My late father had a local small business. He sold home furniture, appliances, radio, and cameras. It was situated in a poorer part of town but still it did a thriving business. Walk by traffic brought in a lot of people who needed everything from beds to carpets, fridges to ‘radiograms, film for their cameras, or movie shorts for their projectors at home. He had the South African licence for the German Loewe Opta brand (some photos of some of our furniture delivery vans with the Loewe Opta brand recently went up on a German museum website), and that meant he could sell the brand to other dealers in South Africa so that also made a bit of money. And, of course, business came in from other parts of town as he advertised three or four times per week in the local newspapers - the Port Elizabeth Evening Post and the Eastern Province Herald. His business was everything a local small business should be, and his story was reproduced by every other local small business. They were successful. And they were successful whether there was a bad economy or a good economy!
Our Family Business in a German Museum!
It's not every small business that gets its story into a museum...
My parents' did! :)
Time for other things - besides business
Please note that neither my late father nor other small business owners worked themselves to death. Nor did they have to be involved in the community or make friends with everybody to find business. Indeed, there was a very strict protocol that separated one’s business life from one’s personal life. My late father still had time to the the president of the engineering society and the chairman of the astronomical society. He wrote (and was published) articles on everything from landing on the moon to how to be a philatelist. On top of that, he had time to lecture at various venues on various topics, danced,(he was a fabulous dancer), dressed divinely every day of his life, had time for exercise every day, etc. So the point is that while he worked an 8 hour day 5 days a week and half a day on Saturday, there wasn’t the stress in business that there is today. Nor was there the belief that if one wanted a small business to be successful, one had to put in sixteen hour days seven days a week!
My late Father, Werner Ludwig Schlesinger, with two of the
furniture delivery vans with the Loewe Opta logo. Oh, the
bike was Gladman's. He used to deliver small goods like
batteries to clients who phoned for them...
So Why Did That Small Business Model Work in the 50s and 60s?
Well, there were a major reason for the success of small business, and it did not have anything to do with the economy.Here’s the reason for successful small business (great examples of capitalism) during the 50s and 60s.
The Manufacturer Set the Price in South Africa - My Home Country.
In those days, it was the manufacturer who set the price. So, for example, a furniture manufacturer might decide that a retailer could buy direct from the him at $60 the solid pine sofa and sell at $100. He also decided that the wholesaler could buy from him at $40 for that same set and sell to the retailer at $60. The wholesaler couldn’t sell at any other price anymore than the retailer could raise or drop the price. The solid pine sofa, regardless of who sold it, sold to the public at a set price of $100, and it stayed at that price until the manufacturer raised the price a year or six later.
This model enabled all business everywhere to get a local piece of the market. Sure some businesses were bigger and some were smaller but that was not an advantage. People did business with people for reasons of distance, service, and other factors. The motto of Schlesinger’s Radiolectric was written loud and clear on every single one of our trucks “We service what we sell.” And we did! We paid a full time mechanic to take care of anything that needed fixing up. And fixing it up was a lot cheaper than buying a new one.
Dr. Miles's holding that agreements between companies and retailers that goods will not be sold below a certain price constitute a per se-- that is, automatic -- violation of antitrust laws.
The Death Knell for Small Business - I remember the day!
One day in the mid late 60s, my parents came home very upset. The laws of the country had changed. Retail business could now set the price. This would enable some businesses to set prices a lot lower than other businesses. It immediately eliminated small business from the mix because they could not compete with business that had endless capital. All that big business had to do was keep down the price of a range of products until all the smaller business went out of business. And they did - my parents’ business as well!
Benefits of the Manufacturer Setting the Price
There were several benefits to the manufacturer setting the price. The first is that it allows entry to many first time businesses without a lot of capital.
Here's the court case in which amazon had something to say about
publishers setting prices.
About a year ago, Amazon sued itunes for sharp business practice. It appeared that itunes went to the mainline publishers and asked them to set a price for ebooks. The publishers did so and the price of ebooks sold by publishing houses immediately went up sharply. As a result, Amazon lost half of its market share. Needless to say, Amazon was furious!
However, note that she did not lose business because other companies sold at a lesser price (as the publisher set the price, everybody had to sell at the same price), but because half the people who were currently dealing with Amazon because she had the lowest prices preferred to deal elsewhere when prices were not a factor!
Needless to say, several small time entrepreneurs became immensely profitable for the first time and others wannabes were able to enter the marketplace with relatively little capital. In other words, by the manufacturer setting the price, it increased employment opportunities.
In addition, ebook writers were now able to earn a decent sum of money for their books? Do you know that I have to sell at 99 cents otherwise my books are passed over? Out of that 99 cents, I earn somewhere between 24 cents and 34 cents? Do you honestly think a writer can earn a living from this?
Amazon’s point in the ensuing court case was that the public wanted these low prices and as she was providing these prices to the public, she was rendering service to the public.
Actually, Amazon, along with every other mega company, was screwing the public in the medium to long term. Let me explain to you why.
- Opportunity for small business to enter the market place is very limited. This means that there fewer jobs for fewer people. It is small business that provides the bulk of jobs, not big business.
- The workers who manufacture or create the goods are screwed over big time because what they make is sold for very little. So they can barely eke out a living.
- While the public initially pay very cheap prices, gradually, as there are fewer and fewer creators, inventors, manufacturers, small business, etc., there are fewer and fewer jobs, and, eventually, it doesn’t matter how cheap the goods are because the people don’t have jobs and can’t afford to pay for the goods, regardless of how cheap the goods are. Ask yourself why the mega corporations are now making 90% of their profits outside America... It’s because there is no more money in America. Remember that the 2009 census showed that half of Americans were living in poverty.
Laws Make or Break Business
Right now, virtually all laws benefit big business. Small business people have to find niche markets that are extremely difficult to make profitable. It’s not accident that eighty percent of small business goes out of business within five years of starting. That never used to be that way.
So, here’s my idea. There needs to be checks and balances in capitalism for it to work. Get the manufacturer to set the price again. Let’s get a level playing field for all players so that we can get our economy working.
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