Correct buying and the most efficient methods of manufacture play a large part in the successful carrying on of a business, but the most important consideration is the successful marketing or distributing of the product after it has been manufactured or bought. Very few products are so superior in quality that they sell themselves purely on merit. Competition in business to-day is so keen that, in order to find a market for his product, a merchant must create a demand for it. Thus at its very foundation, distribution is merely a process of creating a demand and then filling that demand. For instance, the retail merchant is concerned with bringing the customers to his store rather than to his competitor's across the street. The wholesale merchant is concerned with having the retailers handle his goods rather than those of another firm. The mail order merchant is concerned with getting the farmer's business before some other dealer gets it. The salesman is concerned with writing the order before a rival from another house writes it.

In the first place, the merchant must handle those things that his customers consider necessary or desirable. Overcoats cannot be sold in August, ashsifters on the equator, nor electric fans in Iceland. Different peoples, different times, and different conditions create different demands, and it is the merchant's business to study those demands and to fill them. In the second place, he must leave no stone unturned in endeavoring to make his product more desirable than that of his competitors. This may mean extensive advertising campaigns, expensive displays, outlay for costly catalogues and booklets, the expenditure of money for inducements to bring customers, or the hiring of expert salesmen. In fact, thousands of plans are carried out every year in this endeavor to increase trade.

The getting of new and additional business, however, is only one of the important considerations that the merchant must always have in mind. He must also keep what business he already has by maintaining the standard of his goods and by giving his customers satisfactory service. One of the first essentials in this question of service is promptness and exactness of delivery. In this the merchant must depend very largely on the transportation companies, and therefore a brief study of these facilities will be especially in place at this point.

Transportation is an essential item in the problem of distribution. If you wished to drink a cup of coffee and found that none could be had except in Brazil, you would begin to realize how much the steamship company and the railroad company have done in transporting and hauling it where you might buy it. The same is true of our oranges from California and Florida, our apples from Washington and Oregon, and our grain from the Middle States. In fact, in the case of many products the most important item is not growing them, but bringing them to market, since the transportation charges are often much greater than the actual cost of producing. Thousands of barrels of apples rot on the ground every year because their quality does not warrant the high transportation charges, the lack of transportation rendering them useless. In a smaller measure, the delivery wagons in our cities and towns are essential to us because they save us the trouble of carrying our purchases about. Thus, the element of transportation enters into our lives every day, saving us inconvenience, bringing to us necessities that we demand and luxuries that we like, and, at the same time, increasing the price of commodities.

Common carriers, as transportation companies are called, are of two general classes:

Steamship companies operate three general kinds of lines: (1) lines consisting of the largest and fastest steamers which carry only passengers, mail, and valuable parcels; (2) lines using slower steamers which carry both passengers and freight; and (3) lines employing vessels—steamers, sailing vessels, and barges—which carry only freight. The cost of hauling cargoes by water is in every case less per mile than that of carrying the same quantity of goods on land. It costs, for example, over four times as much to carry a bushel of wheat from Chicago to New York by rail as it does to carry it across the Atlantic. It is for this very reason that the traffic on our navigable rivers, the Ohio and the Mississippi, and on the Great Lakes is so heavy. Whenever a cargo can be shipped as well by water as by rail and there is no hurry for delivery, it is shipped by water. However, because so much of our freight must be rushed from place to place, the railroads get the bulk of the inland traffic.

The services of the railroad company embrace the hauling of freight, the carrying of passengers, and the transporting of express and of mail. The hauling of freight is the most important item in the railroad business, about three-quarters of the total income being derived from this source. Each year over one billion tons of freight are turned over by shippers to the railroads, who use almost two and one-half million freight cars to carry it. About one-half of this tonnage is minerals, mainly ore and coal; about one-seventh consists of manufactured articles; and one-twelfth of agricultural products. Commodities are grouped into from ten to fourteen classes, on each one of which the freight rate is different from that of the others. By freight rate is meant the cost of shipping a certain unit, usually 100 pounds or a ton, from one place to another; it is dependent on the distance. There are certain bulky commodities like coal, livestock, lumber, grain, and cement, which are almost always handled in carload lots. They are not included in the freight classification, but have a special ex-class freight rate. Freight rates depend also on whether the goods are shipped by slow or local freight or by fast or through freight.

There are a hundred different kinds of papers used in carrying on the railroad freight business. Only four of the most important will be considered here. When a shipper turns over his goods to the railroad company at its freight depot, he gets from the agent a receipt for freight, which is merely a receipt for the goods he has turned over. In the ordinary course of business these receipts are exchanged at the company's office for a bill of lading in triplicate. The original and one copy are given to the shipper. The second copy is kept by the railroad. This bill of lading may be of two kinds, straight or order. If a straight bill of lading is given, the original is sent to the person to whom the goods are shipped, who is called the consignee, who on the presentation of the bill of lading is entitled to the goods after paying the charges. An order bill of lading is much like a check, in that it can be assigned to another person. Like the straight bill it states the name of the consignee or the person for whom the goods are intended and his address, but the consignee cannot get possession of the goods until he has paid for them. To collect payment, the shipper attaches to the order bill of lading a draft for the amount of the goods and the freight, and through his bank and the bank of the consignee the amount is collected. The consignee then gets possession of the order bill of lading, which entitles him to possession of the goods. This is more fully explained on page 344. The railroad's most important paper is the way bill, which shows the conductor or the agent of the company just what articles are included in the shipment, so that it can be checked when unloaded. When the goods arrive at their destination, the consignee is notified and is sent a freight bill showing the freight charges. When he presents his bill of lading and pays the charges, the freight bill is receipted and the goods are his.

In quoting prices on goods, manufacturers and distributors usually designate whether they will pay the freight or whether it is to be paid by the consignee. In the latter case the price is quoted f. o. b. at the place from which the goods are shipped, which means freight on board at that point. That is to say, if a distributor located at Detroit quotes his automobiles f. o. b. Detroit, he means that he will see that the goods get into the railroad company's hands at Detroit, but that the consignee pays the freight from Detroit to the destination. The latter is the common practice in shipping.

In the following exercises we shall treat the subject of distribution under four heads: