zations which had adequate warehouse records, and from manufactures or distributors who deliver merchandise directly to the stores of the chains and independents. The figures for special discounts, rebates, and allowances made by some manufacturers to some dealers, both in the grocery and drug trades, were obtained from the manufacturers.

The statistics of selling prices and costs were weighted in such a manner as to give effect, so far as practicable, to the relative importance of the several items covered; that is, to the relative volume of the items handled by the chains and independent dealers. The statistics of the quantities used as weights were obtained from the same sources as the cost figures.

In the principal statistical analysis in each of the eight reports the average prices, costs, and gross margins of the independent distributors are compared with the averages for the leading chains. In each of these reports summary tables are presented which show the average prices, costs, and margins for a large number of items combined and for the different constituent commodity groups. The figures are shown on an unweighted basis, and then as weighted both by chain volume and by the volume of independent distributors. The geometric average of these two weighted figures is also shown. In the main discussion of the statistics in each of the reports the figures for the leading chains were combined in averages and compared with the average figures for independent distributors. The following is a brief presentation of the more important facts brought out in the principal analyses of the statistics in the several reports. It should be pointed out in this connection that the statistics for different cities do not relate to the same period, and that the relationships between the figures for independent distributors and the chains might be somewhat different if the data for all the cities were collected for the same period.

In the comparisons which follow the ratios of the selling prices and costs of the independent distributors to those of the chains are on the basis of the geometric averages of the results obtained by weighting the figures by chain volume and by independent distributor volume. The cost figures used are the costs arrived at after the deduction of special discounts and allowances, and the gross margins were computed on the basis of these costs. The gross margins are given in terms of percentages of sales, and the figures for the independent distributors were weighted by the volume of that class of distributors, while the figures for the chains were weighted by their volume. The gross margin of the chain is the spread between the cost to the chain and the retail selling price of the chain. The gross margin of the independent distributors is the spread between the cost to the wholesaler and the selling price of the independent retail store.

For the grocery business in Washington, the results of the study for 1929 showed that for the period covered the selling prices of independent distributors were on the average 6.4 percent higher than the average selling prices of the two principal chains, while their costs were 1.72 percent higher. The average gross margin of the independent distributors was 20.88 percent, as compared with 18.99 percent for the chains.

The average selling prices of independent grocery distributors in Cincinnati in 1929 were 8.84 percent higher than the average for the two leading chains and 9.85 percent higher than those for two smaller chains. The average costs for the independents were only about one quarter of 1 percent higher than those of the large chains and about one half of 1 percent higher than those of the smaller chains. The average gross margins of the independent distributors were 25.26 percent (using independent-distributor weights) as compared with 16.97 percent for the large chains (using large-chain weights) and 17.37 percent for the smaller chains (using small-chain weights).

The comparison of the average figures for independent grocery distributors in Memphis in 1930, with the average figures for the two leading grocery chains, showed the selling prices of the former as 8.28 percent higher than those of the latter, and their costs 2.86 percent higher. The average gross margin of the independent distributors was 25.23 percent of sales and that of the chains 22.91 percent.

A comparison of the average figures for independent grocery distributors in Detroit, in 1931, with the average figures of the four leading chains, showed the selling price of the former on the average 10.47 percent higher than the average for the latter, and their costs 2.31 percent higher. The average gross margin of the independent distributors was 25.02 percent, as compared with 18.96 percent for the chains.

In each of the four reports on prices and margins of grocery distributors it was pointed out that in the comparisons of the figures for the independents with those of the chains, it should be borne in mind that the independent grocery establishments render services, such as credit and delivery to retail customers, to a greater extent than do the chain grocery establishments.

For the drug business in Washington, the study of the figures for 1929, the prices, costs, and gross margins of independent distributors were compared with those for the three principal chains combined. The comparison showed the selling prices of the independents on the average 22.72 percent higher than those of the chains, and their average costs 3.27 percent higher. The average gross margin of independent drug distributors was shown to be 37.66 percent and the corresponding figure for the chains 22.60 percent.

The study of the Cincinnati drug figures for 1929 showed the average selling prices of independent drug distributors as 20.35 percent higher than the average for the two principal chains, and their costs 1.81 percent higher. The average gross margin of the former was 36.76 percent and that of the latter 23.99 percent.

The study of the figures for the drug business of Memphis in 1930 indicated an average selling price for the independents 20.69 percent higher than the average for the two principal chains, and an average cost 1.38 percent higher. The average gross margin was 41.18 percent for the independent distributors, as compared with 28.77 percent for the chains.

The report on the study of the drug business of Detroit in 1931 showed the average selling price of independent distributors as 17.48 percent higher than that of the three leading chains, with average costs 3.88 percent higher. The average gross margin of the independent distributors was 39.40 percent and that of the chains 30.72 percent.

In all the comparisons given above the price figures used for the chains were the prices which the headquarters of each chain authorized to be charged in its stores in the particular city. It was found by tests made for each city (except Cincinnati), in which these authorized prices were compared with the prices secured from the stores, that the average deviation of the latter from the former was slight. It was considered, therefore, that the use of the authorized chain prices was justified. There was one exception, however, in the case of the Detroit drug chains. In that case it was found that the average deviation of store prices from the authorized prices was considerable for 2 of the 3 chains. Therefore, in the report on prices and margins of Detroit drug distributors supplementary tables were presented giving a comparison of independent prices with the prices obtained from the stores of the chains. On the basis of these figures the average prices of the independent drug distributors in Detroit were shown to be 14.53 percent higher than the average prices of the chains, and the average gross margin of the chains was 32.52 percent, as compared with 30.72 percent on the basis of the authorized chain prices.

The reports on prices and margins of grocery distributors in Washington and Cincinnati also presented the results of supplementary studies made in the effort to throw light on the question whether or not differences in prices might be ascribed in part to the fact that some stores rendered services to their customers, while others did not. The services taken into consideration were credit, taking orders on the telephone, and free delivery of goods; and the independent and cooperative stores were divided into three groups as follows: (1) Those rendering no service, (2) those giving service on 1 to 49 per

cent of sales, and (3) those giving service on 50 to 100 percent of sales. The chain stores, which were understood to be cash-and-carry stores, were not taken into consideration.

In the Washington study there appeared to be some correlation between the prices of the various groups and the extent of services rendered, but the correlation was not complete. In the Cincinnati study it was found that for the independent stores and for each of two cooperative groups (with one exception, where the totals were practically the same) the prices for the no-service group were somewhat lower than those for the group of stores reporting service on 1 to 49 percent of sales, while without exception, the prices of the group of stores reporting service on 50 to 100 percent of sales were higher than those for the group reporting service on 1 to 49 percent of sales. These figures indicate some correlation between the prices of the independent and cooperative stores and the extent of the services rendered to their customers. It was noted, however, that other factors, not sufficiently well recognized to permit their elimination, might influence the results.

SPECIAL DISCOUNTS AND ALLOWANCES IN THE TOBACCO, GROCERY

AND DRUG TRADES

Three reports on special discounts and allowances of chain and independent distributors summarize the data collected by the commission on this subject in the tobacco, grocery, and drug trades. These studies were undertaken to determine the truth or falsity of the assertions frequently made that chain-store organizations hold an important advantage over independent dealers because of the large discounts and allowances obtained by them on many items, which independent competitors were not able to obtain.

These studies consist of analyses of the discounts and allowances reported by several hundred manufacturers of tobacco, grocery, and drug items, covering their total sales and total discounts and allowances to a large selected list of chain, wholesale, cooperative and other independent distributors in various parts of the country in an effort to measure the importance of special discounts and allowances in chain and independent distribution on a board quantitative basis. The data on discounts and allowances cover a wide range of tobacco, grocery, and drug products as well as miscellaneous sundries generally sold in conjunction with these articles. Reports covering these classes of articles in the tobacco trade were obtained from 134 manufacturers of tobacco products and miscellaneous related articles for the years 1929 and 1930. In the grocery trade similar reports were obtained from 457 manufacturers for the year 1929 and 464 manufacturers for the year 1930. A total of 682 manufacturers in the drug trade submitted discount and allowance data in 1929 and 688 manufacturers for the year 1930.

Reports obtained from the manufacturers of tobacco and miscellaneous allied articles covered their total sales and allowances to 47 selected chains and 63 selected tobacco wholesalers in 1929 and to the same number of chains and one less wholesaler in 1930. In the grocery trade manufacturer's reports covered total sales in each year to 62 grocery chains, 93 wholesale grocers, and 44 cooperative chains, and in the drug trade the data covered total sales in each year to 49 chains, 58 drug wholesalers, and 6 independent department stores. The various distributors for which the manufacturers reported sales were the same companies in both years. The extent of discounts and allowances given by the reporting manufacturers of these three classes of articles is indicated by the following statements from the reports:

Tobacco. The total amount of the sales of all of these 134 manufacturers of tobacco and related miscellaneous commodities to these tobacco distributors aggregated just under 250 million in 1929 and over 285 million in 1930. The total allowances in the former year were $6,417,161 and in the latter year, $6,928,992.

Although the sales of the manufacturers to the chains aggregate only 57.05 percent of the total in 1929 and only 60.12 in 1930, the chains obtained 82.02 percent of the total allowances in 1929 and 88.36 percent in 1930. As a result the rates of allowances on total sales of all manufacturers to chains (3.69 percent in 1929 and 3.57 percent in 1930) are over three times the rate to wholesalers (1.07 percent) in the earlier year and about five times that to wholesalers in 1930 (0.71 percent).

Of the 134 manufacturers included in the study, however, only 89 in 1929 and 94 in 1930 reported allowances to any of the chains or wholesalers. The total sales made to all dealers included in this study by this group of manufacturers making allowances were $111,229,243 in 1929 and the total allowances of $6,417,162 in that year amounted to 5.77 percent of sales. In 1930 the total sales of this group of manufacturers were $179,510,415 and the allowances of $6,928,992 were at a rate of 3.86 percent of sales. In the former year, the allowances to chains by manufacturers making allowances aggregated 9.67 percent of their sales as compared with a rate of 2.03 percent given on sales to wholesalers by these same manufacturers. In 1930, allowances to chains were 4.99 percent on total sales made to them; the allowances to wholesalers, 1.42 percent on sales.

Grocery. The total amount of the sales of all the 457 reporting manufacturers of grocery and miscellaneous related products to these grocery distributors amounted to 368.6 million dollars in 1929 and for the 464 reporting manufacturers to 351.6 million dollars in 1930. The total allowances in the former year were $6,306,213 and in the latter vear. $6.439,514.