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REVIEW
THE
VOL. LXXX. No. 11 Published Every Saturday. Edward Lyman Bill, Inc., 383 Madison Ave., New York, N. Y., Mar. 14, 1925 8inB Jf
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Per Tear
Restricted Territory and Its Effect on
the Volume of Sales
Granting of Franchise to Dealers by Manufacturers Without Guarantee of Sales Volume Leads in Many
Cases to "Dead Territory" on the Latter's Distribution Maps—The Responsibilities Assumed by
the Music Merchant in Accepting the Exclusive Representation of a Line
H E granting of restricted territory to a
merchant for the distribution of any man-
ufactured product places upon that par-
ticular merchant definite obligations which
many times are not fully realized. The retailer
frequently considers that, in taking on the line
with a definite territory assigned to him, the
obligation rests entirely with the manufacturer
who is thus favored and the dealer can do about
as he likes in handling the distribution prob-
lem.
In the piano trade particularly the restricted
territory idea in retail merchandising has been
in force for many years—so long, in fact, that it
is to be regarded in the light of an institution,
which perhaps accounts for the fact that there
are still many piano merchants who hold agen-
cies for well-known lines simply as bait and do
not consider themselves under any obligation
to feature them energetically from a sales angle
rather than for the purpose of attracting trade
to the store.
Men in other lines of business who have had
occasion to study piano distribution have often
declared that much of the distribution problem
of the industry hinges upon this one factor and
while not many of them favor the open market
idea as applied to pianos they feel that it offers
a real solution unless dealers generally realize
that with a definite field or market under their
own control and restricted to their efforts they
are obligated to produce definite results suffi-
ciently large to warrant the restriction.
In the first place, when a retailer accepts a
line of merchandise on a restricted territory
basis he assumes a definite obligation to adver-
tise that line energetically at his own expenses
and to use every reasonable sales effort to put
it over. He, in a sense, will relieve the manu-
facturer of his local advertising burden in that
particular territory for the dealer himself, and
no one else, is in a position to realize upon the
pulling power of the local publicity. In the
matter of national advertising, of course, the
manufacturer still retains his obligation to keep
his product before the general public. But that
does not extend into the restricted territory ex-
cept as its genera-l value and results extend into
that territory.
A well-known merchandiser in another line of
activity recently very aptly pointed out the dif-
ference in the manufacturer's obligation in open
territory as compared with that which was
T
placed on his shoulders when he accepted the
restricted territory. In the open market, for
instance, under conditions such as those gov-
erning the sale of groceries and tobacco prod-
ucts, the manufacturer seeks general distribu-
of distribution are prob-
Q UESTIONS
ably the most important which con-
front the piano industry at the present time.
Exclusive representation has long been the
predominating method in the piano trade.
Its wide use has led to many abuses which
have had a steadily injurious effect upon
the gross volume of sales of manufacturers
who have not given franchises with the
proper care. No exclusive
representation
should be given any retail dealer without
the latter being made responsible for a cer-
tain quota of sales commensurate with the
territory
which
he
covers.—EDITOR.
tion, places his line with anyone who will han-
dle it or with a half dozen stores within a
city block, and appreciates the fact that under
those conditions the dealers simply must hand
out the product that is so widely advertised by
the manufacturer as to make the demand gen-
eral and in a sense automatic. In the case; of
cigarettes, for instance, we see great advertis-
ing campaigns, but they are profitable to the
manufacturer for the reason that the demand
foe the product advertised can be met by any
number of retailers conveniently located.
In contrast is the restricted territory. Here
national advertising may be of the sort that de-
velops the buying urge to the fullest extent,
but as matters are arranged in the piano trade,
for instance, it is not possible for all that urge
to be satisfied, for the products are sold pos-
sibly by only one dealer in a city, only by one
or two dealers in an entire State, which means
that much of the advertising appeal is lost. As
a result local advertising in this case is essen-
tial for it appeals to those who can have their
demands satisfied within their own particular
cities or districts and the results can be realized
only by the dealer controlling the territory,
which means that it is 100 per cent efficient so
far as he is concerned.
In the matter of selling, too, we find that
there are still many dealers who take advan-
tage of the restricted territory idea as it ap-
plies to well-known instruments for the purpose
of holding that territory against competitors
and using the name primarily to get people into
the store when a switch can be made to instru-
ments not nationally known or nationally
priced, and which consequently can be made to
yield a larger percentage of profit or at least
provide an opportunity for bargaining.
Within recent years manufacturers have be-
gun to resent this idea of holding a territory
for personal reasons and without consideration
for the manufacturer's interest. The majority
of the manufacturers demand, and rightfully
so, that the dealer produce a definite volume of
business in the territory assigned him if he is
to hold the agency. But in most cases this
quota is so low andi reasonable that it places
no great burden on the retailer who is really
an energetic merchant.
It is probable that the restricted territory
plan of selling will continue to be a feature of
the piano business for years to come, for it is
too strongly established to permit of any radical
departures in the near future at least. However,
it is not in any sense an essential to business,
as has been proven on several occasions. There
is one concern, for instance, which has on its
books well over 1,000 dealers, often three or
four of them in a single city. But they are
handling a product that is nationally advertised
and which is offered at list prices that prevail
throughout the country under an equalized
freight rate arrangement. In this particular
case the manufacturer realizes that the bulk of
the obligation rests upon him to carry on a
widespread advertising campaign which will
create national demand supported by sales helps
created at considerable expense, which move
the instruments off the dealer's floors with little
or no effort on his part.
In the case cited the manufacturer adheres
to the restricted territory idea on a compromise
basis, to the extent of analyzing the buying
field in given localities and establishing only
enough agencies in any particular field to take
care properly of prospective demands so that it
is profitable to each of the dealers handling the
(Continued on page 9)