of this type retailer are retail purchasing cooperatives, department stores, and mail-order firms.

Table 15 indicated 2,700 wholesalers in 1962. By 1974, one source indicated there were approximately 900 electrical goods wholesalers. 30 As merchant middlemen their functional specialization at the wholesale level seemed to be two-fold. On the one hand, they formed a trade link for the supply of electrical parts and accessories at various stages of produc- tion, and secondly, they acted as wholesale intermediaries in the classical sense. Nearly 50 per cent of their volume was in electrical parts and accessories and the other half in household appliances. In 1974, it was estimated that this type intermediary distributed approximately 40 per cent of refrigerators and washers. 31

The prevailing trend in West German channels has bee. one of concentratios among all types of distributors. For example, it was estimated in 1974 that one-fourth of all elec- trical goods wholesalers controlled three-fourths of total sales at this stage of distribu- tian. 32 Among concractual vertical systems, retailer-cooperative voluntary groups are emerg- i~ig. Administrative vertical market systems are growing as well; they accounted for nearly ten per cent of total electrical goods wholesale sales in 1974.

SIMILARITIES WITH THE UNITED STATES EXPERIENCE

Marketing studies flows of goods moving from producers to consumers. ]'he concept of flow brings to mind routes or channels that are taken as these goods move from one level to another. As soon as channels are considered, established structures which facilitate move- ment such as individualistic and vertical systems become the focal point of analysis. Im- portant factors determining channel systems start with characteristics of the industry and method of manufacturing. Even though economies of scale are of decisive importance in pro- duction of refrigerators and washers, manufacturers must then seek channels that have the capacity to move these two products on a mass volume basis to the consumer. Economies of scale apply to channel intermediaries too. Other factors than capacity of movement affect- ing channels are the seasonal nature of the demand tot the product and attributes of mar- keting the product. For example, after-sale service can be a decisive part of the consumer's decision in choice of brand of refrigerator or washer.

The purpose of this section is to establish an orientation as well as a historical perspective to channel developments and then bring together type of channel policies in use in Italy and West Germany. It was pointed out 200 years ago that "specialization and the division of labor are limited by the extent of the market. "33 This economic principle is applicable today to channel developemnts for refrigerators and washers in Italy and West Germany. Further, the concept developed by Adam Smith provided a broad analytical frame of reference for viewing the two major types of channel policies prevailing today in the market. The focal point remains on chan~es in channels even though marketiog specialists, such as channel intermediaries specializing by type of product, are relatively unknowns when the market is very small.

As recent as twenty years ago, the total market demand in both Italy and West Germany was too small to financially justify capital outlays for a~y type of channel policy other than individualistic. However, as soon ss the common market took shape and growth began to accelerate, traditional marketlng channels became vulnerable. Integrated marketing systems are more consistent with the current size of market and the accelerated growth experience by all common market countries since 1957.

Both italian and German manufacturers understood that volume was essential to realize low per unit cost of production. As soo~ as plant capacities were available to generate production of several million units per year, the traditional channels of distribution for refrigerators and washers ~ere inadequate. Individualistic channels were neither designed nor had the capability to move major appliances in such volumes to Italian or German consum- ers. Manufacturers in both Italy and West Germany began channel innovations including build- ing new intermediaries capable of handlil]g larger volumes. This process of experimentation represented, in terms of channel policy, a movement a~ay from traditional systems and toward integrated channel systems. The identical process call be traced back to the USA.

In the United States during the early 1920's the most important type channel was indi- vidualistic. This type chaonel was used simply because it was there. A more attractive channel alternative, as in Europe prior to the enlarged and more homogenous common market, was not imperative. However~ im the late 1920"s integrated marketing systems developed rmpidly in the U.S. because individualistic cha~nels for refrigerators and washers could not service a mass market. Simultaneously with the emergenc~ of a mass market, the need arose for performance of more comprehensive marketing functions by each i~termediary through- out the entire channel structure.

In terms of channel capacity, Italy and West Germany appear to be in the mid-seventies where the United States was from fifty to sixty years ago. Individualistic channels exist,

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but integrated systems (corporate, administratiye, and contractual) are increasingly being developed in order to move a greater volume. For example, in West Germany the electrical wholesaler accounts for 40 per cent of sales, but corporate and administrative systems account for 60 per cent of sales. In Italy, corporate vertical systems are responsible for distributing 80 per cent of sales, yet individualistic channels persist, endure, and insure their continued existence by specializing in the purchase of manufacturers' last year's unsold stocks. With end-of-year stocks in Italy selling recently at the factory for 50 per cent legs, individualistic marketing channels continue to exist in poorer regions of Italy (the south, the islands, and country districts generally).

In the United States channel development for refrigerators and washers there was, be- tween 1925 and 1928, a period when both traditional and integrated channel systems existed side by side; both being used. One explanation for the relatively wide use of both types of channel policies today in Italy and West Germany is the continuing momentum in the produc- tion side of the market for both refrigerators and washers. Perhaps more crucial from a marketing point of view is the size of capital required for integrated marketing systems. 34 Manufacturers, thus, are struggling to obtain the huge financing requirements essential to bring vertical marketing systems into operation. Many manufacturers in Europe have not been able to obtain the capital needed to introduce vertical marketing systems. As shown in Table i0, huge plant capacity for refrigerators and washers in Italy and West Germany exists. But, capital requirements for integrated channel systems requires still greater infusions of capital. Branch warehouses in the USA assumed responsibilities of product warranties and of training service personnel. This speeded market penetration. Yet, both of these marketing functions are capital intensive.

Since a relatively large stock of capital as well as channel technology is necessary to develop vertical marketing systems, German end Dutch electrical conglomerates operating in these countries have emerged with apparent advantage; their long experience in building in- tegrated channel systems for their other electrical products including heavy electrical equipment, such as turbines, has provided, in part, the background of experience and the capital for the necessary financing. Some of this capital is apparently being transferred to financing the distribution structure of refrigerators and washers. The building of ver- tical marketing systems by Philips of Holland and AEG-Telefunken in both Italy and West Germany has been one factor facilitating their rapid penetration of both the refrigerator and washer markets.

SOME FINAL THOUGHTS

Today, new channel trends are apparent among Italy and West German major household appliances such as refrigerators and washers. Takeovers and mergers have resulted in the operations of much larger manufacturing units. There seems a sense of urgency to develop channels more capable of large-volume marketing. This monograph has viewed channel capaci- ties for distributing refrigerators and washers in Italy and West Germany, in a sense, through American eyes. The authors conclude there is a tendency for Italy and West Germany to adopt channels developed earlier in the U.S.A.

Refrigerators and washers were chosen as products for this monograph because, to the consumer, both have numerous similarities. Each is relatively expensive, mechanically com- plex, aad both are often manufactured by the same company. Of specific emphasis~ here, however, is the fact that both products once firmly established in their product life cycle, are often marketed through the same channels. In the U.S.A. both products have been well established on the market for a considerable period of time. The authors contend that as these two products changed from a luxury for the few to items of broad usage, there was a sequence of channel events in Italy and West Germany similar to thh changes which occurred in the United States market~ but in a much earlier era.

In positioning the United States experience against the same product experience in Italy and Germany, a number of similarities are noted. The first is that both products are manufactured under conditions of decreasing costs and economies come into play only if a large number of units are produced. Second, volume is concentrated among a few manufactur- ers in both the United States and European appliance markets. The third similarity between the two "markets" is that the size of individual manufacturers is increasing and the capital requirements necessary to establish vertical marketing systems for refrigerators and washers continues to escalate.

A final similarity is that several major appliance manufacturers in both America and Europe are divisions of larger conglomerate-type corporate structures. For example, in the United States, the appliance division of General Electric is but one part of that corpora- tion's many divisions. Further, General Electric o~rns ~ second appliance division, Hotpoint, a full-line appliance manufacturer and distributor, and one with a significant market share. The largest single stockholder in Whirlpool Corporation (approximately 33 per cent of total shares of common stock) is Sears, Roebuck and Company. Sears holds the number one market position in b~th refrigerators and washers in America. In Italy, three manufacturers

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