| te ; At 
tadmilg 6 Io mods intieb 2'trebnoqhs7 ean SuoUp oF at anold asup owt 
basl so3 buow ised off moti eAimed “gardimnte" binw oT 7 
digest saudivteth o3 been yIlenigtio Ietyetam ond sew dotiw J 
ot to bausoSa .astekw frod~rsdbw 36 Saeqaib of bre Tes89 ; 
mnizeliatesk gotdmutq soi eshoo .dtined o3 ateqgneb Lolsnstoq 


ditw bouszads aoareq sit asw redmuiq odo bao bafebidaves stow \3 
OF audeve oft gnoiilasan® bee griagtveb to iti idl pangass odd res / 
-3b ,olae edt sbsm euds sodmifq aif .sbea oft riatw ylqmoa : 7 
bes .larrovam sa Ylqqua at betonyines ,mateye sdd bangie ow fe 
$f1 int Sonatainioan sbivedig of bea ,notisilsatent sf4 odpm 7 
sf3 Yo olor Isaciilbsy2 oAT  ~hoelistant sswiti Sono medage a9 


aved astomegs 13490  .asgned> ynsm snogrshnu abd tedmolg 

o4¢ lo agtesh eAT -arokronmya essing add to Jana zevo nade 

Gaqe ,19unigns ,Jovdidoass tte yd suoh yitroupss) al mezage 
astilvitos thedt vd otedauIS ,iisaat shoo sada vdowo . sedi ier 

bat efctjsotlivéalis Iszetes sewit ognt acy) oewiedd sbivtb - 

, 23035673009 Ieotnedoam as esviaamedd oditoseb vi lewensg 
[s1onsg e5tda odT ers! lessor a0 \adogdorem se mega +sedieq | 
-atdd shi snidtemoe 6d sigim eisdmwtq Yo eorests ~<—e 


_ ‘stot vino Ilse ofdw evotseminos Lootnetosm sopem sal (x) 
stomp ysdT' .eoltq ,setvo> id bos dol addoob of eritids —— 
ait 1% tasnlpre old. .so0dtdote ond satu [isganrt bes no ; 


jedrem Yo Iisa yet ob ¢ioved . tot elias watew ,oSqe@ : 7 
aem92e eoine sift ai arouhorg wae : 

7 < 

a 
b2kx-dgin Josyanoo oly ztodmylq Joeterg\sJoamringe vit fdy het : 
Jon. ob of ban .cd6 , adostorg seuod-nwo) .einemsaige 7 
~2oftg, Lisa ystT .gciysed so. gridimig tearam xo Biss | cpl 
ebargqin oF Madd ro svisusont af7yti at e1srld ,yllewisA ss, ee 

TOT Sila» ashi Wi \ssawy oro.-dodboxq oft to asige xri)ld — abe \ 





Ae) 0) 


effect of the department stores with their floor displays, 

their good use of face-to-face salesmanship, and their mail 

order catalogue have long been a significant factor in af- 
fecting buyer decisions in this country. A newcomer in this 
field is the builders supply house which had previously fea- 
tured everything for the home with the exception of plumbing 
and heating. It is only natural that manufacturers and whole- 
salers may experiment with other methods of filling the void 
in sales. A part of the whole problem with the changing pat- 
tern of distribution is the appearance on the scene of the 
original equipment manufacturer such as the prefabricated 

home builder, and the trailer manufacturer. The dilemma 

that the plumbing and heating industry faces is this: we 

must either recognize and accept the changes that are taking 
place in the industry and in the patterns of distribution or 
reconcile ourselves to losing markets which we have tradi- 
tionally enjoyed. 

This observer further commented that "while consumer product 
wholesalers have shown a decrease m their share of the national total, 
(i.e., total national sales of PHC products) industrial wholesalers 
have grown in both volume and in wholesaling product groups." 

Following closely the previous line of thought, one other 
respondent felt that changes have occurred and are still occurring, 
not so much in the pattern of wholesalers' activities as in the frag- 
mentation of the market into more defined and catalogued categories. 
More will be said concerning these categories in the following section 
on wholesalers' replies. 

In the broadest sense, however, this observer feels the tra- 
ditional pattern of distribution of manufacturer-wholesaler-mechanical 
contractor-user is still predominant. New patterns are developing, 
however, in the re-routing of this flow to the user from the manufactur- 


er by way of retail stores, mail order catalogues, building material 


supply houses, pre-fab house manufacturers, and the mobile home and 


OiGa« 






yaigeth sooli tiedi ditw aenats csioenln alent 
tise tend bre iqitfensmestee 6o49-03-d9n1, 10, Rau booy — 


“ie mi xngoe3 {nbaAiug?> 6 aHoL 9 | 
ahdi of somoowar A ,ytinugs |PHs it~ sieta metsoat 
-693 vienolvet, bad doldw sevod wgqua at ian 
gnidmdg to noftagaxs aii dite smod odd 103 poe Poti bo tus 

-aforw boe sxStudostueum Jedd ated Levey at 37 .aqntaned his wet 
brov ada gobilit. to abodiwn sotto dilw drodilriges yam etol se 
-18q goigonde aft dtiw maldotq sidtw sit’te taeq A .2otaa of 





ait 39 Snece Sd4 no Sonatesqqe oy at notsudiamarh io arst i 
badeotidsionq srii a0 vore tetasdatina Soemqinps fonigizo 7) 
sameith off sow tortyoam efter oft bre .webliud ompd 

aw ceidd ef sede) vrei’ gnivest brs gaidmelo sid Jems os 


antded ste tect esogupd> ond tqenon bat osingosey tatie teum 
to nortediqelb Io anreting |dd wt baer vrtuubod ods ot asely 
~rbs77 lide ow dottw ajadzent gittantl of esviaeio sfiiscoved 
-bsyotos yilsnors 

jsuboig yomianos oftdw" sad? bestnenmdo sedaies’ yerroado stat 


-fsjos [saotisn sit to Stede tisd3 ot 5sassiseb 2 ooode svat areinasionw 
ais!sestodw Isttteubnt (atoyborq DRY to salee Janotten Iasap nt 
,equorg Jouborq gaifsesiodw a) tne omiov diod at savor evaed 

taiso stro pitied io sniff auoivesq si ylasols gaiwoliod 
eQritzus\9 Mite ste bis horayson svbd asgisdo 2613 2153 anesbaeqees 7 


“ghtt sf3 at es estiivison 'srolpenlodw io nréiteq sit ot dove oa Son 


asitogetes Bsugolets: base bantteb som ognl 4od1em oft to soljedaom as 


tokiasa sniwollot off nt ashroqete> 22509 arintsswos bise sd tliw svoM / 
| esiiqor ‘stelssefode mg | 
~aa2 a4 thee tris ato aids eta sworn .9809% Jasbaord sfx al 





pnt yal hl 


camper-trailer business. 


One observer also added that these conditions make it diffi- 


cult for the small independent to compete. In serving these new mar- 


kets the wholesaler's role is becoming one of a "broker", and only the 


largest wholesalers are able to adjust their overheads to enable them 


to specialize in these markets. 


the above, 


In reply to the second question concerning the reasons for 


the following forces of change were outlined. 


The traditional distribution system from manufacturer to 


wholesaler to plumber which I have described grew up under 
circumstances that are quite different from those which we 
face today. I would like to discuss briefly some of the for- 
ces of change that we should recognize. 


1) 


2) 


3) 


Communication - Communication should be much faster, 
clearer and more explicit than it has ever been before. 
However, we still have many problems to overcome. 
Speaking from the point of view of the manufacturer, I 
can say that we have a great deal of difficulty in get- 
ting a clear picture of the market size, of the require- 
ment for products, of the seasonal patterns for planning 
stocks, from our wholesale customers. We never feel 
sure that they have put enough effort into the promotion 
of new products. 


Delivery Time - Historically, one of the reasons for 
large wholesale inventories was the time it took to get 
material from the manufacturer to the wholesaler. This 
time has been cut down by the faster train schedules 
and trans-continental trucking. As we move toward in- 
dustrialized building, this applies to the monumental 
buildings such as the Toronto-Dominion Centre, to the 
high-rise apartments, to the town-house projects or to 
the factory-built homes. Delivery on time of all com- 
ponents becomes absolutely essential. In most cases, 
the job site has limited storage so that material has 
to move in as it is being used. 


Variety of Products - The vast variety of products by 
make, by size, by model, by colour, makes the job of 
stocking all types, all sizes a virtual impossibility 
for either the wholesaler or the manufacturer. The 









-iT2ib Vi site arnkdtbrod sods stot babbs. 08 


“Thm, wer Spends goiyton aT ,¢7eqmoo of snabinpgatin ‘Siok oft toi divs 
oft ying bas” ,"29X01d" oto ant bnfocasd wf alor a relsecbory sift ane an 
msiii. sfdane ot abssdtave 179d4 taulbs of side ove etofsanlodw teogtal) 7 
.214dyar seadt of ssh isiveqe of : 
i : 
10% enosseT sf gmteisofbo dokiienp biaose odd ad vitor of! es 
sbeallito srew sgtbio Yo esotot gniwoffot ent ,avods ona 
03 +9audoetunem mort metava nobjudiwath lanoisatberd si? 
TSbau qu waxy bedizsash sven I dobiw asdsislg of tolsesionw 


ow Hold aed? amt? tnstetiib situp sys Jad? esoabdamosio 
“40% off 30 amwoe vlisitd apiserbh of SHHI Bluow I .vebod saat . 


<2singoosr bliode sw anid sadnis ion 245 _ 
<sede82 coum sd bieots noitestnommed - cotieotavmmad (4 = 
.stoted ossd x5ys asl 11 werd tiotigze stom bas taresio 
.emootevo of amaldorq yoem eved [132 ow ,Tayewot > 


lL ,~rstwisetveam sia to Boly Yo tmiog Sdt mort gnidesqe 

-d99 ni Yjivottith to Tesh testy © sve se tard yee! aso 

-Q3tpet of) io ,ssie tadtam sit to suvddiq taglo & gna 
anteqala 10% atajteq Ietagsss aft to ~aidouborg sel inten : 

asi Toten oW. .sranoisen olsaplodw tua moti gadoqie 
vorsomoxy sf? oink a1x0%ts Tavares avy sved vSet SsAy |tus 
.adoubotq went to | 


tnt. andesex sdy to ano yylfgotroseih ~ ort! yreviisd (& 
15g OF alaod 3H Smit «ds sow epinotnoynt ofgastorw sgxul 7 7 
afdt ,xsiedelotiw add 03. tetolostunem sis moxvd Iniystam : = 
gSfubsiioe mist? FSit20i odd yd owob duo nosed asd suka oe 
-tt htpywos sved>ow,2A  anidourd fetes too ato), bas 7 
vemminas ait of es baaze atdr ee. basitn th 
J pageeete) Go eon a allt dove eaaibiiod 


age ies 


ra f 





seat tere 


only acceptable alternative to excessive inventories, 
high costs, frequent stock-outs and delays in the job 
is a co-operative agreement in the planning, provision 
of adequate lead time and an attempt to reduce the num- 


ber of varieties on the part of the wholesaler and the 
manufacturer. 


4) Discretionary Income - A new force of change that moves 
in the opposite direction to the variety of products is 
the discretionary income now available to so many fami- 
lies in Canada. As in industry, we face the problem of 
providing a reasonable number of choices to the public, 
presenting them in a way where they can make selection 
and yet not create such a multiplicity of products that 
we can no longer do an adequate job of either product or 
profit management. 


5) Need for Lower-Cost Housing - Perhaps the most pressing 
change facing the whole construction industry is the 
need to be able to build houses that people can afford 
to live in. The Canadian Government approach has been 
to do a study on modular construction of industrialized 
fabrication and in development of a new building system 
that reduces on-site labour. 


6) Need for Easier Service - as the charge-out rate for 
plumber's time goes up, it becomes more and more im- 
practical for the average home-owner to have a plumber 
do the normal service work. With a charge-out rate of 
say 20 cents a minute as is currently being used in 
some cities, it is quite conceivable that the cost of 
changing a 10 cent washer might well be $25.00. A year 
ago we introduced a device that would simplify the ser- 
vicing of a faucet by the home-owner. We showed this 
product at the mechanical exhibition at Montreal last 
year and attracted a lot of attention at the exhibit. 
The reaction which we got was interesting. We were con- 
demned by the plumbers in Montreal for showing home- 
owners how to service their faucets and thus depriving 
them of their livelihood. However, they did not need to 
worry because our total sales for the whole of Canada 
were six units. 


Another observer felt the principal factor in promoting these 
changes in distribution was the refusal of the so-called plumbing indus- 
try wholesaler and plumber to accommodate change and re-pattern his 


services to meet the requirements of a new generation and more desirable 





Os<. 









pestiasiavat aviesooxes oF Syig fs ‘afd 

dat ola ‘nt, ayslob be eIv0M ioe, ara 
ditelvorq ,antonot, std mt fe ‘é 
sin aii soubor of Jqmetts As. bite emtd baat 53 
oiit boa s9Parolodw sd io t18q gdt co’ eo tds om 
. stotpy: 


asyom tert syfedin 2o sore? usa A - smonnl Pere Serrery (a n 
2} sdopborq to yioltav sit) of pobdsox bb sdzebqqn sta mi oe) a 

-imet yen oarot efdslisve won Be Seah visnoisa32e15 od 7 
to msfdesg sft b9Be aw .vTdelbAr oi aA -Bbsaso ot aSil : - 


.cliduq sit ot esrtons to todmm sldanosisy BF gutbtvesq 
qaitzstea otfem tho vot stow Yaw Book madi pitinsesag 
tea atoibory to vitoriqitium # pote Ssssto Ten Joy bits 
10 touwbotq yediie io dof ot ke pola a3 ob 75Rn0! of.fe>, Sv 
jo smegeiem® 1207 


gitlassiq deom ont aqedred + gnkevod a20o-sewod 192% boot {ec 
ort. at vyzeubh? pAottourvtedeo sfoilw oti gritos? sgneio 
biotic, 15> sfqosa Jaa aeaed’ blind 6d side sd oF been 
need end dosoxqgs Janmnteved Hetbadso off at svel oa 
bastletvtaube! jo nmoisovtsenos telobom a6 youta & ab 63 
madevt gnibitud wat s to Jeamqoloyahi ut bos nolspodaded - 
-trods! site-no esovbes Gadd 


toi ossy Jwo-egxad> si} ae - Ssoivisé istesd bia best (a 
~mt stom Sife von nemossd 2t .qu>ssog samba e'xsdauly 
. Sadeiate s sved oF x<enwd-omod Sastevo sid stot Las toontq 
jo Sde2 tuo-ogitedo o datW tow solvise Inmion Sida ob 
ak bsev ahted vitesse al 2c ctunio » ejnea Of yee 
te deou odd Jod3 sldevisonom etinp et JE ,asttio ame 
yssy A .Q00,¢8@ ed [low itiginm s9fesw ja45 OF & gatgnens 


-4023 903 ytblqmta bluow ind) soivub s beauhotdIni sw age a 
ehdy bewole aW .Fonwo-smatl ot} yd as90k7 6 to gatoiv — 
tesf-[sorineM Is sotitdivdas Csotnstosm ot da Jouborq 1 

-Jtdbiixe old ya) mo rior do dol sc betonss3e. bok as 
-19> stew sW  .ghttesrsiak aaw toa sw ulsidw dokioeer | v6 ' 
stot gotwede to fear al axsdanttl q sit ed. bsnmet 7 

ankvisqeb 4 bas ag wt xisit salvage 07 e19nwe , 

oan fr Bt yah ov ae ie 





Vag peo ere ee a one _ 


Be) © 
shopping atmosphere. 
At this point, the reader may recall the discussion in Chap- 


ter IV of the bath shop concept. One observer commented on this new 


concept as follows in his reply. 


When we look at the new residential housing and part- 
ment market, and commercial, institutional and industrial 
building, the distribution of plumbing products to these 
markets is relatively sound and straight forward. 


The manufacturer's major cause for concern in the dis- 
tribution of his fixtures and fittings lies in the area re- 
presented by the modernization and replacement market, - 

a vast, yet sadly neglected and stagnant potential volume 
of business, representing perhaps 25 million dollars. 


How are plumbing products reaching this modernization 
and replacement market? Based on surveys our company has 
carried out, and general market intelligence, we have con- 
cluded that only approximately 60 percent of these products 
reach this market through the so-called "traditional" chan- 
nels of plumbing and heating wholesaler to plumbing and 
heating contractor and finally to the customer. A very 
significant 40 percent reaches the consumer by way of depart- 
ment stores, building supply dealers and other retail out- 
lets. 


The plumbing fixture or fittings manufacturer's distri- 
bution problem, relative to this market and this situation, 
is therefore a simple, two-fold one: 


1) How do we move our products most efficiently and profit- 
ably to this market? 


2) How do we make this market larger? 


At American-Standard, we have concluded that to try and 
train all of Canada's plumbing contractors in the way we 
feel they ought to sell is impractical. In the first place, 
we are not too sure if all contractors want to be retailers. 


In the second place, do we at this stage really know 
enough about retail merchandising methods or retailing pro- 
blems to teach anybody anything? 


We are satisfied that sales on a direct basis to large 
volume retailers, such as department stores, building supply 


EY... 





. : + — i 
~qatd ni nolaeoeakb oda [léosa gem rebnes oft sntoq “adits 3A 


| | ry We a. 
wah alld to bsdnstmoo ravacete 40 .tqsonon gode uized sdd Jo VE gag 


viqs abd mt awolloi es 1q39009 | 


“33806 bat gnroved [nlinebtlaoy wen 5d3 36 aol ow nedv . a. 

fstwievbni bos, denoltivaiteak yietoteuncs hak .tedsem Inom —_ 

seona oF sdotboiq getdmulqg Go motiudt+teth ody aribliod ‘ 
-biswiet Jngisute Bae honda visvideisi ei Biaatem 


sath edd ai oxeondo rod Sauea robe 2'!xotey sethnam 5aT ; 

“91 69% sf3 nt soil agaist? bee asivixti ata te ackisdsay ; 

- -Isdism.inomansilgss bir nobtastiisshond sit yd seineestg ; 
omitiow Dekinsioq tcongete bes pgideldun yl i9y .Feav B 
sathifob roti fin ¢S eqetssd go isasasrgst peespieud 36 


Hoisastnyvebom stds gitdoses atayhorq snatdmula 18 wo : 
ann Ynsqmbo wwe sy sytie 66 ‘baakf Ysitem inameaalqes .brp 
“709 svid sw ,sofegibisiniedodsem Isrsnga ite sho betsres 
éiauborq seeds to tosaxey 00 ylasenixorqge vino jsit babel . 
-vedo “Tanots pba" Bollsosog sax Aguosdd. aokrem eidy Hs 89% 
bas goidmulq.oy aalsesiatt gmrbsson bos aridmdls 10° elon 
yrev A  ,19meJselfo sit of Viieet? bos coteesinos gatteaend 
-SraqSh to yRw yd wemeago> ald edivess doosaeq OS sdesktiogsa 
-3u0 lieje: tofizo bas e74ibeb ylgque gntvftud , 201098 sen 
: -sial 


-fagebb a'reatsS8luné egotditi ro esuixid gaideutq) sAT 
~Hotiauiia Beidd bir sodvem aid’ on aviiaiasy matidodg coatiud 
; ‘(960 bielt-owt ,slqamia 6 stoterods at 


-iije1g bie YIsnsioiilo Yeom ajoulery te svom aw ob wok (FT | i‘. 
Saabs dure aida ot yids’ : _ 


so Sysguel Jetiam abt sen sw cb woH ¢ 
at tetd bobutsaes Shu cte~rneciramA WA | ¥ 










ee: 


dealers, etc., who are geared to serve the modernization and 
replacement market, is a trend that will grow and expand. 


Now we should discuss perhaps more radical new concepts 
of distribution to this modernization market. One idea has 
recently been revealed by American-Standard's opening of a 
retail store, The Bath, located in a shopping plaza in North 
LOEOnton 


We felt that somewhere along the line this industry had 
missed the boat in attempting to expose the products and ser- 
vices we have to offer via our present retailer, the plumb- 
ing contractor. We had been unable to interest enough eS 
ing contractors to adopt our selling philosophies. 


Here are some interesting and somewhat significant 
figures: 


DBS figures show that households with two or more cars 
have doubled in number since 1961. 


Households with colour TV sets have increased six times 
in number in the last two years! Four years ago, there were 
only about 200 snowmobiles manufactured in Canada. Do you 
know what the sales’ estimates for these fun vehicles are for 
this year? 400,000! And to round out the selling season, 
the Seadoo is now in full production and promises to be 
another winner. 


Each of these products I have mentioned represents an 
expenditure of between one and two thousand dollars. That 
kind of money will buy a beautiful new bathroom, but the sad 


fact is that we know our modernization market has not grown 
at anywhere close to the same pace as these other products. 


The Wholesalers' Replies 


"The homeowner public deserves a better shake than the plumb- 
ing industry has traditionally offered . . . what this industry offers 
the public is really pathetic when compared with the fine shops and ser- 
vices that other industries are currently offering." This is a comment 
made by an observer at the annual meeting of the CIPH in Digby, N.S. 
Following are some of the comments received from him concerning ques- 


tions one and two. 


i 
y ra 






PY... 


bak nolassiatsbom sny svret oF hSteeg oTA ott orp gata 
-basaxa boe wotg Il tw ders brow B at sete duomes 


atqdofins wen fos tbee stom equiraq aguparb hishotte aw wo 
aad uSbt en .7Sazem nofdesiorsbesr efdd oa nobiud) eth ois) 
& to girinago 2 ‘brpbnet2-moteoma yd beleoevsa assed yluceoss 
dis04% ol sselq gtiqqgeda s at bstnool ah sd ,stode images 
sosno Tet 


bad yuteubnt arAy satl odd snole stslwemoe Jedd dist oW 
-1es bap siaubexrq sd} os0qxs Gf Raligmsdae BL deed odd heeein 
-dimlo oft tel reat inetestq tuo siv ysiitG oF sved Sw asoty 


~ dma t 4 big je9xSsial od sfdpaw meod bad 4W  :aessstinos get - 
Sidqotolinag gailises wd tqobs of srotsetisoo got a 
jiesttingia saAdyvemnce bao yaitestsini onoa ste S198 ; 7 

: aa yng td 


a%Bo Sitom ro ows ddiw ablodsauod tedd wore asavgr? ead ; 
.fd@L sodta vadinonm at baldyob syed ad 


eamta «zke Bbeassto! SVEN e352 VI sucdias Haig ab[ofsavok 

Stew su9ds ,Ofe eTSb¥ Yol leussy ow) geci eft of TedmwA nt - . 
voy of .ebersd ni bervios ings 2slidomwons OOS Subds yiso 

sol sts aesietday wi seeds tot sstanttes-esler sdd tedw worm 
,Govétss antlisa sms 4u6 bona at bok 1000008 ‘Saesy ards 


6d of eseimotq bie nokizoboty ifui ab won ah eebRse sx : 
toatig Traritots 
: aa 
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idT .eseliod basevayit owt beé.sno naswred Jo sis Tbnages 
bee edd dud ,moordited won Jutidvuesd s youd Diiwysanm Yo bobs : 
hwodg Jon #64 toxvem cotdesktrasbom tuo woo)! ow Jedd ef 2987 = 
»etcuUbomq asdiec Seeds ae a55q Smee sot 01 ssolo steadwyne de 7 
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ergs 

This observer outlined several markets which the plumbing 
wholesaler must serve. The reader will recall these "markets" were 
mentioned previously in the preceding section on the manufacturers' 
replies. 

These markets are; 

rT) Mechanical contracting on non-residential construction; 

49) Apartment construction; 

3) Single family home construction; 

4) Manufactured homes (including mobile homes) ; 

D)) Industrial sales - pipes, valves and fittings; 

6) Waterworks and sewage; 

Js) Replacement or remodelling. 

This latter market may be further subdivided into two classes: 
(1) installation services not required, and (2) installation services 
required. He pointed out that more and more homeowners with increasing 
leisure time are frightened to death to call a tradesman at 8 to ll 
dollar charge-out hourly rates, and often tackle the job themselves. 
This observer feels materials and products are getting easier to in- 
stall and as this market grows, products will be more and more designed 
for quick installation. The biggest problem is that the plumbing indus- 
try has lacked sales outlets or sales centers. 

Patterns of distribution thus have been changing since the 
early 1950's. The growth of the large national chains such as Emco and 
Westburne to compete with the existing national chain, Crane Supply, is 


one major change. Other chain type wholesalers have also developed 





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gotdaulg ois “ ay ens putt pent: 






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‘agb$ouatarios laAtioebisoy-n6n no girisesenes faotnadseM a 7 
- 7 I iy 

ttoftoustanoo JfeiiteqAé ¢s ¥ 
; Wy 

j ; a 
(oorttausjengs smod Ylimst Signt2 (€ : 
-(aomen ol kdem gatbulsak) eonod beawsssiing «~=6 : : 
-_ 
~2anis7ii bos e5visv ,saqt¢ = aslee lebvaevbay ‘fe - 
:Sa6wsa bra alrowrsg ew @ is) 

b | y 


-gnti Lebomsz, xo dears at qo (X =~ 


sageeels cwd onset bobivibive r6Hisn7 ted Yeo Seolrem yotial etn’ - 
speliodes elit fal eas (S) bes ,bstiupes gon s5oivree notyalhed eat (Dp : . 
gokessyont ddtv arenwogwon stom bis syom SEAT tio hsanlog oH  bathupet , a 
7 
Pr o4 8 id aporashbes3 8 tles o9 doxab 63 heisdilg tay Sis sits sntet 
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«ni oO) 36base goisisg ots ajowbotq bak eletrsdam eloed royasede whdT 
béogiasbh stom bas stom ad Ifty e2suborm ,ayory todaan etd 6) bee ‘seebe!' 
—- Sattinpia arls Jedfa * et dmeigu td oft Ries Pe 

eae AE a: elie 


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(such as Western Supplies and Cronkhite Companies), but not in the 
same national scale as the "big three". While these companies are not 
new, their dominant position in the market place is what constitutes 
the change. Wholesaling is polarizing into two groups - the large 
chain operator with many branches, who can buy "better" from the manu- 
facturer, (because of buying power) and who competes with the other 
chains for the large jobs, both commercial and residential, where the 
volume sales exist. 

The growth in demand for housing, particularly high rise 
apartments, where large quantities of material are involved, has helped 
this polarization by concentrating the business available into large 
orders where price competition is fierce and substantial financing of 
credit terms is required. 

At the other pole, are the small and medium independents who 
do not have the buying power, and as a result, cannot be fully competi- 
tive on large jobs. Nor can they handle the financial burden of exten- 
sive credit sales on 60, 90 or 120 day terms. These tend to be single 
branch or regional branch operators. 

Another major factor in the polarizing of small and medium 
independents has been lack of funds for expansion of capital facilities, 
inventories, and accounts receivable. There has also been a thinness 
in the managerial assets that has inhibited growth. Frequently, these 
have been businesses developed by one man, often with only a sales 
background, who has been concerned that if the business got too big, he 


would not be capable of managing it. This observer also points out 


Ov... 
ot} at Jan jud Kedhauqaig® stidanord tne saga esas wa 
ton S76 egitieqnos oped? oft Wy ST ewald eer ue lehineneniin 










saual sda - actoteg owt otk dnteteutan ar ot taxotodw ne 
-unsm of? mort "tSt390" yud neo odw ,eedonead yoem datw todesage afads 
tsij0 sri3 Witw ssteqnoo ow bes (Towog griyed to senesced) ,2emwaoeT | - 
sid svedw ,fstonabiaes bos Istoaramios Arod ede, ogial ot 303 attedo | 7 
| Jatxs soles omufov | 
Sait dgid ylabluottyeq ,aitbaved Jot bretob ak dtworg sat 
bac Lori est ,bevlovat 18 Tetssiam jo asidiignanep satel son , sinamt7Eqs. 
sgiel ojni eldelieve enontend off gotsesinsonoo yd aoitealisieg ails 
to giiionsnt? (stiostedve bis, so7sbi al aobs td sqmod sotig stelw srebro 
-betivpst et amazed Jibe7s 
ow -etnebdogsbat mifbam bone Thame eda orb 8 LOq tetie efd JA 
-teqnioe YIfud od sorhas -tiyest 6 ea bas ,s59oq Roetyud ode svar jon _ob 
“ietxs to nabtwd Intooanit sms sfboed yedd oes 20H -ado| sayel ao ovis 
signke otf o7 bitet saedt samrss qsb OST ro 02 08 10 aslge sibero ovie ; 
-2rosnyeqo donerd Issotgey 10 plomad _ 
aos.t bam bre linme to attstretog sda ai 109982 vot am yodIenA va | iss) 


avid tl tos) ind.iges to fobamaqus tot ebiivd io Ase! moed wad _simebnagebat 
exsonids & teed pals get Se sae pens UN i sae Salih i 


ane = seep a 


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Be Blk! 


that all three national chains have had access to funds to finance 
their growth. 

Returning for a moment to the previous market breakdown, 
another observer comments in his reply . . . that while conditions have 
not changed in the methods of distribution, in the first three categor- 
ies, and thewfigth and *sixthysthere! Ws a) defini tetrend™and! awchange: in 
the method of distributing material required for mobile homes (item 4) 
and replacement or remodelling markets (item 7). He concludes by ie 
gesting that many alternatives will no doubt develop in the future 
that offer opportunities to wholesalers, but one thing is certain - 
sticking to the traditional system appears deadly. Many opportunities 
have already slipped away - and much more will - if we remain blind to 
Be. 

One observer also felt another important reason for the 
changes during the past five years is new products, the most important 
of which are polyester fixtures and plastic pipe and fittings. The 
established plumbing manufacturers have entered the polyester market 
with bath tubs and counter-top basin combinations, and while they have 
attempted to market these products through the regular channels of dis- 
tribution, there are recent indications that they will be forced to sell 
direct to end users, bypassing both the wholesaler and the contractor. 
Small plants are cropping up innearly all the major cities in Canada, 
and all are’selling direct to end users. | 

As well, there are many plastic pipe and fitting manufacturers 
now operating across the country. These products are becoming increas- 


ingly difficult for the wholesaler to handle because of direct selling. 


WV. 







sonnet? of ebnul of eago5e bs aved eanteds Tadot san an tio Vall 
es stoveon =a 
enwobagsad dodge avolvetq “id of Srismom 6 YO} ee = fh! 
aust anorstbnos slidw dati . ... wlasr etd nt admomaos rovasedo eins 


: 


-fogeten sayvid detii ods ot .nottudiserb to abortam we nt bogewils a 
at sansdo « bas basxi sticiisb « et s1eda .aaxta bas ds3i2 so bas , eat . 
() art) yeamod alidom tot bsriupst Isizodem gattudtiselb Yo bibs daw“ 
-gu2e yd esbutonmoo oH .(\ adr) eteduem gotiishomss io inomanbiqat bia q 
siwiut. sda mk qolaveb gdiob on Iitw.eswlisissiis yiam dene gak2esg 
- weaadée ai yrindsd ann jud ,arsisesioly of as tt tad toqqe se%20 tadd 
eatisinusiszoqqo yorM .yibsob etesqqs moteya I[enots bers sda 03 gatlstie 
o4 tokid atsero1 sw tt - Iliw stem doum bon - yawe beqgile yoaseia aved 
at 
aft To? Mosse Inojsoqmi isfitonn 31st coals revtsedo anO 
ities xoqat teom. of} .etocbotq wan ak etesy svit fasq odd arias sognads rm” 
sq] .2gmkIai bre oqkq stjeslq bee ae03xt? tas 8syloq ote dotdw Y 
15dvam rs3 weyloq efy borsios sve atsidissiunen gaidapiq bedetidssae 2 
oven yoda elidw bos: ,anoitagidmo Atesd got-reirwes bin adud Aped aku ; 


-8ib Yo elsanazds teTuges ais dguvotds atovboiq sasHda teolraem oF botqmes 3s : a 





fisa oD beorot ed fliw Pry ous tnottnatbar ta998t aid sxory norte 
0 sea oy bee sstneslody oils tos arhanagyd = sat 


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canto 
Other respondents also agreed with the previous statements. 


One observer made the following comments concerning questions 


one and two. 


Patterns of distribution have changed during the 1950's 
up to the present time, and I believe will continue to 
change. Some examples of changes in distribution have been 
in the approach of manufacturers to large department store 
outlets across Canada which affects both plumbing and heat- 
ing equipment. As well, there is more direct-to-the-plumbing 
contractor selling of specialty equipment, such as fire hose 
cabinets and heating and air conditioning units, particularly 
on new commercial and industrial contracts. 


There are more stencil lines being manufactured for the 
direct-to-you distributors; e.g., departmental stores and 
chain outlets. A few examples of these are: pumps, softeners, 
fixtures and fixture trim, hot water tanks, toilet seats, 
bathroom accessories (paper holders, toothbrush and tumbler 
holders) and medicine cabinets, all of which were, at one 
time, distributed by the plumbing and heating wholesaler 
through the plumbing and heating contractor. No doubt there 
are many more examples that affect the volume of sales at 
one time enjoyed by the wholesaler. 


One factor that has caused the change in distribution, 
I believe, is that manufacturers have become more and more 
aware of the fact that the wholesalers and the plumbing con- 
tractors are not doing the job of merchandising that the 
manufacturer has expected them to do for him. The whole- 
saler has put most of the blame on poor merchandising, mar- 
keting and selling in the lap of the plumber. I do not be- 
lieve this to be entirely fair. 


The wholesaler generally has not had adequate training 
programmes for their own staff, nor product shows for the 
plumber. There are numerous wholesaler "order-takers", but 
very few knowledgeable, sincere, service-conscious wholesaler 
salesmen. A wholesaler's advertising of a manufacturer's 
product has been poor if done at all. In most cases, techni- 
éal problems*orecomplaints thattanisesinethediieldyeparticu- 
larly on specialty items, were referred back to the manufac- 
turer for correction. In some cases, this was because neither 
the plumbing contractor nor the wholesaler had taken the time 
to really study and know the products that they were selling, 
distributing or installing. 


In other cases, if the product was understood, they were 





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ee 


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‘+ 


es bee eee 


e'O02°t edd gnituh beadata sved ed oasaaenh lo ented ist 
os epmitnoo iltw svetfed ¥ bre johPs Insse%q fd oa - 
naed syvad nokiidivaeib mi eognaso. to ‘avighoxs ante? cae 
evosm itomafeqab 97k! ot erstyyosiucsm ta sine teys ae 
-tnod bus gtidmulg didd etosits ere ‘ees “dedipe, etel 
gniiimuiy-odd-od-toenlb stom et steht .1%Sy 2. |,taSiips ak 
aso whl 26 dova ,dnomatirps ~atadt cage id gatiios, JoJopiTsneS 
qiisluviszag ,artav antngtsibnag tis bos gititasd bas elontdes 


-poontinds [éisteubht bis Istorsamos wan ne 


oft mt boyedos ten seisd eohtl Iitcdsic. sian ota stent 
bas 2eTote isinematsqob ,.4.5 j;arTododlateib voysod- stoeaib 
afensd toe .aymvg :sta. send tovesignexs ust A .etoldug 
ete92 Jol tot coat tstewetod, mrts saseit bun i 
taldmua bos dautddicos .exsbilod serneq) estroR2so0g 2 
ono Je ,staw doinw io Ple-jparsnidas satoitbenm Dre ta 
t#iseafodw snattsor bas gn tdnus fq oii xd boiiditrelb » 
s12e3 tdueb of .topostinos patiesad Bue uokdmtiq ads ion 
$s e2isa to smploy off 3o5tts gedy aslqmixa Suan YoeMm Sore 
.teisesiodw sft vd boevolns smky ono 


~foltudisieth ni sgtadd odd Doaves. anil dedi yotost sng 
som bis ssom omozed saved avoxrvtonieadn gads af ,svebFsdd. 
~103 gnidmyigq ofa bas erelsrofodw odi Jedd Joei sii 16 S7auE 
sia tedt antersinsdorsm to dot add ahfob ton srs arotoaTs 
-sflodw oft mid 102 ob oF mei bstasqua aon. xsxus983 a 
-tem ,antalhoadotam rooq ro ompid sft Jo 229mm AUK and ae. 
“30 907, ob I .tadmulq sf3 to gal off nt antbise bas gictd oa 
.thsi ylorktas ed oF edt veil 


goiniss3 Sjnvpsba-bed gon abd yilsexveoos teleeslonw ont 
ata Bist ewoite J ouborg son ,Tiade “nye thoy x07 . 


ns 1. eels 
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re) 


too busy getting new orders to correct or service the field 
problems. Therefore, they took the line of least resistance 
and called on the manufacturer or his representative. Orders 
for the bread and butter items (soil pipe and fittings, oakum, 
range boilers, hot water tanks, copper pipe and fittings, 
housing fixtures, etc.) -- products that require little study 
and teaching to understand -- were usually far easier to get. 
Therefore, insufficient time was spent to learn about or sell 
specialty equipment. Also, items of a technical nature were 
not mentioned, and these were the first items to be taken 
from the wholesaler by the manufacturer and sold direct, 
particularly if there was little or no credit risk involved. 


The introduction of new materials that are easier for the 
handyman to work with have encouraged the manufacturer to look 
at other forms of distribution such as department stores, 
direct-to-you outlets, etc. When roughing-in material, such 
as steel pipe for pressure lines and cast iron soil pipe for 
drainage, etc. was commonly used, the handyman would not nor- 
mally invest in the tools necessary for installation of this 
material, because it was an expensive proposition. Electric 
or heavy tools were necessary, also cutting and threading 
machines, reamers, cutters, cutting coils, fire pots, torches, 
chain “tongs', "etc. 


Copper pipe and fittings were introduced to our industry 
just prior to the War, but by necessity discarded during the 
war years. Again, introduced after the War, they gathered 
momentum in acceptance during the 1950's and gradually re- 
placed steel pipe, malleable and cast iron fittings for many 
installations. Copper pipe and fittings encouraged the do-it- 
yourself type of trade because expensive tools were no longer 
necessary for many house or farm installations or many small, 
general maintenance repairs. They were lighter in weight and 
easier to work with. Many installations could be made with 
only a hack saw, cleaning equipment (sand paper, etc.),solder, 
and a torch of some type. The basic material cost for copper 
installations was generally more expensive, but this was more 
than compensated for by the saving of labour and, as mentioned 
above, the lower cost of tools. Copper pipe and fitting in- 
stallations have more recently given way to plastic pipe and 
fittings. Plastics are less costly than copper, easy to work 
with, and make general home maintenance more exciting and 
easier for the handyman; thus making a double saving -- both 
material and labour. 


Other factors that have encouraged manufacturers to look 
at the department store type of distribution is the replace- 
ment of heavy enamelled cast iron baths and basins, etc. with 
the lighter enamelled steel baths, vanity basins, and stain- 






RAs. 


biatt ona sotuxsa to tob7mO5, od etShTo Tight aaatoom yard oot = 


sonpietes: tues! Fo sat! sy eo yarns sed 
stebz0 .eviininagsays7 ehdycro t97u3 oe uae sds enn bas 
mana esguiggid bhe aqtq [toa). ames 1 tejjud baé beeyd edi to? 
eranigakt be sqtq zaqqyon ages TH36 Won ated Bod ogre? 
rr sflasil ativpsa sans. 2: Jayborg =: (048 -eomuaat® goltevod 
i3eg 03 tolepe 181 ¢fleusn s33y =. Dasdersbeu ca grhdonad bre 
Lise ww tveds ntasil of 10995, sw enli Insioiigean! ,szoteretl 
otew st0dea iesianoes » to anpah oelk .ynsmgiips yaistooge 
fisted ot amasi 2e1ktt sd saew sxoil) bas ,bsnotinon Jon 
oerth bine base atid ogianm odd vd tefsestodw edd mor? 
-bavIount Sata atbeyo on 10 Sigabl saw asvods 7h Ui salvo titagq 


sdf tot tebebs se dads elaAtresgem wan Ge nobisvhexink sa? 
Hool of te7uT5s Wem oft bsgauvoone 4ved iz hw Atew od asmybied 
aototTe Sasa tHqeh as fove nobiivditzelh to giro? tertte ts 
Rout ,A8LIsIem Hh-gnidgvet wedW. .o39 ,239S8lino voy-ot-29eTEb 
tal eqiq fioe most tees She Bentl oviess7q 267 SQtq Paste bs 
~rom Jos bluow isayvbasd sit bea. yliomion anw . 936° »sgunieth 
sind 30 nottvel letedt rt yistesosn Sioce add nt desen) cifnm 
sivdoolA .nokitdoqoid sytenayxs me ehy vi Sateobd Yinirsdam 
gntbssti bis snidavo calls pyabadsgeiwr stow aloo “yvnod To 
, asta) ,atog etlt . si too q7isjes yatatico . etomeet pesrttisem 
.uJs ,89nes nbeds 


Vrupbet so oF bssybotini stow agnigala Soe sqyiq teqqed 
a3 griseb tobrasetb you zeessn vd apd te sdy oe teitq Dav, 
botsiieg, ysis ,reW Silat setts booiBorar .cISgA .#@3bey Tow 
-or “iisubatyg bre e'D021 art anivtbh sonatgsosh oi awyasmem 
(Asm Jos BatijIt tol ten bio ohdsslfem -sqtq feats Hebela 
-Jt-ob shi bagetivoons. agaiisia bre aqtq tsqqoD .anoidelfedent 
T9gno! Gn er4aw, elour phe de cided sgusoe’ sbets lo say) ilserwey 
el leote yosa ro -erogdeliaiang mnt to Sapo Yom Xot YIsEeSoor 
bas Aigiew et votdarl srow yont .etheqet oonnteinism feyensg 
iatw obem od bites enoitel reagent yor lite daeow 69 tekens 
pasbioe,(.539 .149q6y bone) tromqtops gnhissls »wae toad a vino 
Teqqous tod sees lefysiem diged eT .aqyt amos Yo dasod 6 Bie 
Sx eau ekat sitd <QV i aagRS arom yIlersnog sew scoiteiiedent 
—— walsh ie 2 to, ae ot vd tad SN oat a 


aie tot oot Baie duos ole 


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less steel sinks that are easier to handle and install, and 


the introduction on a volume basis of light-weight coloured 
fixtures. 


The manufacturer became more and more aware of the fact 
that the plumber was not a good merchandiser and that the 
wholesaler usually was not that much better. 


The price situation and rising economy of our country 
was also abused, and often prices quoted by the plumbing and/ 
or heating contractor were much higher than prices advertised 
by other outlets, leaving the customer or end user confused 
and suspicious of the contractor. This, in turn, encouraged 
the handyman or do-it-yourself type of individual to shop and 
explore for other sources of material. The steady increase 
in wages of plumbers and installers of heating equipment has 
also encouraged home-owners to attempt doing their own pur- 
chasing.for building maintenance and also doing their own 
installation. In other words, many plumbing and heating 
shops were guilty of gouging the public. The manufacturer 
also became aware of this and looked for other ways of dis- 
tributing their products through more sophisticated outlets 
which would advertise plumbing materials at a true or realis- 
tic market value. 


In approaching the department stores and direct-to-you 
outlets, manufacturers were able to increase their production 
and ship in larger quantities. This helped cut down overhead 
expenses. Advertising budgets were lowered because the new 
outlets assumed part of this responsibility. These factors 
contributed greatly to a reduction in prices on many items 
bought and installed by individuals. 

The replies received to questions three and four have been 
summarized together. 

3) Many wholesalers are, of course, still independent in 
traditional sense. Will they continue to exist as such in the future? 

4) What changes will the independent have to make in order 
to remain independent? 


The Manufacturers' Replies 


Without exception, all manufacturers replied positively to the 


16... 


ben ,distear brs attired wa tebeas ora: tadd 
bstUO fos a hall ai to dasd naan & mO4 





3981 sit Yo sttwa Siom brn szom omaosd scot sta sdT : 
éd3 iadd bos asdbbandorom hong 8 36n apy fq ons sant 
sited doom. edt soo) sha Yin y xknes toute 


yisaues Iwo le Ymoness gukebr bas no tint te, eokaq ott 
\birs, yoidmulq sifs vd hatonp asoitq medto bis beads offs saw 
healizevbs aechiq ned sodgtd down stew totsataaos gatveed to 
bsenines taau bre a0 tsnotaus ela guiveasl weit. 49d30. yd 
bexeiwesio .oxvd mt , sii? .te¥SHsSHoS Sit i6 euOhotqawe ‘bes 
bes yore ot Lavbiwithirt in sqyd tisexoy-si-ob 20 memybwad ons 
sansuont ybsste oAT .!nivesa@ ic Avotee tehto 31d silage 
abd toomepivps' ants asd to ered iatent brs etadmuiq to asgaw mt : 
“iq nvo siedy sniob t4mad38 oF exdnwo-amod begetocoss oaks 
avo ttedd gafob o8!s hak sonehadntem onkbfied x07, gotandia 
ariined bes gridmelq yien ,absow tedao af ,aobtelistem - 
tatwiontunem aff .olfdig end gotaros a0 yilivg stew eqortte 
-2ib to ayaw yarlio 3t07 bsslon! obs aids io ovnwe smecead wala. 
sjolduo bode stietiqgos stom saguosdd advoubotq sheds gqndtudics 
~giipst to siti 6 te elsizssem gnidmilg seitsevbs' bipaw doldw: ¥ 
-wisy tstrem, ofF 


BeY-Cd-JOSsib bas eayole Inomtiaeqgebh sii geidonoxgqe at 
notioubetq afedi sessrent ot side stew arewwdsetwnem ~ataiaio 
besdteve nwob Juo baqisnf sift .esifliaoayp yegtal wi gide bas, 

wen sd saveoed bexyewol ssw alegbud gnfekituvbA .saansqys 

exosei seal .ysitidienoquss sits 26 gueq bomzan ell 
emad? ynem ao essisg af gotiovber « of ¥lgnerg batudyaana 
aleubivibot vd bal lesemt bos tdgeod 


hesd eved wot ban sstda anottgsup of bovisosd astiqad sat 


enki bosttsemme 
fit Savigybt {ihde /eTIA> to aan ee ee a 
aphale eB 08 ang seed Ba 


ge Bibs ws “ an 
| ayes oa 
ee ; ates ti 


my 





signet 
future of the independent wholesaler in this industry. The writer 


quotes one observer who says: 


(this) does not mean that the small independent whole- 
saler will disappear. On the contrary, he becomes even more 
necessary to serve .. . markets such as modernization, cus- 
tom built homes, small and medium commercial and institutional 
construction, and the like. The independent wholesaler who 
gears his operations to serve these markets, or in effect, 
"specializes", can look forward to continued profitability. 

- - . to remain independent and profitable he will have to 
decide which market or markets he wishes to serve and set up 
his staffing and practices to best serve these particular mar- 
kets. A degree of "specialization" is a must. 


Undoubtedly wholesalers today face very serious problems. 
If a wholesaler elects to restrict his activities to the 
plumbing and heating contractor, and that particular customer 
loses a market to other forms of outlets, then that wholesaler 
loses this market also (and it follows that the manufacturer 
who restricts his sales to wholesalers then loses that market 
as well). In my opinion, in order to survive, wholesalers and 
manufacturers in the plumbing and heating industry must decide 
who their customers are, and the type or types of markets they 
wish to serve. If we are to overcome the problems of delivery 
of premium-priced products, and if we are to do a better job 
of upgrading our sales, its to be hoped that at least one 
wholesaler in each major market elects to specialize in this 
kind of business. To my mind, more and more specialization 
on the part of wholesalers is a distinct trend for the future 
of the plumbing and heating industry. 


Another observer answered question three as follows... 


I will rephrase this, and in place of the word "will", 
use ''could they''. And my answer is yes, most definitely 
with a very bright future. He can do this by changing his 
identity from wholesaler to distributor . . . and contain his 
activities within the framework of his limitations dictated by 
the pressures of the big jobber chain groups. The independent 
could also service those manufacturers now performing a par- 
tial wholesaler function, and could build a substantial busi- 
ness on a profitable basis. The market in his trading area 
that he could serve very well may be made up of something in 
this order: 


- service the local area plumbers on their daily pick-up 
requirements ; 


BOs 







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obiosh tavm yijaubni gntzssed bos enkdaitq sf4 nt exyetuesbigdae 
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xidnd Soct4 a smd tonttelbh = et evalseeloiw te 32&q) steno 
saepbbdl goisxad bite gutdote ety To 


4 


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qissintiah ta0my.asy) at teltane uot bwA» ."yodt titpmat! i oe 
wiH gnigtedo yt gids oh nes sf etude? Idakid wrev & 
aif mketnos Hes . , .. oder ivasth. ae x £8 body, mort aks 


a Ska ii entotsea inl wT) 10: teowsmbxd ‘otf fii 9 
| eit ee ce es : 





- serve industry in his community; 


- cater to the do-it-himselfer (Friday nights and 
Saturday business) ; 


- supply to the kitchen and bathroom renovating contrac- 
COGS, 


- specialize in catering to the carriage trade by offer- 
ing more sophisticated styles of fixtures, and possibly 
the inclusion of a bathroom boutique shop. 


The Wholesalers' Replies 


The wholesalers' replies to the "future of the independent" 
were somewhat less positive in nature. All replies did indicate that 
survival of the independent was possible under certain conditions. 

For example, one observer commented .. . 


If an independent wholesaler is to remain independent 
and be successful in a very competitive market, he will have 
to change and sell directly to the public. In many cases, 
the wholesaler will be performing an assembly function, yet 
he will have to create an image and make the public aware of 
the goods he has to sell. Advertising, a good showroom, and 
excellent counter service are examples of changes the inde- 
pendent must make to survive. In short, he must merchandise. 


Another observer commented... 


We believe that the large independent will continue to 
survive in the traditional sense (intermediate between manu- 
facturer and contractor). He will be able to buy almost as 
well as Emco and Crane, and will be able to remain in a com- 
petitive position with them. The large wholesaler is an 
efficient means of moving a wide variety of goods to the 
construction market and this is unlikely to change. His 
ability to move large quantities of materials for manufactur- 
ers will remain a cheaper means of distribution than the 
manufacturer can hope to achieve by direct sales. Manufactur- 
er-owned wholesalers are not cheaper to operate than indepen- 
dent wholesalers. 


The small and medium sized independent can survive pro- 
vided he adapts to changing market conditions. He will need 
tousearch, carefully, for, those, markets, he can serve efficiently 












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peo 


and may have to move some parts of his sales effort into dif- 
ferent channels. We believe there will always be many repair 
and replacement plumbers who need good service on delivery, 
technical advise, etc., who put price secondary to services. 
At the same time, many products like tub enclosures, waste 
disposers, etc. lend themselves to sale on a direct basis to 
say custom builders, cabinet shops, modernization centers, 

or possibly even to apartment builders. Wholesalers can 
handle this type of sale more efficiently on a local level 
than the manufacturer. Some wholesalers may even become mas- 
ter distributors for some specialized product lines and act 
as service/supply depots for other wholesalers. We do this 
now for water softeners and waste disposers of certain brands. 


The small/medium wholesaler who is not likely to survive 
is the one who attempts to compete with the large wholesaler 
for large jobs but can't quite keep up because he doesn't 
buy as well nor can he stand the financial burdens placed on 
him. Specialization is the key to survival for the small/ 
medium wholesaler. He must "sell smarter, not harder" to 
borrow a phrase. 


The product explosion in this industry has been dramatic 
in recent®yéars First; copper then“plasitices ror texample; 
brought rremendous changes to piping technology. New instal- 
lation techniques had to be mastered yet the old ones retained. 
Wholesalers had to expand their product offerings with the 
consequential heavy investment in inventory. They also had to 
acquire more knowledge about products. To survive, a whole- 
saler must maintain a high "product capability". 


"Manacerial icapability™. ts “the *other™concern for *strviv- 
al. It is true of the large, small, or medium wholesaler. 
Sound business practices are extremely important when competi- 
tion is fierce, credit terms are difficult, financial burdens 
are heavy, and product capability is demanding. Wholesalers 
who attract good people by employing sound business practices 
have a better chance for survival than those who still rely 
on "seat-of-the-pants' approaches. 


Another observer also feels largeness is the answer to inde- 


pendent survival. He comments... 


I doubt if the independent wholesaler will survive un- 
less there is a great deal more co-operation between them. 
For instance, our company and three competitors in other 
cities, namely Kitchener, Chatham and Windsor got together 
and formed a separate buying company. We have used this com- 
pany to get into various rebate structures and quantity buying. 


tB... 


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OF 


This has helped us substantially. I also feel that this 
close co-operation will lead to an amalgamation in the very 
near future. Two of these companies have other lines, 
chiefly in tools and mill supplies, that would blend into 
our business, thereby adding sales volume. The only salva- 
tion for the independent wholesaler is to find additional 
lines, and if economically possible, to join forces. 


Other comments were quite similar to the previous... 

You point out in your letter that many wholesalers are 
still independent in the traditional sense, but I would like 
to suggest that it will become more and more difficult for 
the independent to remain independent. I make this state- 
ment because today there are more and large national chain 
wholesalers spread from coast to coast across Canada. These 
chains exert pressure to increase their buying power, thus 
making it more difficult for the independent to buy as com- 
petitively. The independent cannot, of course, buy in the 
same volume as the national chains. This would require more 
bank credit than he could possibly get regardless of how good 
his credit record had been in the past. 

Banks are not allowing the financial borrowing necessary 
and the interest rates on company loans are steadily increas- 
ing. Financing is becoming an ever-increasing problem. 

I do not believe that the independent as such will con- 
tinue to exist in the future. 

Replies to questions 5 and 6 are also summarized together. 

=) Vertical marketing systems are one alternative, several 
types of which are possible: (a) total vertical integration of manu- 
facturer through to retailer, (b) wholesaler sponsored voluntary groups, 
retailer owned co-operatives, or franchised store programs, (c) manu- 
facturer control of a particular line in a stere, rather thanecontrol or 
the store's entire operation. 

Would you indicate what you think the relative importance of 


each of these vertical systems will be in future wholesaler operations 


in the industry, and your reasons? 





a 





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aes) 


6) Horizontal or 'conglomerate' integration is also evident 
in the industry. Do you see this as an alternative to vertical systems? 

There were problems inherent with these questions which the 
writer hoped would not appear. However, some difficulty was experienced 
due to respondents' lack of familiarity with terms such as vertical in- 
tegration, wholesale sponsored voluntary groups, conglomerate, etc. 

Some respondents were, however, quite familiar with these terms, and 
these replies are presented below. 
The Manufacturers' Replies 

Total vertical integration was, according to one observer, 
definitely a real possibility, as was manufacturer control of a parti- 
cular line in a store. 

Concerning horizontal integration, one observer felt the con- 
glomerate will be the principal participant in serving the new home 
construction and high rise markets. Their operation, he felt, will 
come under the classification of "jobber", and because of his volume 
buying and ability to earn the maximum volume discounts, this observer 
could also quite readily envision him becoming the supplier on a lot of 
items to distributors. 

Another observer felt both vertical integration and wholesaler 
sponsored voluntary groups were going to take place in the future. (Some 
vertical integration exists now, of course, with Emco and Crane.) How- 
ever, he could not visualize manufacturer control of a particular line 
ined store tor “two reasons. 


a) . . . a manufacturer such as ourselves must contemplate 
more and more control over the distribution of our products. 


, 





, 


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For many years, we have faced the frustrations of independent 
wholesalers stocking and promoting our products almost at 
their whim, and plumbing contractors acting as the retailers 
of our products without any training or interest in modern 
retailing methods. I think it is inevitable that large manu- 
facturers in the plumbing and heating industry integrate ver- 
tically with the result that they own not only their own 
wholesale outlets, but also their retail operations as well. 
This has happened in many other industries . . . and it is 
only a matter of time before it occurs in our industry. 


b) - « - Since many wholesalers experience the same frustra- 
tions that the manufacturer does relative to lack of retailing 
expertisejondthe) parteof his contractorfcustomersyviothinktit 
is very likely that wholesalers collectively or independently 
will reach more and more into the retail level of our busi- 
ness. 


This observer does not anticipate a great deal of horizontal 
or conglomerate integration to take place within the industry, since 
the Combines Investigation people in Ottawa are opposed to this sort of 
growth within an industry. However, ... 


I can certainly visualize horizontal acquisition taking 
place outside of our particular industry, as has happened 
with our own company on a world-wide basis. In the past two 
years, American-Standard Incorporated has more than doubled 
in size through the acquisition of such companies as Westing- 
house Air Brake and the Mosler Safe Company. I don't see this 
strategy necessarily as an alternative to vertical integration. 
I think both have their place, and which avenue is followed 
probably depends on the individual company's circumstances. 


The Wholesalers' Replies 


What this writer considered two excellent replies are sum- 
marized below. Unfortunately, other replies were too sketchy. 
The first respondent's prognostications were as follows: 


Total vertical integration is one direction that has been 
taken by Crane and Emco, although they have not apparently 
gone the full route and to our knowledge, do not operate any 
retail operations. Quite frankly, we cannot see any real ad- 
vantage to wholesalers owning their own contractor (i.e., 
retail) outlets. Vertical integration of wholesaling and 








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sme 238 éttons ynsifeoxs owt, bsrablanoo s92k3w. ads jaw 
Ae nol stew aeliqar sarijo «Uistanutz0in0 | -woled b 
- awoken, an xan docapralinaits pee od oT an 


pbiassathi an BI E° 7 we 






ses) 


manufacturing seems to be a valid arrangement and more of 
this is likely to continue. 


Wholesaler sponsored voluntary groups is an interesting 
topic. We engage in such an arrangement with several other 
wholesalers for buying certain commodities. Personally, I 
do not understand why more of this has not been done, parti- 
cularly in the purchasing area. It seems a logical develop- 
ment if the small/medium wholesalers wish to compete with the 
larger ones. There is an opportunity in this for someone to 
develop. 


Retailer owned co-operatives for buying does not seem to 
be a likely development. It does not offer any advantage to 
the large mechanical contractor because he buys specific 
items for specific jobs. This co-operative arrangement re- 
quires a certain amount of business sophistication that the 
small plumber who would possibly benefit, just does not seem 
to have. Co-operative buying implies bulk purchasing, hence 
inventory accumulation. Plumbing contractors do not generally 
hold inventories. Franchised store programmes are a very real 
possibility and American-Standard's "The Bath" will be the 
first attempt. We believe it will be successful. 


Manufacturers' control of lines in retail stores does not 
strike us as a likely development. Plumbing and heating lines 
moving from traditional channels into D T U (direct-to-user) 
outlets will still be supplied by the same manufacturers. 
Merchandising techniques required to move these products at 
retail levels are not developed by these manufacturers and 
they are not likely to attempt to develop them in the near 
future. 


Horizontal integration really only exists at the manu- 
facturing level. Wholesalers who expand horizontally are 
just buying other wholesalers and their main reason for doing 
this is to expand into a new market. It is usually cheaper 
to buy an existing established wholesaler in a market you 
wish to penetrate than to fight your way in. It also has the 
advantage of removing one wholesaler from the scene so it 
does not add to the competitive situation. 


Horizontal integration by manufacturers is done mainly 
for one of two reasons (sometimes for both). 


a) An opportunity to improve corporate profitability. Most 
manufacturers are generally alert to this. In the case 
of large companies, sophisticated management techniques 
whereskR.Osl.a(return on investment)sis stressed, fre= 
quently will lead to horizontal expansion. 






ee 






1o sxomt bpt. TnaoyaeT ts sti eft 


Qhitesyotal ns at abies <li on wt 
taijo Larovee Wtlw Inemagnsti lhe rage ot Semagtt 
1 eellenoamd . asia bbomins otters: viv 

“seq Snobs bpBd. tor aah alt Fore | boetewsbowy 
ease fasiaol « amese 57? leaue aiteatitdg any sr ; 7 


afd altiw sdegnon of detw ayalounfoiwy outbem\fishe add’ Ht doen teat 
o3 Snosimme got aldy mi i i ns ek ovat .gend toytel 7 
.qoleveb ve 


O27 mese Jon esoh gotved 101 eéeitgréqs-oo hortwo wo hintoil 
Oo} Sgsitavds yas gStle_ion~asob.tl . .inamqoleveh yiadit s ‘sd 
oltineqs ayind of sashoad sogoerined leolandoom agrel ont 
“$0 Joemegnarie ovidaroqo~g9 ata?  .ado~ of¥rssqa tot anavt 
a3 Jeng foitsoitertyoe guantebd Io Jnontn oiattss » ese 
mse Jom asob Jeu{ ,dfieasd yldieccq bladw ofw atsdquig Liam wy i 
sonod ,onipadowg tad ‘2otlomb grivud svtisxzsqo-c0 .ovedos 
yiletscsg zon ob. aiesoetdnes yitidmyis ,aotis'umusda yaodascenl 
_ 188% YIov § SIk eemmsmgeyq¢ sidfa Roetdoiss . esl zodeeget Ghor 
eft ad Li tw ‘a scl" @'bieshnsdd-nazisomA bus va itd bess 
itTeasonue od Iliwot svokfed sw .3quetis desk ae 


som anob esitote [tater ot eaakti 36 Tetetes ‘atsx0s seinem 
soutl goitsad bos grtdawld .anemqeleveb yishili « an eu ettavte 
(tsan-o3-soe7Ib) BT Gd cant afonteas Leroidibers mort yobvow 
e29TutoBtuaem omse ot yd balfgana ed Ditte Litw wei 
20 stonborg seeds svom ot buttupst eexpiatied go hettretonsl 
bon StstusIetunen seeds yd hsqoelsvsh son oon elavel Lradeg 
teen oft mi man? qulevsh on s4q0es95 of ylswkt som ote volts 
-oTusud 


“nem of3 ts sletxs vine ylfses cotisrgeyn’ Intnosiret 
ets yilainostiod barges oflw aroleasfodW Level gnbtds02 
Qutob zed noapet ateam siol4 fan csolesstotivw iste anivud aaut , ey 
teqesd> gilewan 2: JT .dodzen wan so, oon basqxe of et etd ; 
uoy Jadtens oF tsfaeslody betetideses upitetxe me yu : _ 
of ef caisig] at yow suey tigi? 02 medi ste1aoreq. od | 
$i oe S99¢- 919 minx telaaslodw sino goivons: te een 
i oi apeba aaanae vile og) bbe 








one Oo 


b) To protect existing products. Because of rapid product 
changes, manufacturers attempt to protect their tradi- 
tional market positions by acquiring companies manu- 
facturing related products. This is particularly true 
if a company regards itself as a supplier of product 
that performs a certain function rather than by type of 
material. For example, American-Standard is in the fix- 
ture business, hence when stainless steel sinks, enamel- 
leds 's teeletubs; sinks, basins ,! plastic vanities! etc. , 
appeared, these new products had functional features 
that American-Standard regarded as traditionally part of 
their product offering, so they moved into these fields. 
Similarly Noranda, a copper pipe manufacturer, has moved 
intot plasitic piping; 


The exciting changes that will likely occur in our in- 
dustry are more likely to be in vertical integration rather 
than horizontal because vertical integration represents real 
departure from the norm. Horizontal integration is not an 
alternative course of action to vertical except in the purely 
financial sense that available funds will probably limit the 
course of action taken. 


The second respondent's comments compliment the above: 


Two national manufacturers and wholesaler distributors 
are already offering a packaged bathroom to the building in- 
dustry. The instant bathroom by "Crane" called the Futura 
300 (5'10" X 5'9") includes a moulded-in tub, medicine cabi- 
net and mirror, lighting and all accessory hardware, vitrous 
china water closet and integral lavatory with trim. Futura 
300 includes floor, walls, ceiling, etc., and comes in four 
sections that can be taken through a 30-inch door and can be 
installed in half a day. Futura is made of sanitary grade 
fibre-glassed reinforced polyester resin with a smooth 
gleaming white interior. 


Emco are not far behind and will have a different but 
competitive bathroom to offer the trade in 1970. Bathroom 
and boutique type stores, specializing in "everything for the 
bathroom" are opening across Canada, seemingly getting their 
start in Eastern Canada. In all probability, American-Standard 
will co-ordinate other wholesalers to compete with Crane and 
Emco. This new concept in marketing will, I think, be success- 
ful and further handicap the independent wholesaler unless he 
makes the necessary changes. 


A possible way to compete and remain independent will be 
to specialize in some part of our industry ... e.g. con- 
tract sales, retail outlets, bath shops, etc. 










touhorg birqks to seucve! .arauborq gniadixs 2sdorg oT 
-thexd tiedd 3139)0%0 of sqmedas Seotvsstsunaiee patie ti: 
-unam sstasdmoo gubibirpsa yd, giacq +o°ven Ponots 
ovat ybyaluota req: 2t eidT .etde hotq, bois l sx 3 4 
Joubotq Io xzakiqqiiz A ar {bsast abrnnet Yas 2” 
to aqyd yd add yon felsonur wipites & enrrottaq daily 
~“ti sis ot at brebae7- reorremA yolquraes 1oO7 =, Lobkrodom 
-fomsrs ,ailfte leste ge inteta seny soten ,eeonbasd oped 
_.999 , 29tvineve >itzvanic eatagd: adie Cadi Teete bol 


gatas? Iaoolt¥onut bad gi aubotq wont seornkt , »steoqqe 2 7 

to tueq yilsnoitibast es babragsy brebnes3-nestismA tan - 

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bevom ap .tsatoninnem sqiq tsqqoo B ,sbakYouw ylini take ; 

Bhiqiq oipealy ott 7 

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{est atqsestqs1 notsuzagstar Ipobytey saisosd: Jesmesivod aed | 
if Jon e#er cetiszasini Istnosizoll .mtoa sid most stad @eues 

vietiq 543 of aqs9%9 Iseldusv od notice, tou setvos evivegaisiis To : 

wid 4imil yidsdosq [liw aboaw) eldslinsve dads ssage Iefonenks : 
sHoiet ootion 10 Setues 

wods off tnsmiiqmos ‘stnonmos a'tnsbroqess brooss sar ; 

atajudizieib telseeaforw hae eastotastveem [unotdsh owt 


“af, grfbliud af 03 mootdaad Gogeadase & gtigatio vbserle Sue 

. Byiyt oda ballon "saard" yd mootdaad Sebi atti sAT .veseub 

-Ides sototbsm .duy nt-bsblvom p asbafonk ("e*2 K MOL'C) OOE 

svotiiv .casawbasl yrosesons lis bas gatudetl , tortie bas Jon i 
Bxwjuai = «.miva dmiiw ytodavel Jergetnt bas tsgolo saasaq onkdo 

tuot al gamoo bna ,.935 ,gntiteo ,alflew ,reoli asttilont OE 
od. abo bts toob dsei-0€ s dguodda usist ad nto aed enolasse 
*bS39 VibJinsa Ie sham @f sastvd- vb. ue tied at bel ietent 
Atoms s Aitw mest tetasyloy beotoinisr tszapdgeswd tF 
-tokroju! stidw goimsolg 


Jud sMstsaa tb ‘a oved Pbite hire! hatiled tat ton sin coma : 
moosHieh §\OXC! ai Short silt 910 o4 moordsed oeivn seas 
sift “an? gfidty rove!" rahe ena 8 pats oye. suphs 





sinaat ci ioe Lian tea, bee 


seis) 
It appears that the vertical marketing systems such as 
that planned by Crane and Emco (and possibly American- 

Standard) will be on a trial basis and will be with us for 

an indefinite period of time. The length of time will de- 

pend on whether or not they are successful. I am inclined 

to believe that they will be successful but will probably 

concentrate on the remodelling and renovating part of the 

market. Statistics have been quoted to show that this type 
of market exceeds $25,000,000 for fixtures alone and that 
this figure does not include installation charges or cost of 
other items which go with the remodelling package. 

7) What future do you see for your own company in this 
area? 

The Manufacturers' Replies 

One observer reiterates American-Standard's entrance into the 
field of retailing, namely the previously mentioned bath boutique in 
Toronto, The Bath. 

Another observer, on the other hand, does not indicate his 
company will vertically integrate, but he does spell out clearly that 
they intend to move their product any way possible. Under the pressure 
of market change, this observer looks for the movement of large quanti- 
ties of plumbing goods to the consumer by way of capable marketing 
units, i.e., the retail store. He feels the Canadian market is small 
in terms of permitting the investments necessary by a manufacturer to 
produce more economically, and hence, the manufacturer must supplement 
his market by moving his products through marketing groups outside of 
the restrictions of the plumbing industry. 

The Wholesalers' Replies 


Wholesalers' replies to this question were also quite sketchy. 


Many respondents felt that they had implied the answer to this in 






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-novivent) whats og ban) 6 
dot au datw od Ettw bre etdad | 
= igh ‘Ehiw ‘oml f Bie} Higgat att, . : 
humping? ms It ,Ipteehoous oF fom 10 78 
yidsdoxg Iity tod Loisasovow ed, Thi : 
gat. 20 dveq salgevoroy bia’ gAbtTabombe sit re Stantiaono2 
sqet aid? apdy wora o4 bedunip © sven. soba. . tooltem f 
tadi bes. agefs. gaxitxts 208 000, zea, ogee to po 
to den 26 esgieds notteliasack agatha jon ¥soh atugts abla 
.8gSioeq anti isbomsxy sid datw og ds ide amsa i soto 





eldd ol vasqmon nwo toy JOT SS voy Ob saydot tenW  (f 
TaeTe 
avs lgan ‘syoraootuceM OAT 
sid odni s4npties 2a'biabtist<tacttom) potatad hss tevréedo ono 


ot supljuod rigad bsned 3A em (ibbotyong Sis Ylomen aotl beder to bled 


~~ 


-i3ed of? ,otnorer 


ind susobint jon esob .basA tvedjn sii ao ,73vys8d0 2eHioaA 
Sead yiarelo tuo Lloqa agob sd sud .o9styetot yilwoltasy Ditw Yonqao2 
emwaesig an. tabn ,sldtaeoq Yaw. vas Jovboag thodd avon od Baesak yond 
-itniup sgtel to Jnamsvém sift y0t,elool 35uTe8ie ahd ogres Seteam Bo. 
antiedism ofdiiuns. to vaewoyd asmasnod ana oo shoog gu bdmika to esfd a 
fteme 2! 3oovenm on rbenisd edi eles? of ot0t2 [teterosdy PEP 2a law u 


ad Tamdgeinped:s xd Wiaeesoan ei homlasvas. oult yith3a,tnteg: 20 aries ak 


-_ 


a 






Iremolyque Jaum ware 4 26 komen saa ene ss evils . MONOD 3 





AS C. wdiy A 




















age Eny mga airs inte. rr Ag poube 7 iL savor yt 
: + aise ane 9 
= ” my \ a) = rs 1 gtrie 7 
7 a nits, i. 7 ; ’ 7 
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ae 0) 
answering earlier questions. The writer has included two definite re- 


plies, however, and believes that they are quite adequate for purposes 


Of this*thesis: 
One observer commented... 


We feel our future lies in being flexible in our market 
approach to move into areas of opportunity where we can excel. 
We are acquiring specialized product knowledge in the field 
of plastic piping and we know we can do a better job than any 
other wholesaler in our market. We are stocking products 
with which we have demonstrated our ability to out-perform 
other wholesalers such as: In-Sink-Erator garbage disposers, 
Showerfold doors, Everpure Water Softeners, etc. We are pre- 
pared to sell direct to builders or retailers if this becomes 
necessary to movelicertainitypes of products ®#®'We"are experi- 
menting with retail sales in one of our branches. We are 
moving strongly into waterworks markets (specialized field), 
as well as into industrial sales, and we are backing up this 
marketing effort with a highly efficient order handling pro- 
cess and information system that keeps us on top of our 
operation at all times. 


Another observer had this to add: 


To answer your last question . . . means to summarize 
and repeat some of the foregoing. I personally have an un- 
questionnable faith in the future success and growth of our 
company, as an independent. If we were to be bought out, 
say by a conglomerate group with unrestricted financing, 
this would no doubt expedite the successful future of our 
company. Whether or not this will happen remains to be seen. 


If we remain independent, we will only continue to be 

successful with sound and capable leadership and management. 

The key to our continued success is, without a doubt, people. 

We must be able to attract and keep the most qualified and 

capable personnel possible to fill important leadership posi- 

tions as they arise. 

A detailed description of all replies has not been included 
because the writer feels it would serve no useful purpose. Many replies 


were very similar in nature. The criterion used by the writer was to 


include those replies that were most complete. It is interesting to 


0@..... 


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7 a) 

eskoqaug tol sdaopube, eiitup sts yard anid asvelled ban ytevewor -sobiq 

-eteodt ald? 390 7 


. _ hasnumos teviseds sav oe 
: i 






ssdxam tio ak sldixe!l? eered at eakl suvgua suo [est sw 
-fesxs ho sw stsiw (sido voqqe Lo akSts offi eyo od dosptagqs 
bist of mt sgbelwor! soubomy boskisrosge yrtxiwpos ote, oW 
yin madd def 493360 # ob oso! ow wot sw bis gakgiq sitentq to 
ed aubntg gniloota sts sW .jaaian tup at asistelodw tefso 
mrotteq-dpo od) yatiids tho, begets puch oved ow dotdw Asie 
(@1920qHtbh sandtba tota1a-thie-nt fea dose swelarsionw Ist 
-31q ate 6W .ot9 ,ats9nvito2 36464 etuqraye ,et0eb bioittswede é 
esnened eidd. it sislladet a9 exbbliwd of Jouttb.tlise of bateg 
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ove 9W .eadonetd ave Yo sno Ar esdoe lisset dAsiw sotgaom 
,(bfeti Seerlelosqs) eisign eltowisJaw oint yigooste gotyem 
efi? qu seblon! om Sw hoe ysolse lutaseugbai ojat ae Ifew es 
-OTg gittibrad tebio thsisiiie yitetd & AYiw Jy0349 BorIsstem 5 
tuo to gud co a eqead teddy mataya nolsfarroin) bas agay . 
.vanid Ils Qe noliemsgs 


‘bos of 2ld4 bed vrevieeds r4odsonaé 


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“no re saved yilnngexeg 1 .erlegorok 687 Io Smee Je4sqe7 bah 
Tey 20 fawowg brs aessour sizoiud sid ni Adisd Sidsoseriesup, ose 
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gototant) betoitiverdy dtiw quot, sjxtemoelgnoo s ydvyRa —.§ - 
Iwo io sjni Iotassacove ait oitSeqxs idvob on bitow eis - 
isse Sd od entomey nvqged Iitw atdd ton 20 daitltsdW .yonqebe ve 


$803 sunijcgo yino [liw ow, .Josbrisqebih oiemer aw DF vit c 

-iddmegenam bos gittrebeo! sidiqed bus bayoe ditw Ivlessooue < 
-eigesq (ddueb & inodiiw .et svoszte beatanoo moos yar: o4 - 

bre bepliflesp s40m Sid qocc) bok Tosteye 07 olds 
“Heng qideisbssl smudsoqnt [1 '2 04 afdtesoq Ter 


<Sonae - : 







— 





eure} 


note, however, that there was no contradiction expressed to any of the 


questions by any respondent. 


in nature, a few to the point of being almost meaningless. 


to be unexpected in research of this type. 


Unfortunately, some replies were sketchy 


This is not 


Following the writer has prepared a table summarizing respon- 


ses to the questions asked of both manufacturers and wholesalers. 


Question 


lk Patterns Changed? 


Pd Factors 


2% Independent Exist 
in Future? 


ae Changes 


Die Vertical Systems 
6. Horizontal 
Integration 


Manufacturer 
Yes 


Communications; 
Delivery time; 
Variety of Products; 
Discretionary Income; 
Low-cost Housing; 
Easier Service; 


Yes, with reservations 


Develop new markets; 
Merchandise; 


Total vertical inte- 
gration; 

Wholesaler-sponsored 
voluntary groups; 

Franchised store pro- 
grams ; 


No 


Wholesaler 
Yes 


Development of new 
marke ts; 
Chainstores; 
High-rise Apartments; 
New Products; 
Merchandising; 


Yes, with reserva- 
tions 


Merchandise; 
Specialize; 
Develop Expertise; 


Partial vertical 
integration; 

Wholesaler-sponsored 
voluntary groups; 


No 


Question number seven has been deleted from the above sum- 


mary as it is really not pertinent, and can be deduced from the replies 


received. 


A further observation would be in order at this point. Re- 


plies received and interviews carried out indicate a strong competitive 


Te» 


Jon at @fAaT .eeabgninuega agomis one 2% smkag ad a) woh es Seuaps 


.oqya ents tio einai ni batoogxany od of 


-fogast gaisitanmue oldest « betaqaitg sad seatuw ofa gntwollot 
i. 


Pe 







Lareiesicnw bas wreiutostungm didd Io betes goobtesup att es sem a 


1elesslody 
any 


wert Iq tesingafsyved 

* BJ sal tent 
;aexop.e0i HHS 
- eivemd tagjA se hi-teth 
:Rad ouboxS wav 
;arterbnaioiteM 


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enoi3 


)aarbrodatoné 
:28iiniosage 
~S8igtsexd qol svat 


Isotsitev Ipisars4 

tok eng oir 
bstoatoqe-isiees lori 
paquezg Yrnjaulov 


to7u 2 0B IRM 


aay 


p8ROLI so FimumMOo 

j omnes (revi! a4 

:eJ oubord Fo, yds taBY 

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:sekbosioxsm 


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boxoanoq2-saipaelarty 
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(aneTa, 


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a92 


feeling within the channel. The retailer feels he is paying too much, 
the manufacturer feels no one wants to sell his product, and the whole- 
saler feels everyone is trying to do the wholesaling. 

Perhaps if more channel co-operation existed, many problems 


would disappear. 


Ta 
, , oe 


a oo _ - 
. : » _ ' ; 
»foum oas goiveg at od alge2 wabkajet oft bet , - 


~6forw ott bow JouWe1g cid [fen oF adfew Suty ‘on afoet +: 









7 


9 


goilseslody off ob of gakgrs sal smoysave: 
amsidoxq ytan -bedeixe noldateqe-oo Istrads stom FE equdzst 


CHAPTER VI 
CONCLUSION 


In Chapter I, it was suggested that there currently prevails 
two distinct views concerning the position of the wholesaler in our 
economy. Either the wholesaler is losing ground as a source of supply 
to the retail trade or, in certain instances the wholesaler has made a 
comeback to a competitive position. | 

The reader will recall that it is the future of the wholesaler 
with which the writer is concerned in this thesis, and not the function 
as such. Therefore, it is who performs the function that is of para- 
mount importance, the assumption being that it must be performed. The 
independent, the reader will recall, was described essentially as the 
"traditional middleman", and having no ownership ties with either manu- 
facturer or retailer. 

With this in mind, then the writer will now outline the cen- 
tral ideas that have developed in earlier chapters. 

The Emergence of New Markets 

It was determined from the replies that some changes in pat- 
terns of distribution had taken place since the 1950's. These changes 
were the result of the development of two new markets for PHC products, 
namely the prefabricated and mobile home markets, and the remodelling 
and renovation markets. Manufacturers and wholesalers both agreed on 
this point. The traditional patterns of distribution (manufacturer- 


wholesaler-retailer) still predominate in the industry, most observers 


















TV. AATAAHD 


YOTeIIONOD _ 4 


idevexy yitnerzio s19d3 set beaesggual aaw a2 7 Medgedy 


rt \ 4 7 a, 
THO AL ssIreslodw 14 ) NOtD bao gf4 sntaysonos awokv sont seis va 


a ae ow f 
YViggve lo Souude & et banvotg gcfaol et ssipesiodw sid zemetg Re 9 
: 7 wai 


sdf whserrolasq 34 Jaudt 3) } gnfed tnoldqameaa odd- somes raged dai 
d3 as yilsitnseas, badiroesh ssw “Ifsdey Ilkw sobaet. ana <saabnogebint 
ee tantdts att 9t3 qidatanwo on gitived bos ."nenstbbim ‘Isaots tbexd 
peer 
Telistss go 793u30 th 


“fan sla snokitdua w ry aoe w od mod? . brim oi elda dee” 


; 
15 tivas af boqulsvsb en dads 
P 
} f ) Sonsy tend sat 
= SS nee 





“36g ‘i adgoaads soee tedd esiiqe: oft most banimxss 5b daw AT 


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; _ ettoubor OHY xo? etodrvem won owt 6 Spiamqolov vob ont ” sis te + s3ow 
"° 


Z ; et ts vt 


> aie - “ee 
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= ona sbeme oni _ init at 3 58 bers. ‘ba: 








ne ‘a ba (2; a6 Aso eae a a ts xt at i. di 





peo 


felt, but were being encroached upon by mass merchandising at the re- 
tail level. This situation resulted in direct bypassing of the whole- 
sale middleman. 

Better communications, better and lower cost delivery, in- 
creasing discretionary income, the need for lower cost housing, and 
easier servicing of products were all cited as forces of change. New 
materials and ease of installation, combined with high tradesmen's 
prices, has become a major impetus in the development of the do-it- 
yourself market. Department stores, building supply houses and the 
like are dominating in the sale of these products, and as mentioned, 
typically buy direct from the manufacturer in huge quantities. 

The reader will recall one observer's definition of a plumber 
in Chapter V. Both the major mechanical contractors and the apartment/ 
project plumbers seem to have limited incentive to "sell" plumbing pro- 
ducts. The service/repair/renovation plumber, on the other hand, has 
the opportunity to do a creative job of selling. Yet, most observers 
feel little actual creative selling takes place. Again, to quote this 
same observer, "one of the greatest opportunities for both volume and 
DiOglt we Lleseine this area, 

A similar situation seems to exist with prefabricated and 
mobile home manufacturers. Apparently the manufacturer has found it 
necessary to bypass the wholesaler again because of lack of performance 
on the wholesaler's part. 

The prevading idea throughout the above is, of course, the 
concept of selling. Each segment of the PHC industry attempts to blame 


the others for non-performance of this function when, in reality, all 


aE ns 





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parties seem equally guilty. 

The marketing of plumbing products is now entering an era 
where style is taking on more and more importance. This is particu- 
larly evident in the "visible" products in the bathroom or kitchen. 
With new products appearing constantly and the continual awareness of 
the consumer, it is not at all unusual for a bathroom to be out of date 
even two or three years after completion. 

Servicing and specialized design of some products to meet in- 
dividual needs is also becoming an important factor in the PHC industry. 
The margin in many of these lines is higher than in the high volume 
items, and by becoming an expert in his field, the seller can retain 
more of the margin for himself. 

Does this mean, then, that the independent wholesaler should 
reject his traditional customer, the plumber, and sell direct to the 
final consumer himself? Perhaps he should set up a "bath shop" and 
stimulate his trade to the purchase of more sophisticated plumbing pro- 
ducts. This solution is, the reader will recall, being attempted by 
American-Standard and "The Bath". To sell retail would very likely 
stimulate higher sales and profits to the wholesaler. There is a defin- 
ite need for this. However, for the wholesaler to enter this field 
could be very perilous. For example, he risks losing the plumber as a 
customer to his competitors. As well, the wholesaler is simply not a 
retailer, and to become a retailer would be a major task in re-organiza- 
tion’and thinking: 


The "bath shop" concept is not suitable to the wholesaler for 


> 
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these reasons. Rather than integrate downward into this business, the 
wholesaler should endeavour to have his products placed in these shops 
(and this includes bath shops in department stores). In this way, sales 
can be upgraded with little or no disturbance in the industry. 

To do this requires some re-orientation, of course. The 
wholesaler's salesmen would probably perform more services for the final 
seller. He is not selling to the plumber now, but to a group of indivi- 
duals to whom the technicalities of even simple plumbing might seem a 
mendous problems indeed. 

The reader will recall the experience of the Andrew Company 
outlined in Chapter III. Design, training, and trouble-shooting were 
all added to the "traditional" job of selling. The experience of other 
industries who are performing these services can also be profitable. 

Wholesaler showrooms are another effective way of merchandis- 
ing. Surprisingly, the era of the wholesaler showroom seems to be 
passing. As mentioned earlier, many PHC wholesalers abandoned their 
showrooms some years ago. A few continue to persist in Western Canada, 
particularly, but industry observers suggest consideration is» being giv- 
en to the elimination of all showrooms in an effort to economize. 

The showroom is now coming into its own. Perhaps previous 
wholesaler dissatisfaction with this concept was premature. There is a 
cost associated with a showroom, of course, and each individual must 
decide for himself the relative advantages and disadvantages of this 
concept in the future. The wholesaler, particularly the small indepen- 


dent, cannot afford to be without one. New products and colours must be 






















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chetera 
exhibited to the consumer. 

As well as encouraging remodelling and renovations, the inde- 
pendent wholesaler should also encourage new home and apartment build- 
ers to use better products. Too often little or no effort is made by 
the wholesaler or plumbing contractor to inform these people of the 
advantages of newer and better products. 

The manufacturer often makes efforts along these lines, with 
his local representative detailing to architects, plumbing contractors, 
builders, and government agencies; however, his efforts are spread 
thinly, and sometimes incur the ire of the wholesaler who feels he is 
being bypassed again. 

Prefabrication and mobile home manufacturers are both highly 
specialized operations, requiring a different plumbing "package" than 
do apartment builders. Much of their installation is not done by 
licensed plumbers, which generally means a requirement for simplicity 
of products. Hence, the introduction of "complete'' bathrooms which are 
merely bolted into place. The constant repetition and standardization 
required by these people results in many more pre-assembled packages 
than is found elsewhere, although this trend is becoming more evident 
in apartment construction. 

The point is that for the most part it has been the manufac- 
turer who has been in contact with these people. The wholesaler has 
sat back and done little to determine how he can help these markets. 

In other words, the wholesaler must decide where his markets are and 


how to best serve them. He need not serve them all poorly, but rather 
























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ano: 
one or two well. 
Polarization of Wholesalers 

Wholesaling in the PHC industry is polarizing into two groups 
- the large, national, multi-branch wholesalers who are often vertical- 
ly integrated with at least one manufacturer, and at the other end, the 
small and medium-sized wholesalers who may operate one or two branches 
or a small chain of six or eight branches. These are not national in 
character, however, and are not vertically integrated in any way, pad 
generally conform to the writer's definition of an independent. 

While there was some difference of opinion expressed in the 
replies as to whether buying power was much of a competitive factor at 
each pole, it is this writer's opinion that "the big buy better''. This 
does not mean there are tremendous differences in pricing arrangements, 
although this may be so. In fact, prices may differ by one one or two 
percentage points. Other arrangements, however, can include special 
"dating" of accounts payable, or rebates for purchasing certain quanti- 
tiles . 

These special arrangements can be a very important competitive 
factor in an industry where profits are low and volumes are high. 
Paieine such as this then is likely to result in increasing polariza- 
tion in (thes Guturer 

The independent then is likely to remain in the future at an 
opposite pole from the large, integrated wholesaler. Hence, price- 
wise, he will be unable to compete with the large companies. Coupled 


with this problem is the independents' problems of access to funds for 





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wit . Bas aentao srs ae bas Tosa ang dessl. 4p datw vonexgsamh ch 
gapotatd owd Yo, 00 Stateqo Ym il arelaorotlonw beshe-mdbam han baeh 
ni Senojisn ton sts geodT .asdanstd tdgta ro xbe 20 aisdo [ine 8 IQ | 








Bits. . URW, - at Botargsint viisofixey ton oa bas ,T9veWoR, pres aetedo. a 
tnabasqebst nc to-ndks telisb a? tsaixw ods oF myoines yiienemeg (7 _ 
ot ai baeporgxs aointgo to eonetsiTih smoe aew evadd slid: © agi) ae i 
4g toto? svidisisqmo> 5 Jo Aybm, asw Tawoq aniynod rendjshw. ot es estiqay i. 
edt ,"potaed wid gid ois" dadd gotntqo e* sod tae anda eb tr, 9foq dose 
.aiiemegantis goicitzg nt eeomoweRtib exobasmers sia stadt pom Jon @aob, i: 7 
ow? yO ono gno yd 1927ib yor ssoktq..ts0t nT .oe od yam atta dgueilal 7 
detosqe abulont cap ,1tsvawod ,etnemegnetie 19d90. -.etoteg ‘ogssqso%eg, 7 


<tineep abeite> griesdoxeg foi estadsr xo yaldeyeq adnwosos to “gabdakl — 


ees a 
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«gid 976 asa lov bos wol ota ailtorq orsdw ysteubot as at “a 


ener datkeawnaitt ot divest os ylodit at nodd ebda. ne 








B tbe, 
capital expansion, inventories and accounts receivable. Often there is 
a thinness of managerial assets as well. 

The independent then, assuming he wishes to remain as such, 
must be aware of these facts and act accordingly. The future lies 
largely with himself. One must remember that direct selling by the 
manufacturer affects all sectors of wholesaling and not merely the in- 
dependent. Hence, he should quit worrying about being bypassed and 
find those markets and products to which he can attune himself. 

The previously-mentioned mobile home and prefabricated hous- 
ing markets together with the remodelling-renovation markets are exam- 
ples. Whether the independent wholesaler can serve these markets re- 
mains to be seen. Most respondents did indicate, however, that the 
independent wassinia sbetter _posiLtionstoeserve «thematham theslargesgePHC 
wholesaler. 

The future of the independent could be bright. He must be 
content with smaller volumes, higher costs, and probably lower profits 
than his big competitiors. Undoubtedly, the major conclusion of this 
thesis must be that the independent wholesaler must decide where his 
market is and then determine how to serve it in the most efficient 
manner. 

He must further review what functions he can perform for 
these new markets and allow either the manufacturer or retailer to per- 
form the other functions. The day of the traditional wholesaler per- 
forming all of the functions outlined in Chapter III is finished, yet 


still many independents feel it is their right to perform all these 


Sa 
a} gxeit mett0 \.sldevisost atmyooom bre aotrotasunh snokarages 
| Lia 29 e0and Inltagenam Yo ausontti i) 

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oi3 xd aniljes Jo97tb tart Sedeemes Jem so .doented kw elena) 7 
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inn boaanqyd acied ivods ghiyttow Jiwp bivode of ,ganeH .dasbaegst 
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-evo bessolydetsiq bas smo olidom tuarinshsipanalinaielt eg sit os 
«6x0 978 edstise notsevoray-gnkilsbome: od dtiw tetvegus stedtem gat 
-st siediem sued? svtee oan telseslorw Josbrsdsha) ody wedded esky 
oft tate ,tevowod ,otestbak bib etuabaogest da0M ,nosa ed ad aniam 
ING sgte! adt osda asd? svise of a0ltieng 197350 5. oP asw Inebasqebat 
- tsiseslodw 7 
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adiivxq towol yidedotq baa ,etsoo sétigid ,eaeutovy refidame dotw gasmnes 
eid? lo notavlonoo soften off .viboddvoball .erotsiteqmos gid sid mat 
zi Ssedw sbiosb Jeum tolsesladw tosbnsqeboi oft aed od Jeum abeod? 
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mse ma 0 a hipaa: sty wa 





. 100 
functions. This is simply unrealistic, and the sooner the independent 
realizes this, the more prosperous he will become. 

The Vertical Market System 

The reader will recall from Chapter IV the discussion of 
vertical marketing systems. It was suggested here that ... "the con- 
cept of functional shiftability has replaced the concept of role separ- 

nya: MA 
ation’. Furthermore, conventional marketing channels seem to be becom- 
ing economic anachronisms. 

Three types of vertical systems: corporate, contractual and 
administered, were discussed. In the qestuionnaire, however, these 
terms were not used as it was thought they would prove to be too con- 
fusing (see question number five). 

As mentioned earlier, replies to this question were not as 
complete as the writer had wished. However, in the analysis of the 
replies, certain consistencies did appear. 

Vertical integration, or the corporate system, had a very real 
future in the PHC industry. Manufacturers felt they needed more control 
over the distribution of their products. Crane and Emco, as mentioned 
earlier, have been integrated vertically for quite some time, and re- 
cently Emco announced the acquisition of another manufacturer, Stamped 
and Enamelled Ware Ltd. 

As well, an industry observer suggested to this writer that 
American-Standard was negotiating to acquire a wholesale PHC chain. If 


this happens, American-Standard would be the only full integrated (manu- 


IMcCammon, et al., Emerging Patterns of Distribution, p. 2. 


OOl.:. 





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sL0 


facturer-wholesaler-retailer) PHC organization in North America. 

Wholesale-sponsored voluntary groups were considered as a 
future possibility by two observers. One could visualize greater buy- 
ing power achieved by group purchases among small independents. This 
solution is particularly suitable to the small independent in this 
writer's opinion because of ease of communications and agreement. The 
large independent in the opinion of one observer buys almost as well as 
the national chains now. 

Retailer-owned co-operatives are not a likely possibility in 
the PHC industry. The large contractor has maximum buying power, and 
the small contractor who could benefit from an arrangement such as this 
usually lacks the sophistication. As well, as this observer suggests, 
group buying necessitates storage, a function heretofore performed by 
the wholesaler. 

This form of group buying from the wholesaler is a real pos- 
sibility, although it is unlikely this arrangement could bypass the 
wholesaler. The wholesaler would be willing to increase discounts 
substantially under this purchase plan. 

Franchised store programs are a real possibility, as men- 
tioned by one observer. He suggests ''The Bath" as only the beginning 
of a very successful program. 

The writer also believes this to be a real possibility. For 
example, plumbing contractors in Toronto were quite disgruntled with 


ws 2 : 
American-Standard's entrance into retail merchandising. Yetguait 


2contractor, Jonew 1 969 sip. oli 


TOD. 





epotvamd ditow at noksexEnegxn SHYT (tof. 


6 an boxebianes orsw eqnoyg redhu lov bescehpdababnane¥ — 
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oi 
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: 
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st? ,jrnemsetgs bos anolicotaymmos lo Ses9\ 26 sevesed nolnikge oe aasieel 
26 {iow es taomian eyud revisedo sno to notaigo sf) ot Jnsbreqebak Sguet’ 
| won entero bematzen sda 
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bas ,Tewog gniyud miumtxess ee totostigos sgial sdf .eeseuhe® Ol eee, 
Ne es (love tnemegneats 5 mort titemad Blyoo ofw yoyosssnos Dieme erg 
,@ieoeggue toyisedo ait es ,IlIsw eA .notisotiakdqoe sda aloeh yiieven 
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. 1sleesiodw odd 
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afd aesqyd bluos imemsgnexis alda yvheltit et at dauorida  weRIReRS 


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a. 

.osiq sestdrug efdi tbe yfinimaedeh |e 

ret 

“Sa 25 pel Matiaecd [so¥ 68 538 amsigorg stose boabdonase i Snap — 


Rnisnigod sds ared en Nee oT" etasgaue oH ceeetiinn ono yd bsmokd : 


NR nets as 7 








Brie 0 
American-Standard were to now set up a program to assist the plumber in 
entering the "boutique" business, the program could be a tremendous 
success, and could promote the sale of American-Standard products, 
rather than hinder them. 

Only one respondent commented on the administered system, or 
manufacturer-control of a particular line in a store. Because of the 
lack of merchandising experience on the part of the manufacturer, use 
of this system appears unlikely. However, if "The Bath" proved to be 
successful, this writer feels the door could be opened to administered 
systems. 

Horizontal Integration 

Observers felt horizontal integration could not be looked at 
as an alternative to vertical integration. Rather, the only advantage 
to horizontal integration at the wholesaler level was the removal of 
excess competition. At the manufacturing level, reasons of improving 
corporate profitability and protection of existing products were cited 
as advantages by these observers. 

For the independent, horizontal integration has other advan- 
tages. For example, integration with a larger financially or manageri- 
ally strong company could provide the independent with needed financial 
and managerial help. This is too important to be ignored because, as 
mentioned earlier, many independents suffer from lack of these assets. 

The Future of the Independent 
The writer concludes from the preceding discussion that the 


future of the independent is limited. From the responses to the ques- 


S01... 






nt tadeurlq oi tebdds 02 mergOrq B qu Jse won os: 


avdbremasys x od biues mzrgotq odd, zeemkeud ihe nel i 


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mst webotd apts wedgw 
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' 
oft Jo séts008 .orvo37 « at sakl welnolatke # 26 Torjnpo- Ted oe turism 
9a ,tsi1wtoniunam sit to 348q end no sxdahtéqxs Sorebboaderad aeons 
of od bevetq "W458 sil" 24 .aSvewoH .yisdiinu aresqqs moteye eideeas 
bsussatnimbs oF bansqo sd blue saceh of3.efasd sortow atde _luieessoue 
- ehedave 
hotsoertgstal  istnoxsisok = 
jr bwlool sd ton blues soltargstoi issaosisod sisi ereyvesede ie 


sagtiidnevbs vino sia: ,Tedted wnokistasinkd Isotsieay op -ayignnaesis ea ae 
favomes stly eow favsf tolevolodw-sdd ih nolistgesar igdamosizod 03 
gtivorqmi 20 ¢noarox ,level gifiusostunem sai FA “no t3.ttSemes eesoxs. 
betts stew ejovbotq scisetxe to sokiszesoxrg bos yi hdenbiorg araeqto 
-etovisado sasdt yd eoqamnyvip ae + 


“fevbe asilto end notaatgstolr |einostved ,inehbrogqebsai sia 64 ass 


~bregavem 16 Viletonanti togzel s. di iw nolo psgssat aiqinmes tot veogat 
Iwtonerst bebsen ditw inebpsqobnit +44 sbivozq blued ynéqmos gaondagiis 
ah (ogunas! \bavedRY od a3 Ree bat al sie 





i Oe: 
tionnaire, the independent wholesaler's problem is found in his inabi- 
lity or unwillingness to develop new markets. to specialize, and to 
merchandise. 

The manufacturer feels neither the wholesaler nor the plumber 
is doing much to merchandise his products. 

The wholesaler, by his past performance, indicates his unwill- 
ingness to do other than those functions which he performs best. He 
does not want the retailing job it seems, but would rather supply the 
retail trade. 

From the material obtained through the questionnaire, the 
future of the independent is bleak indeed. From this evidence, the 
independent should prolong his life through specialization, group buy- 
ing or even horizontal integration. 

However, both wholesalers and manufacturers replying to the 
questionnaire have seemingly ignored what was described in Chapter III 
as the basic marketing function, the sorting process. Perhaps this 
aspect was taken for granted. 

However, perhaps the PHC industry does not "see the forest 
for the’ trees’. That is to'‘say, the survival’ ofthe, independent whole- 
saler depends on his ability to do a job in the marketplace. This 
writer's suggestion is the function of sorting, the basic marketing 
function, can best be done by the wholesaler. 

This thesis is only an introductory study into a very complex 
and virtually umresearched area. It is very broad in nature and at 
times, vague. However, it does provide the necessary groundwork for 


future research. The various functions of the wholesaler have been 






| ' vi 
GOL... 
~idank atd nf bol at meldorq 2'sofeestody scsitdgiiee liege 
od brs ,astictosqe of .h161%sm wen golevab o3) sesageRll tone 70 OH 
_ ealbandicae "a 
rsdimlq afd ton 19iseeforw ot Fadia ton alse} T93td ostuecem SdT., 6° G18 
eee etd seibaed>sem of down geneva ae 
-Iltwnu aif esteotbol ,soasmietzeq Seaq ald vd (telraslodw oft )\ ae : 
SH .desd amroitsq of doldw atotionut seedy nals asis0 ob G2) epengat 
ofa vlqqua tshisa bluow aud ,amase jt dot getiisses ads anew gekpeaek- 
.sbera [tsdet 
add sifenrodtessp ait dgvowlt benieido Istrsism sat more oo 
eit ,somabiys eid) mort .bsebal dseid at anebssqsbat saa Qo exnsie 
-yud quo wR mottestiptosye squeal stil eid gnolorq bivore gaeabaaqstal 
-corsjsrgetat Isanosiaoasve se gut 
e032 02 gotylqe: erstiosivnsm bis stefagsfodw dicd . Tovewort oe 
[iI tadqed) oi bediztoeob saw tsdw bevongi xignimesa oved sytehaghtesup 


ids aqsdied .2e9901%q anidyoa ani ,notdoav?t gniislven 2ised pfj en 


ae 
sboine tg 107 felsd sew doeqgas * 
: , _ 
Jest07 odd 992" son zsob ysseaubrh QUS vondd eqaritsq: CrovewoH _ 
r 
-slodw Ioabneqebrt od3 to Isviviue off yee od at sedD) fees edited | 


ail? .o26lqtaliam aft nk dot 6 ob 01 ystiidn ahd fo abmegeb gefee 7 
ghiiedxsm aiesd eds ,gnt2zHe Io dotsonyi eild at nokieuggue, s'xedbae 
‘ . : - 2 





ase O04 
documented as well as the feelings of members of the industry. 

Future research should include an attempt to cost each func- 
tion the wholesaler performs. This might provide insight into the area 
of what functions the wholesaler should be performing. More research 
should be done concerning the differences, if any, between large and 
small outlets, and between manufacturer-owned and independent outlets. 

The writer erred in not analyzing each business sufficiently 
nor in sufficient scrutiny of each function. As well, the writer's 
visibility in the industry because of his association with a family- 
owned wholesale outlet would have introduced certain biases as outlin- 
ed in Chapter II. 

It is my hope that because of this thesis, industry leaders 
will be more responsive to future research. Some difficulty was en- 
countered with local management of competitive firms because of the 
writer's association with the industry. 

Industry members should look at their responses and decide 
for themselves if this is really the way it is, or the way they would 
like it to be. The study was conducted at a low point in economic con- 
ditions, and with other biases previously mentioned, could serve to 
colour responses somewhat. 

I would not necessarily be hesitant at this point to go into 
the wholesaling business in either the PHC industry or elsewhere. How- 
ever, I would hope to remember my basic function in the marketing pro- 
cess, that of sorting. 


Finally, the up-to-date information available on wholesaling 





daxBees1. sioM .gnimrotrsq 4d buAite: so fees tou! ii Saati rate 30 
bad Sgtal maewisd ,yne Tt, aeometstaib: oily yninrsano> 006: sed biidlode! 

s3gijuo Jmshtsgsbni bas bsowo-rSstuIosiunsm haowa od; bos .etehsho Tame 

yisnetotsave aesatavd yiseo gatsylene 40n ni ‘bors tas iuw SGT: | = ewe’ 
ree ont ,iisw eA .aoltonys dons io yatsuaoe inotsttige al aoa 


-ylimat.s diitw aclinztsoesn alt io gayBoed viseubot oft ob gobitdialy — 


-atijvo, ee. esestd nlaizss. baoubowdnt sved bnew del soce eee bomwo 
. 2 

-Ti tetqed9 ak -he : 

etabsol ysteubal’,atasds eidt to veveood tedd sqod ya Bk a >a. © ¥ 

“719 #6w Yiluoriit¢h omo2. ,doiwssest stusut oF sviefioqest Stem od Ihkw n 


oi 30 Seuveped antti avis tisqnoes 26 insmogearam Issel dibw bersiaues 
-iieubel sit daw coitsfootes a tadige s\a 
Sbiosb bas esanoqess tivdt ts dool bisode aredmen yataahn £ ib oe . 
bivow-.ysds yaw dd3 to .2i Ji yaw odd yvilesy ef abi zsvioamod? s02 SS 
“neo atmonoss ot tmteq wol s is .bsipubaos' eew ybide ofP ysdios a2 okt i > 
ot svxs2 binas ehsnoistrrom, yletoivetq esentd tonae ditw bra enki to 4 
. ociemoe soanoqan wwebaas 
a 

siege ips area mary ijeeibinche gaan 
“ ~~ 

oa 


eel | § Jing eran 7 ak wee 
ana 





5 hOD 
in general, and more specifically the PHC industry, is deplorable. 
Government statistics are available for the 1961 census and not later 
as Of April 1, 1971. The CIPH collects information quite admirably, 
yet 1968 information is not available due to "insufficient reports". 
One wonders why wholesalers did not feel it necessary to report vital 
information in what observers say has been one of the worst years in 


history of the PHC industry. 


TT Pa oot a 
- n ie 
no ie 


pWidevimbs ‘saiup totsenroist etoatios HID, At vert 





y 
= 
















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<aldsxolgsb 2b Mebane DHE gts vnlan 
tedel don base auenmes Lael 4rls ee 5idelisve ove 






."aitoqot instolttisent" ad svb sfidefteve doen af notdtanoxel © 
[sativ roqay ot yIsensoon 3t Josh ton brb ersieaaiady vide @ 


ml etnay tetow odd io sno nood gad ys2 etovisado tedlw ot foksuerto iad | 


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o 
Mai y > 
Aide O bet 
’ 
SELECTED BIBLIOGRAPHY 
Ca ! 


~ ie 


Horton, C.C., ’ 
ATTN 1 


a ing, Ja 
7 a 
‘wes > 
« ow Crane Fownd the Key fo Pretit 
: _ z 84 March 1 ; or, _ 
= chs Aiea avy 4 ihe! 


— 





_YHYASOOTUATa asromae 


207 


SELECTED BIBLIOGRAPHY 


Alderson, Wroe, "Dynamic Marketing Behaviour", Homewood, Illinois: 
Richard’). Rirwin, Vine! seh965. 


Arnal, Paul M., “Arnal Blasts Industrial Marketing”, 48, April 1963. 


Battelle Memorial Institute, Columbus Laboratories, "Final Report on 
the State fof \thesArtcof Préfabrication in the Construction 
Industry to the Building and Construction Trades Department, 
AFL-CIO", Columbus, 1967 (mimeographed). 


Beckman, Theodore N., Engle, Nathanil H., and Buzzell, Robert D., 
Wholesaling, New York: The Ronald Press Company, 1959. 


Buell, Victor P., "Door-to-Door Selling", Harvard Business Review, 
May - June, 1954. 


Burgess, J. A., 'Trends in Distribution". Paper presented at the 37th 
annual meeting of the Canadian Institute of Plumbing and 
Heatines Digby Pen. S., July 1, 1969. 


Canadian Institute of Plumbing and Heating, Wholesale Division, "Survey 
of Operating Cost", Montreal 1968 (mimeographed). 


Diment, Paul, ''How your Trade Association Can Help You". Canadian 
Business, May 1969. 


Ernst, John Jr., "Shirley-Onstad's New Living Center", Supply House 
Times, February 1968. 


Heating, Plumbing, Air Conditioning, June 9, 1969. 


Heating, Plumbing, Air Conditioning, "Home Owner Deserves Better Shake 
From Plumbing and Heating Industry", July 14, 1969. 


Horton, Charles, "Progressive Distribution Thinking", Supply House Times, 
Mie UL Ye LIOGs 


Horton, C.Gipe'lTrénds fintMarketing .and Distribution". Proceedings 36th 
Annual Meeting of the Canadian Institute of Plumbing and Heat- 
ing, Jasper, Alberta, July 4, 1968. 


"How Crane Found the Key to Profitable Distribution", Sales Management, 
84, March 18, 1960. 


Lewis, Edwin H., "Comeback of the Wholesaler", Harvard Business Review, 
XXXIII, November - December 1955. 


Wiis. 








retonilit .boowemol ,"avokwedad 


eo itoqod Isaid" ,satrotuaedsd ‘eudqu lod: setuouiaen I D 

noetsouttenad saa ot notisobidststd to. 3th. ara to oa8d2 

mom iAqed esbnxz? coltourtenod bes gatht tee sat os © 
.(bodqe1goomim) Tae! ,eudmufod ."O1D-7HA 


.-G Atadod -ilessud bas ,..H Tinsdist ,oigad 2 sic 
Reel eieanio’ sHo71T bisaoa Sit stIOY wen q 


woivel eeankeud biases «"anilis2? 1900-03-00" ,.4 gog5RV -Ifeua 
.¢0L Conwi + walt ; 


daX€ of9 ts bstnsestq tsqed ."nokjudtzizid al abassT" ,.& VU canny “ 
bre ynoidguld to stusiganl netharsd sii toe antisom Ieuane : i 
.PG0l .f vivl ..2) WM .vdgit .gabdesh 


oy 
ae © 
yevaue ,cotaivid sisesiodW ,gritesh bas gaidmel to savsigent mekbaged © - 
.(boniqatgoomim) 8ACl [ssrta0M ."3209 goisetagd Bo 
ee 
Seibenp) ."voY qisH ns) notisiooaeA sbaxT awoy woH" cent seamkt 
- C801 vol , sesmibeug a 
sevoH yiqgue ,"198I099. gaivid wel e'betanO-yslarde” | .at gideb dete i - 
Boel vxeuads%, , zomet oe 
; . — 
i. 








Cd@f .e Saul .~garmotstba 


sash? 193198 29vtsest asnwO amok” om Ni 
O90f ,Af yiul ,“ysteubol gatassH bre potde 


<BamkT sevol yigque- ."gntdmidl noted etter Seeehae 2 
-BO@t UL 


-"notaudrn bn Seales dor on 9 a 
1G 20 Slab at atl [ oot 20 ak Free Lain 2 it 





.108 


Mallen, Bruce E., The Marketing Channel, A Conceptual Viewpoint, New 
York: John Wiley and Sons, Inc., 1967. 


Marketing Symposium, Changing Structure and Strategy in Marketing, 


Edited by Rovert V. Mitchell, Urbana, Illinois, University 
GEehilLinois Bulletin, eOct. 1957. 


Marketing Symposium, Marketing Adjustment to the Environment, Edited 


by Donald W. Scotton, Urbana, Illinois, University of 
Illinois Bulletin, Oct. 1961. 


MeCammon, Dr B.C. Jr., Doody, Dr. A. F., and Davidson, Dr. W. R., 
Emerging Patterns of Distribution, Report to the National 


Association of Wholesalers, Las Vegas, Nevada, January 15,. 
1969; 


O'Neil, Donald F., "The American-Standard Concept of Distribution". 
Paper presented at the Annual Meeting of the Canadian 
insita tute’ of Plumbing and sHeating..» Dreby. Nas., uly l, 19592 


"Out Go Distributors and Up Go the Sales", Sales Management, 85, 
November 18, 1960. 


Revzan, David A., Wholesaling in Marketing Organization, New York: 
John Wiley and Sons, Inc., 1967. 


Terry, George R.,-Marketing, Selected Case Problems, New York: 
Prentice Hall, 1960. 


The National Industrial Conference Board, Building a Sound Distributor 
Organization. New York: The National Industrial Conference 
Board, Experiences in Marketing Management, No. 6, 1964. 


The National Wholesale Druggists Association - The Association has 
published a wholesale trading area map for the drug field. 


United States Department of Commerce - The Department has published 
wholesale trading area maps for groceries and dry goods. 


Taylor, Robert, "Financial Health of the PHC Wholesaler”, Supply House 
Times, VI, February 1964. 


Taylor, Robert, 'Du-Kanes Newest Sales Venture: 'The Bath-Room' "' 
Supply House Times, VII, May 1964. 


2) 


"The Text of Horton's Address at the American Institute Convention", 
Supply House Times, IX, January 1967. 







bed ibs _dngmngs kidd CTs oar $e 58 


to Yitersvial , gion ELLY , Bandy | : 

BOT 990 (aitsLiue etonklit . 
, AW. 90 podebived bon (GA. 20 xboed ab 7 6 ot <fomms3oM 
[eaot3seY 93 03 axoqsA .sotaudtaaeidq a 
-Ci vrsunsl ,sbevel ,aeagsV esd ,eisiseslo 





-"aobtudiaie? to sqa5n0) bisbrsse-nsotromé oft! ,.9 biened” fests 
aetbansS odt io gattseMt TeunnA oft ts bedasestq zeqee 
2d0! .f yfoOL ,.2.4 .edyid .antrisel bis gnidmuft to sauddzent 

ruv F 

.c8 .Jnstiegstielt esise ,"'So0le2 odd oD qi bas axomsdteaend od tu" — . 

080! .8f xsdmsvoll a 


:47OY wel .qolIssinegxO “giigsatemM nd gnilsasilornw gus bived .assveed 


Val ,.9nT ,ano@ Bok yoltW met 


«+H sgyesD (yrTeT 
% ent sottastt 


{H4OY wor 





amealdoxzd sas) bagaslse 





sojydtadetG bowor « guiblisd ,brech sansarstnod Labeadasin isnolse oaT 
ssnetsinod Iatrtevbri Teriptiev SaT iwI76Y wah .aottés 


.bdlf .d .av Snsmogen a guitsdisM ot esonsiteqed , 


7 
iv, 4 7 
een noliplooagéA sav - noidvsetoosen etelggusd al sesfondW age oat. | “4 
sbist? qutb sd rot. qem sote sotberd slueshadw a bodebidug jar a 


bedekiduq eatl Joomiyeqsd “AT - Axe io inemdtaqgsd @eon32 bet lav 
-aboog vb bas agiievorg To} aqem 5915 — —_—e “as 


« TalsgolonW ORE on Time eat hace 


- 
ne : 


es 





209 


Unger, Monte. "Pros and Cons of Cash and Carry'', Supply House Times, 
VEGI March! 19655 


Warshaw, Martin R., Effective Selling Through Wholesalers, Ann Arbor, 
Michigan: University of Mechigan Press, 1961. 


"Wholesaling: Why is this 150 Year Old Marketing System Enjoying New 
Growth?" "Printers! Ink, 265, October 17, 1958, 






» "aoe 
- _ a 7 io i 
7. a - > 
- a The : i : 
= - e- 
Y , P : : 
: s ' 


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a4 @ ey 5 > | ae 


> oS it) fe 
é 4 fey 






wo ynivopnd mojeva gottotye ‘610 TRay 
(Beet Vi irene | 














“APPENDIX 






_ 








- 
fhe equivalent of one hundred and thirty yale tlds vide i 
 Tepor ure included In several rez ates con panies @ote th 4 oF 
, ts >< ; I . : 
. branch was included in some area tety and these have zen } + . 















herein ae individual waits for euch bre seh ts: volved ra 


- 
7 7 
: leas 
; 





Wher * there were, nor 
Hee wa, the Tepe ta of 


ah 


7 hum sey next. 
— 








XIQUASTA 


ea eel 


APPENDIX 


WHOLESALE OPERATING COSTS SURVEY - 1967 


VOLUME GROUPS 


ib Wholesale sales up to $1,000,000 

on Wholesale sales from $1,000,000 to $2,000,000 
Sie Wholesale sales from $2,000,000 to $5,000,000 
Ze, Wholesale sales over $5,000,000 

AREAS 


Reports received have been divided into five geographical areas: 


(A) Maritime Provinces 

(B) Province of Quebec 

¢G) Province of Ontario 

(D) Prairie Provinces 

(E) Province of British Columbia 


NUMBER REPORTING 


The equivalent of one hundred and thirty-six individual 
reports are included. In several reporting companies more than one 
branch was included in some area returns and these have been reported 
herein as individual units for each branch involved. 


Where there were not at least three returns for a Volume 
Group in any area, the reports of that Volume Group were combined with 
those of the Volume Group next above (or below where that was neces- 
SaLy). 


Pid ea. 














err tr 


(ael - YEvaU2 eTaOd OMT TARIIO, AIABEAOHW 


’ 
= 
, : i 7 
; | eqogio_sMUaOV 
= —_ 


000,000, 1% o4 qu gates olsastodw I 

a 

' 000,000 .S¢ o4 000,000, f@ mond asfes olcaslom 
a y 7 

' 

O00 ,000,¢¢ ot 000,000 $2 mot? easise sisasTortl 
FP) 


ag, . al » 
000 .000,¢¢ x$vo eefse alseefodw = | eh 


_ , _ 
i 


- re” 
BAMHA 
_ _ 
; . ; satiate 
Bh B Age TQZ098 Avril ogns bobivib assed evaed. bevisost astoqed 
- 


ssonivety amit ivaM 
sadauD to sonlvord 
otistn0O to senivord 


asonivoert sizer” 


sidmulod slettit& Jo sonkvord 





a a ae 
OMIT IOGEA AEMUM 


7 


- feubtvibot xte-yoatda bas betbauil sao 30 Jasisvinps aT 7 ' 
8b ned’ sxow setnagmon gutagzogs letevee nt «bebutva ois at oqet 
bedyoqst néad ovo seb bas wistlies sste smoz ot baby ioe any a d 
: . .baviovnl dodexd dd60 102 3d Ein “LBe 
. ing [eee a, Se 





b: VIR Yi Be a 
oa bat i md 
oY yi aan “ a 3 


ae 
SUMMARIES PREPARED 
Two groups of summaries have been prepared: 


ihe National Averages - all reports by respective Volume Groups, 
regardless of areas. 


at Geographical Averages - all reports for each geographical 
area by respective Volume Groups. 


In each case two divisions of data are presented: 


(A) Report of Operations - averages, by Volume Groups, of all 
reports submitted - expense classifications shown in total. 
only. 

(B) Details of Expenses - averages of details of each expense 


item of all firms reporting on each particular item. 


Where at least three firms in any group have not reported on 
an item, percentages were not shown for that item. 


Columns have been provided on each sheet of the summary for 
the insertion of percentages of each individual firm for the years 
1967 and 1966. Such comparison of the firm's own percentage with the 
average as shown prove valuable. 


The following tables are reproduced from: 'The Canadian 
Institute of Plumbing and Heating "Survey of Operating Cost", Montreal, 
1967', (mimeographed). 
















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r . zs : Ms . , 
aquotd.smuleV svtiosqeaet yd e37gqe7 Ils = aogeTevA anole 
ad i . 85 57s ‘to aeol bre: 
stxoges Ils + eogetavA Feoldqe2go a 
nox oa Lo evitse Lee: vd pre a 
| roy p 


< _ 


— ieee 
9Ineee%q O16 Kteb to enolelv?b ows saso dose ol 49 


ear owt" 
r : ‘ ' = ee 
to ,equot? smuloV yd ,asgetevs - eftoljeregO to Itoqgsx | 4 
[et04 mi nwode anolsastiteapls) sensqxea + bets indvz at roger "i 
| «tino - 


& 7 
« 7 i 
sansa ef ti [tsetsob lo esgateve - asensqxe 20 sited 
P =, eae 
vuotj1eq dose no gniszogsy emst> ils to medr 


A , - 
’ 7 bad , 
mo bstdzoqea ton sved quovg yaa of serst? setd? gessi 38 sten@ 


, } y. > P a Y » « es ~~ ~ 
M9 Z Jana Bie F owe ne 3 oa og TSW espetrsest 9q >t 
j ° Ff 
a 


. tod amma & tc tsed2 doses go beblvo1q oesd sven aamilod - ~ ; 
i eyssy sf} 702 mi}? f2ubtvibat dose Yo aegndasszeg Jo Mokeremen wee 
. iy dAsiw 90 &: 55% Sq oO ge mit end to angel: reqmos Haue ’ ao bre 7 
| .idse fav esvotq mworne ee get 


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= 


nal 





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| ,laatinoM ,"t2a05 gttss1taqO lo yovae" gntiaon bak gartdau 
, 


*dnoa3 (uemoT Jo) ueysty yxou oy} UT 
*e ueyy sseT sem BSutjuoded swatF 


pezedoduoouTt adem SOT AsT}eYS yons 


JO aequnu oy} eueaym dnous Aue ut paysttqnd usaq aaey SOTYSTIES ON 


ope ouletis 

















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oe Se ep ee ee ee ee 
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6h° SE° om Le th* Th’ new com 
€6°S c6°S Se€°9 Lo°S L6°9 62°9 cE L s0°9 
80°T 6T°T T8° €6° S6° 80°T 60°T 90°T 
h8°S% 90°€ 68°C 66°C S6°? One ZO°h 9S°€ 
98° 98°2 T8°Z2 TL°? T8°S% 00°€ 00°€ 60°€ 
ee ITI cs ees rte te ee ee ee eee 
€0°9T co°ST S8°9T €8°st se°Lt €8°9T 9° 6T 66.91 
ee ee ee ee ee ee SSS 
L6°€8 8L°h8 ST°€8 LT°t8 S9°28 LT°€8 8e€°08 T9°€8 
00°00T 00°O0T 00° O0T 00° 00T 00° 00T 00° O00T 00°00T 00° 00T 
eT 1 8 = TZ cA 02 = 6e = 6h cA €T ra €S h 
ia z L T TZ 4 02 st LE z Sh 9 €T = TS 9 
(ON) (S®9X) (ON) (S®9X) (ON) (S2A) (ON) (SPA) (ON) (S9A) (ON) (SPA) (ON) (S9X) (ON) (SPA) 
996T L96T 996T L96T 996T L96T 996T L96T 9960 L96T 
EEG one =U AAU EGY AAAS AAA LIGEOAmC Al ARCA Ona AIWAGAAAUS> GEL Gh) 
sodnsTty anox 000 000 S 4°40 000 000 S 93 Gf 000 000 2 93 GN 000 000 T 93 4N 
h dnowd € dnowo @ dnouo 


>TLON 





00° 8EZ*TOL$ OO*HETSSO8$ O0°ESL*ET9$ 00°99h*E79$ 


00°S8T*LhHS$ OO° TELS TOL$ 





00° HSTS ZZH$ 00° ETT SHZ9$ 


A AP ee EEE EE Ee 
00°000°T6 $ OO°HBLSES $ OO°HSSSHE $ 00°0SZSZOT$ 00°888°L8 $ OO"TEB*E $ 


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oasis a 





; : : o @ ~s 
ane ie ; - © : _ 99 aglteiooiqeb bam 7 
ee, - a : G4, agnibdl: 
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— 7 
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go. EO. é v.I 
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TE, L 4 


le 


36 


4. 


Se 


C. I. P. H. WHOLESALE DIVISION 


a anette 


REPORTING FORM 


Wholesaler Operating Costs — Fiscal Year 1967 
VOLUME CLASS 


H 
ft 


Up to $1,000,000. 
Upr ta o2,000,000. 
Up to $5,000,000. 
Over $5,000,000. 


bY 
HHH 
<HH 
eau 


Do figures submitted inolude sales of other products than those 
generally olassed as P & H, for example hardware, metal mill 
produots, mill supplies, eto. 


If answer is YES, do sales of these other products amount to 
more than 35% of your total sales? 


NET WHOLESALE SALES (Gross Sales, inoluding Federal (not 
rovinoial) Sales Tax = less returns, allowances and oash 
discount) equals 


EXPLANATORY NOTES: 


(a) 


(d) 


COST OF GOODS SOLD (Opening inventory — plus net purohases (less oash 


The figures required in the following questions are in 
terms of percentages of your net wholesale sales for the 
year 1967 (as defined above) and are requested to be 
extended to two deoimal points. 


Questions 6 to 10 cover the five major items of expense in 
our type of business. These are further sub-divided 
according to normally acoepted aocounting practices. If 
the sub-divisions do not oonform exaotly to your acoounting 
system, you are requested to apply your information to the 
Olassification given as aocurately as possible. In every 
Oase provide peroentage figures. (Please do not insert 
new expense headings). 


It is recognized that oertain member businesses do not 
have outgoing delivery expenses due to an operating polioy 
variation from standard. In such cases, please indicate 
by "nil" in sub-section (o) of Item 7. 


"FRINGE BENEFITS", inolude the company's share of the cost 
of pension, hospital, medioal and life insurance plans; 
unemployment insurance; workmen's compensation insurance 
and minimum wage commission plans. 


“OFFICE SALARIES", inolude Credit Manager, Controller, 
Offioe Manager, Acoountant, Purchasing Agent, and all other 
office staff except, 


“EXECUTIVE SALARIES", inolude Company Offioers and Manager, 
Assistant Manager, Partners' and Direotors' salaries. 


“INWARD TRANSPORTATION" should not be treated as an expense 
as it is actually a part of the oost of materials purohased. 


discounts), freight and transport charges inward, and duty oharges = 
(PLUS SALES TAX IF APPLICABLE) less olosing inventory.) 


GROSS PROFIT ON SALES 


ape eulizes 


UO UU 


ee 
—_S 


est... 












1000, 000—f8 of qit= I 
000, 1200658 Ot of qv ~ It 
000,000, = ti 
.000,000,4¢ unit is VI 


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2aY ifim Letem ,etawbted sigaexe tot ,.f 3 I ae bosealo ¥ 
ote peotiqgua’ {ita ah 


UUUL 


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Tuslen Latot tu0y Yo nee nade 
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ftaao baw aeonewolls ,caituset saat < 


af ats esotsaoup yaiwelflot edt at betbhupet setuyt oat 
edt tot selan stavetodw tan aeoy To seqataeot to amtee 2 
od of bateoupet ora Soe (evods bentiteb wa) Teel taey a 
utateg Lamiosh ows of bobavtxe — ¥ 


ai saneqxs to amsti xobam evit edt teveo OL of & srotéisen® ~ (¢) 
bebivib-cun tsdttut eta seedT .gennleuwd Io eqys so 
tI .esottoesq Raitavosos hetqgsoos yLlawtoa of palbtooca © 
anitagooos «voy of yltoaxe mitotave fan of enotelvib=dpa ef? | 
eds of solsamrotal twey ylqes of bateeupet exe voy .meteys — 
yievye cl .oldlesog os yTodetyoon a aevly nole sol tieaalo ( 
$teqal tox ob aeseld) -neteRlk a_eteeoteq ebivexg 

-(ayatbacd saneqze Dat 


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66 


7e 


Be 


Go 


S 2S 


DIRECT SELLING EXPENSES 


a ) Sales Managers' and salesmen's salaries, commissions. 


bd) Sales Managers' and salesmen's expenses and other direct selling 
expenses, including entertainment; and depreciation and mainte-— 
nance of cars used for selling. 


o) Advertising and sales promotion 


ad) Total 


WAREHOUSE, RECEIVING & SHIPPING EXPENSES 


a) Salaries or wages of all warehouse employees, shippers, 
receivers, cheokers, drivers and assistants, and 
supervisors. 


b) Insurance, repairs, gas and oil, and depreciation on 
trucks, garage rent, eto. Truck and driver rental 
charges if applicable. 


o) Outgoing delivery charges by common oarriers. 
d) Packing and Shipping Materials 

e) Other warehousing and delivery expenses. 

t) Total 


OCCUPANCY EXPENSES 

a) Rent and depreciation on buildings 
bd) Taxes and insuranoe 

o) Light, power and heat 


ad) Total 


GENERAL & ADMINISTRATIVE EXPENSES 

a) Office Salaries. See Explanatory Note E. 

b) Exeoutive Salaries. See Explanatory Note F. 

o) Depreoiation on furniture and office equipment. 

ad) Supplies, stationery, postage, tel & tel and other variables. 


e) Other Administrative Expenses — 4noluding Head Office charges 
(if applioable), donations, dues. 


f) Bad Debts Expense. 
g) Fringe benefitse See Explanatory Note D. 


h) Total 


Sa 4 8) 


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Bae anf eratldaltar err bra fat & for ata woe re 


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10. 


ll. 


12.6 


13. 


14. 


15. 


16. 


17. 


18. 


19. 


206 


s Sb ies 


FINANCIAL EXPENSES 
Interest expenses, Bank charges etoe 
TOTAL OPERATING EXPENSES 


Total of Items 6,7,8,9,10 
OP@SRATING PROFIT 


Subtract Item 11 from Item 5 


NON OPERATING INCOME (Inoome from investments etce) 





NON OPERATING EXPENSE (eego all expense related to 
non operating inoome). 


NET PROFIT BEFORE INCOME TAX 


Add Items 12 and 13 then subtraot Item 14. 
AVERAGE SALES PER EMPLOYER 


Net sales (Item 3) divided by average number of all 
employees. (a) Independent firms; (b) Chain or 
multiple branch operationse To be completed by Head 
Office for entire organizatione Submit one figure 
to be included in National Averages only. 

AVERAGE SALES PER SALESMAN 
Net sales (Item 3) divided by average total number 


of outside salesmen whose sole responsibility is to 
contact oustomers. 


NET SALES COMPARED WITH PREVIOUS YEAR 


Are your sales up or down compared with last year? 


Up [aael Down: [es] 


By what peroentage of last year? 
INVENTORY NOW COMPARED WITH 12 MONTHS AGO 


Was your yeareend inventory up or down oompared with 
last year? 


Up] Down (_] 
By what peroentage of last year? 
INVENTORY TURNOVER RATE 


Add monthly inventories and divide by twelve; 
divide answer into oost of goods sold for the yeare 
(Take to two deoimals) 


ry bif 


% 


() 


Times 


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ee es 
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af 


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— 4 = 


21-¢ RETURN ON INVESTMENT IN RECEIVABLES AND INVENTORY 


Add average monthly inventory to average monthly 


receivables and divide the result into net profit 
before taxo 


COMPLETED RETURN SHOULD BE MAILED BEFORE MAY 30, 1968, TO 


MR. De Re PATTON OF PAYNE, PATTON & PUGSLEY, 1509 SHERBROOKE 
ST. WEST, MONTREAL 25, PoQe 


SUBMISSION BY 
Company Name: 


nn 


Address: 


AUDITORS MAY CONTACT | Mr. 







BSk. .« . 
AOR MCV aus BaIGAVIS 
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J i $0 


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ZHOOKHHGEe COB T YagZoud 4 MOTTAN ,AUYAS TO rT 
* 

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of q aS JJ aa 


June 5, 1969 


Mr. A. Fleming 


Triangle Plumbing & Heating Supply 
40 Jutland Road 
Toronto thes iOntanio 


Dear Alec: 


6i29 


As you know from our recent conversation, I am preparing a thesis at 
the University of Alberta as a requirement of the program leading to 
the degree of Master of Business Administration. 


The subject I am researching concerns "The Future of the Independent 
Wholesaler in the Plumbing and Heating Industry in Canada", a subject 


with which you are also concerned. 


As we discussed, it is very difficult todo accurate, meaningful 
research on this subject. However, I am attempting to gather the 
necessary information through the use of a short letter to a few 
knowledgeable wholesalers like yourself who have considered this 


question in the past. 


I would appreciate it if you and Don would give some thought to the 


following questions: 


1, Have patterns of distribution changed significantly since, say, 


the early 1950's? 
De What factors or conditions have caused 
ae Many wholesalers are, of course, still 
traditional sense. Will they continue 


the future? 


4. What changes will the independent have 
remain independent? 


these changes? 


independent in the 
to xist as such in 


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14.1390 


Mr. A. Fleming - 2 - June 5, 1969 


De Vertical marketing systems are one alternative, several types of 
which are possible: a) total vertical integration of manufacturer 
through to retailer, b) wholesaler sponsored voluntary groups, 
retailer owned co-operatives, or franchised store programs, 
ec) manntacturerscontrol of a particular’ line in a store, rather 
than control of the store's entire operation. 


Would you indicate what you think the relative importance of each 
of these vertical systems will be in future wholesaler operations 
in the industry, and your reasons. 


6. Horizontal or ‘conglomerate’ integration is also evident in the 
industry. Do you see this as an alternative to vertical systems? 


igs What future do you see for your own company in this area? 


I realize answering these questions will involve a substantial amount 
of your time and I apologize for the inconvenience. However, to my 
knowledge very little academic research has been done in this area and 
I feel the results will be worthwhile. 


Please do not feel it is necessary to confine your reply to the above 
questions. The questions are intentionally broad to allow you the 
necessary latitude in answering. 


I assure you your reply will be kept strictly confidential. If you 
wish, I will gladly make available to you a copy of my results, sum- 


marizing anonymously the responses to this letter, together with my 
thesis conclusions. 


May I thank you in advance for your co-operation and request that you 
answer at your earliest convenience. Enclosed is a stamped and 


addressed envelope for your convenience. 


Yours. truly. 


R. Fraser Baliour 


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Responses were solicited from the following persons: 


Manufacturers 


E. Blake 

General Sales Manager 
Kindred Industries Ltd. 
Kindred Road 

Midland, Ontario 


J. Burgess 

President 

Wallaceburg Brass Ltd. 
Wallaceburg, Ontario 


Donald F. O'Neil 

General Manager 

American-Standard Products (Canada) Limited 
80 Ward Street 

LOCOPLOmL/ 2 em Ol ta r1O 


Awake DEGKINSOD 

Vice President of Sales 

Crane Canada Limited 

5800 Cote deLiesse Road 

(BaO se bOx "7700, eo GeeLaurenusr a0.) 
Montreal 9, Quebec 


Wholesalers 


A. Fleming, President and 

R. Gray, General Manager 

Triangle Plumbing and Heating Supply 
40 Jutland Road 

Torontoe to, sOneario 


Pierre Deschenes 
President 

Deschenes and Fils Ltee. 
8335) St. Michael Blvd, 
Montreal 455, Quebec 


Roland Savoie 
Codere Ltee. 

P.O, 50x 130 
Sherbrooke, Quebec 


Ets. 


























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beos bazbald 

oliszcO ,boelbiM 


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olystap .gsydgosl lew - 


{tei"O .¥ bincod 
735 eceM Ies Sons 37) I 
atin? i (sbeaneD) aeaoubor4d baaheetS-nebbreh ; 
. 398392 bisW 08 ” 
oluaindD Sil oxnoror 


noraineatd .A AA 

es to JasbsestI sotV 

betimil sbens) sosv) 

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(.0.9 tansyual .92 OOS wot .6.49) : 
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ye | ee 


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TossneM Iatsnsd .¥BsD Ff : 


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beud bnelsut, 06 : 
ofanind SI otnoteT 


ecnadoasi srrsit 

: : tnebiasrT 
pag lit bas aenadoesd 
. byl {oadoiN 32 2668 
cate: ae Iestao0 co 










ce, ee 


Wholesalers ....cont'd 


E. G. Jarvis, President and General Manager 
W. Stairs and H. J. Hoskin 

Wm. Stairs Son and Morrow Ltd. 

3667 Strawberry Hill 

Halifax, Nova Scotia 


Eee ApHoOSiiood 
SumneriiGo. td: 

635 Main Street 
Moncton, New Brunswick 


R. G. McMorran 
Emco Ltd. (Wholesale Division) 
69 Huxley Road 
Weston, Ontario 


J.0.D.P Hhorster 

Barrie Plumbing Supply Co. Ltd. 
ISOuVietoria Street 

Barrie, Ontario 


S. Shergold 

Brampton Plumbing and Heating Supply Ltd. 
275 Queen Street East 

Brampton, Ontario 


J. E. Gilson 

Marks and Company (Hamilton) Ltd. 
104 Robert Street 

(PO. Boxed.) 

Hamilton, Ontario 


Ie C..eoass 

iow eA LeneanadnGo. std), 
108 Ahrens Street, West 
Kitchener, Ontario 


A. G. Jackson 

Regional Sales Manager 

Cronkhite Companies Ltd. 

704 Chinook Professional Building 
Calgary 9, Alberta 


A. T. Woods 

Manager 

Cronkhite Supply Ltd. 
302 = 50th Avenue, S:. E. 
Calgary, Alberta 


. : , 7 Fi 
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riik viTodwe7te faat 

aijoo2 svow .xetileah 


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Wholesalers ....cont'd 


G. D. Thompson 
Manager 

Cronkhite Supply Ltd. 
90 Market Avenue East 
Winnipeg, Manitoba 


RaaJanvie. Director 
Cronkhite Companies Ltd. 
420, The Kingsway 
Islington, Ontario 


Canadian ins clrutenot Plumbing and Heating 


G. H. Dixon 

General Manager 

Canadian Institute of Plumbing and Heating 
785 Plymouth Avenue, Suite #305 

Montreal 306, Quebec 















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.134 


Replies were received from the following persons: 


Manufacturers 


E. Blake 

General Sales Manager 
Kindred Industries Ltd. 
Kindred Road 

Midland, Ontario 


J. Burgess 

President 

Wallaceburg Brass Ltd. 
Wallaceburg, Ontario 


Donald F. O'Neil 

General Manager 

American-Standard Products (Canada) Limited 
80 Ward Street 

Toronto 1/2, Ontario 


Meow. rece rns On 

Vice President of Sales 

Crane Canada Limited 

5800 Cote deLiesse Road 

PO BOx-2/-005—-ot.—-hatirent-P.0; 
Montreal 9, Ontario 


Wholesalers 


A. Fleming, President and 

R. Gray, General Manager 

Triangle Plumbing and Heating Supply 
40 Jutland Road 

LOLOuLoO Sloss OntarLo 


Io Gs Jarvis 5 

President and General Manager 
W. Stairs and H. J. Hoskin 
Wm. Stairs Son and Morrow Ltd. 
3667 Strawberry Hill 

Halifax, Nova Scotia 


R. G. McMorran 

Emco Ltd. (Wholesale Division) 
69 Huxley Road 

Weston, Ontario 





















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Wholesalers....cont'd 


Jie EayGul sion 

Marks and Company (Hamilton) Ltd. 
104 Robert Street 

(220. Hox 45) 

Hamilton, Ontario 


TG. sass 

Jteeo reall en, andiGo. Ltd. 
108 Ahrens Street, West 
Kitchener, Ontario 


AGS G. Wackson 

Regional Sales Manager 

Cronkhite Companies Ltd. 

704 Chinook Professional Building 
Calgary 9, Alberta 


Reovarvie 

Derector 

Cronkhite Companies Ltd. 
420, The Kingsway 
Islington, Ontario 


Canadian Institute. of Plumbing and Heating 


G. H. Dixon 

General Manager 

Canadian Institute of Plumbing and Heating 
785 Plymouth Avenue, Suite #305 

Montreal 306, Quebec 





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The following persons replied with regret that for various reasons they 


were unable to answer the questions posed, or replies were received too 
Tate tor the first draft, 


AP eo Diekinson 

Vice President of Sales 

Crane Canada Ltd. 

5800 Cote deLiesse Road 

CREO me Bboxe 27 O05 Ste Laurent: P.O) 
Montreal 9, Quebec 


Pierre Deschenes, President 
Deschene and Fils Ltee. 
833558. Michael) Blvd. 
Montreal 455, Quebec 


A. T. Woods 

Manager 

Cronkhite Supply Ltd. 
302 - 50th Avenue, S. E. 
Calgary, Alberta 


G. D. Thompson 
Manager 

Cronkhite Supply Ltd. 
90 Market Avenue, East 
Winnipeg 2, Manitoba 


















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