A C T A U N I V E R S I T A T I S L O D Z I E N S I S FO LIA OECONOM ICA 17, 1982
K alevi Piha *
SO C IA L AND ECONOM IC IM PLIC A TIO N S OF TH E CHANGE IN TH E D ISTR IB U TIO N SYSTEM IN FIN LA N D
1. D IS T R IB U T IO N SYSTEM
T rad e is a su b -sy stem of society, th e ta sk of w h ich is to elim in ate th e differ ences in place, q u a n tity and tim e b etw een pro d u ctio n and co n su m p tio n l . I t reflects tre n d s in th e d evelopm ent of th e society w ith th e d istrib u tio n system h aving to a d ju s t itself to th e changes in th e s o c ie ty 2. The s tru c tu re of th e d
istri-b u tio n system acts as a m echanism of a d ju stm e n t.
T he d istrib u tio n system can v e ry sim ply be described as a flow of goods b etw een p ro d u ce rs and consum ers w h e re w holesale a n d re ta il tra d e h ave fu n ctio n s of th e ir ow n. In g eneral, w e are used to analyzing a n y d istrib u tio n system fro m a point of v iew of th e in te g ratio n system s in d istrib u
-tion, n am ely th a t of w holesale and re ta il tra d e ; b u t also consum ers have a fu n ctio n of specific im portance in th e d istrib u tio n sy ste m of tra d e , as seen in fig u re 1.
* P ro f. Dr, T he T u rk u School of Econom ics a n d B usiness A d m in istra tio n , T u r k u (Finland).
i a . A u t i o , V. P. H o l o p a i n e n , R. K a n e r v a , K. M a n n e r m a a , P. R i n n e , M a rk k in o in n in p eru sttie to , T ap io la 1975.
* K. P i h a , Y rity s y m p a r is tö n to im e n p ite e t m a r k k in o in tik e in o je n ra jo itta jin a , H elsin k i 1976.
Fig. 1. A g en eral m o-del of th e d istrib u tio n
The purpose of th is paper, on one hand, is to in te rp re t effects of changes in th e d istrib u tio n system on th e social and econom ic s ta tu s of consum ers, and, on th e o th e r hand, to ev alu ate th e role of consu-m ers as a p a rt of th e d istrib u tio n systeconsu-m . W ith reg a rd to changes in th e d istrib u tio n system th e analysis is based on research es on pro sp ects of hom e tra d e in F in lan d by 1990 3.
2. BACKGROUND OF TH E CHANGE IN D IST R IB U T IO N SYSTEM
In 1960 th e G N P sh are in F in lan d w as 10.0 p e r cent, and by 1975 it increased to 10.3 p e r cent. D uring th e follow ing fifteen y e a rs it is estim ated to rem ain on th e p rese n t level. In 1975 th e sh are of w holesale tra d e w as 5.1 p e r cent, and th a t of re ta il tra d e 5.2 p e r cent. By 1990 th e sh are of w holesale tra d e is estim ated to increase to 5.4. p e r c e n t, and a t th e sam e tim e th e sh are of re ta il tra d e w ill decrease to 4.9 p e r cent.
To u n d e rsta n d th e changed sta tu s of a consum er, th e social a n d economic changes th a t have tak e n place in society in th e last few d e-cades have to be tak e n into a c c o u n t4. T hey have effects on th e m a r-keting situ a tio n of a firm , and f u rth e r on th e d istrib u tio n system d e-scribed in figure 2.
The global en v iro n m en t e x e rts an influence on all activities in th e society. T he n a tu ra l system has been changed into a h u m an system w ith sophisticated cu ltu re, h ig h -sta n d a rd technology, and varied va-lues. This m eans a new m ark e tin g situation, to w hich a firm has to be ad ap ted over and over again. This can be seen as changes in th e d istri-b u tion system . F acto rs of dem and can istri-be d erived from th e changes in th e s tru c tu re of th e society. T hey can be classified as location of po-pulation, dem ographic factors, socio-econom ic factors, and consum ption
and b u ying h ab its of p e o p le 5. T hey have a stro n g influence on th e system of d istrib u tio n in trade.
Location of population as a factor of dem and m eans regional c h an ges, such as urb an izatio n and co n cen tratio n of population in th e in d u -strialized areas of a country. It m oulds th e a ttitu d e s and th e b eh av io r
* K. P i h a , M. J a 1 k a n e n, J. E 1 o m a a, K o tim a a n ka u p a n s u u n ta v iiv a t vu o tee n 1990, T u rk u 1979.
4 K. P i h a , E n viro n m e n ta l in flu en c es in th e d istrib u tio n sy stem , Ł ódź—
K o w ary 1977.
5 K. P i h a , M ainonta 1980: M u utosnköaloja ja k e h ity se n n u ste ita M ain o n n an tie to k irja by В. F a g e rlu n d a n d M. L a rre s (eds.), P orvoo 1973, pp. 17—23.
GLOBAL ENVIRONMENT
( n a t u r e , c u l t u r e , t e c h n o l o g y , l e g i s l a t i o n )
Fig. 2. F acto rs in flu en c in g th e d istrib u tio n system
o f consum ers. It is a basis of a new sty le of liv in g 6. In F in la n d these a re a s include th e southern and w e ste rn p a rts of th e country. S ixty p e r c en t of th e F in n ish p o p u lation live in u rb an ized areas, a n d over e ig h ty p e r cen t in so u th e rn F inland.
D em and also varies according to th e dem ographic facto rs of th e po-p u lation. D em and depo-pends on th e s tru c tu re of age and sex, size of fam ily and curve of living 7.
In F in la n d th e p ercen tag e of aged people is becom ing la rg e r and larg e r, so th a t m ore th a n te n p e r cent of th e p o p u lation are now p e n
-0 E. J. K e l l e y , M arknadsföring i d et m od ern a sa m h ä llet, S tockholm 1969, pp. 56—57.
sioned, in some places even 20 p e r cent. Y oung consum er s a re im por-ta n t because th e y a re th e fo re ru n n e rs of a new sty le of living ■.
Socio-econom ic factors, such as changes in education, occupational s tru c tu re , a n d incom e h ave an influence on th e social s ta tu s of people. T he s ta n d a rd of living is rising and m ore and m ore consum ers a re ab le to satisfy th e ir needs on a h ig h e r level®. In F in la n d academ ic education is com m oner th a n in an y o th e r co u n try , th e occupational s tru c tu re of society h as changed to respond to an in d u strialized society, a n d th e p ro sp e rity of th e c o u n try has increased.
C hanges in th e s tru c tu re of society can be seen in th e b e h a v io u r of people, viz. w h a t choices consum ers m ake in th e ir ev e ry d a y con-sum ption, an d how concon-sum ers m anage w ith th e ir e v e ry d a y shopping. A rising s ta n d a rd of living re su lts in a dim inishing sh a re of necessities in consum ption, such as food and tex tile s, and an in creasin g sh are of a lte rn a tiv e s, such as cars, household m achines, and le isu re tim e s e r-vices 10. T he developm ent in F in la n d has been ju st th e same.
A considerable n u m b e r of p riv a te cars and a new re ta ilin g tec h n o -logy h ave given chances to b u ying c e n tre s and su p e rm a rk e ts outside th e c ity n . It has changed th e b u y in g h a b its in F in lan d , to a conside-rab le e x te n t, as evidenced b y a n ew em pirical r e p o r t 12.
S im ilar observations of th e b eh av io u r of consum ers can be m ad e also on th e basis of th e sta tistic s concerning th e dev elo p m en t of re ta il tra d e in F inland.
3. STR U CTU RE O F SA LES IN R E T A IL TRADE
The econom ic and social developm ent of th e F in n ish society is c le a rly reflec ted in th e s tru c tu ra l changes of re ta il tra d e sales from 1952 to 1974. T hey a re p rese n ted w ith re g a rd to ev e ry d a y p ro d u cts and special p ro d u cts sep arately .
E v ery d ay goods a re m uch th e sam e as K irk p a tric k ’s convenience
8 J. R. K e r r , J. E. L i t t l e f i e l d , M arketing. A n E n v iro n m e n ta l A p p ro a ch , N ew Je rse y 1974, p. 80.
• Ch. S. G o o d m a n , M anagem ent R esponse to E n v iro n m e n ta l C hange in
th e 70’s, T he E n v iro n m e n t o f M a rk e tin g M a n ag em en t by R. J. H ollow ay a n d
R. S. H ancock (eds.), N ew Y ork 1974, p. 520.
10 K e r r , L i t t l e f i e l d , op. cit., pp. 70—71.
11 R. S. V a i 1 e, S o m e C oncepts o f M a rke ts and M a rke tin g S tra teg y . T h e E n v iro n m en t of M a rk e tin g by R. J. H ollow ay a n d R. S. H ancock (eds.), N ew Y ork 1974, p. 62.
52 64 66 68 70 72 7Д 80 85 Fig. 3. D ev elo p m en t in sales o f e v e ry d a y goods in d e p a rtm e n t stores, a n d food
a n d n o n -fo o d shops d u rin g 1952— 1974
The curves disclose c le a rly th e follow ing tendencies:
a) T he sh a re of e v e ry d a y goods of p riv a te consum ption is decreasing slow ly. It confirm s a h ig h e r sta n d a rd of living w h e n ev e ry d a y goods re p re s e n t a sm a lle r sh a re in th e satisfy in g of h u m a n needs th a n b e -fore.
b) T he decreasing sh are of sales of food and non-food sto res gives evidence of th e so-called shop-death. It is connected w ith regional changes of society w hen villages in th e co u n try sid e a re losing th e ir po-p u latio n to cities and in d u stria l centres.
c) A d e p a rtm e n t sto re — incl. su p e r m a rk e ts and a u to -m a rk e ts — is an exp an d in g chan n el of d istrib u tio n th a t has com e to rep lace th e
1S C. A. K i r k p a t r i c k , A d vertisin g : M ass C o m m u n ica tio n in M a r k e tin g
N ew Y ork 1964, p. 5.
goods 1S. T h ey can be divided in to tw o groups, i.e. food and non-food goods. In official sta tistic s th e y can be se p ara te d v e ry ro u g h ly accor-ding to store types. It can be seen in fig u re 3.
tra d itio n al n ex t-d o o r store. The sh a re of sales of d e p a rtm e n t sto res is predicted to grow over th e n e x t fifteen y ears because of th e fact th a t th e y w ill increase th e ir a sso rtm en t into th e field of special goods.
Special goods correspond larg ely to K irk p a tric k ’s shopping goods 14. T hey have been divided into five groups of b ranches according to the official statistics. T here a re big differences b etw een th e bran ch es as seen in fig u re 4.
On th e basis of th e cu rv es rep re se n tin g th e m ain special b ran c h e s of special goods th e follow ing conclusions can be d raw n :
a) T he sh a rp rise in sales of cars and c a r services rep re se n ts in itse lf an in d u stria liz e d and m obile society. I t co n stitu te s a basis fo r new ch an n els of d istrib u tio n and m akes th e consum ers free to choose w h e re to buy. T he sh a re of c a r business co n tinues to grow so th a t b y 1990 it w ill account fo r m ore th a n 25 p e r c en t of th e to ta l re ta il tra d e .
b) T he sh a re of household m achines, ele c tric ap pliances and e le c tro -nic devices is risin g slig h tly an d th e tre n d goes on in th e fu tu re . I t is a proof of th e risin g s ta n d a rd of living and also reflec ts new v alues in th e society.
c) T he sam e im plication holds good also in th e case of hetero g en eo u s g roup of o th e r sto res o ffering special goods, such as sp irits, cosm etics, je w e lle ry etc. T o g eth er w ith th e slow ly grow ing b ra n c h of fu rn itu re it reflec ts best th e new sty le of living, w hich w ill value fre e tim e, b e a u ty , a n d pleasure.
d) H ow ever, th e sh a re of te x tile an d shoe sto res is decreasing, a t th e beginning of th e p eriod v e ry sh arp ly , and fo r th e fu tu re m ore slow ly. A decreasing sh a re can be accounted by th e fac t th a t n a tu ra l m ate ria ls, such as wool a n d silk, have been rep laced b y sy n th e tic fa -b rics 15. On th e o th e r h and, m ore a tte n tio n w ill -be paid also to th e design of ev e ry d a y w ear and purch ases w ill be m ade a t h ig h -sta n d a rd s to r e s 16.
4. VOLUME O F SALES IN R E T A IL TRADE
S hares of sales b y b ran ch es r e fe r to th e h ie ra rc h y of consum ption in society. V olum es of sales, on th e o th e r hand, re fe r to th e buying p o ten tial of consum ers, w hich follow s th e g ro w th of G N P th a t in F in -lan d d u rin g 1961— 1975 has b een 4.5 p e r c en t a y ear. V olum es of sales a re pred icted to develop as p re se n te d in tab le 1.
The branches, w h ich a re p red ic te d to grow m ost stro n g ly , i.e. cars and c a r services, fu rn itu re a n d c a rp e tin g as w ell as household m achi-nes, electrical appliances and electronic devices re p re s e n t th e objecti-ves of w e ll- to-do people w ho em phasize th e q u a lity of life.
15 B. S. L o e b , T h e Use o f E ngel’s L aw as a Basis fo r P red ictin g C onsum er
E xp e n d itu re s, „ J o u rn a l of M a rk e tin g ” J u ly 1955, pp. 20—27.
u P. M a r t i n e a u , Social Classes and S p en d in g B ehavior. T he E n v iro n m e n t o f M a rk e tin g M anagem ent by R. J. H ollow ay a n d R. S. H ancock (eds.), N ew Y ork 1974, p. 199.
T a b l e 1 V olum es of sales by b ra n c h e s in re ta il tr a d e in 1974, a n d p red ic tio n s for th e
y e a rs 1980, 1985 an d 1990 Sales in Billions of Marks
Yearly growth 1974-1990 in per cent Branch
1974 1980 1985 1990
Department stores, food
23.1
and non-food shops 14.9 17.9 19.9 2.8
Textile and shoe shops 2.2 2.5 2.8 3.2 2.5
Household machines, electrical appliances, and
5.8
electronic devices 2.8 3.7 4.7 4.6
Furniture and carpeting 0.7 0.9 1.1 1.5 4.4
Cars and car services 6.9 9.6 12.3 15.5 5.2
Other special stores 4.4 5.1 6.1 7.2 3.2
Total 31.8 39.1 46.9 56.3 3.6
T he branches, on th e o th e r hand, w hich a re p red ic te d to grow m ore slow ly th a n average, i.e. food an d non-food products, te x tile s and shoes as w e ll as o th er special branches, re fe r to th e d im inishing signi-ficance of th e ty p e of living in th e old-tim e society.
The sam e ten d e n c y can be seen also in th e figures concerning th e q u a n tity of personnel in re ta il tra d e , and th e n u m b er of stores and shops in d iffe re n t branches. This m eans th a t th e level of services in re ta il tra d e w ill decline considerably.
5. CONSUM ER AS P A R T O F TH E D IS T R IB U T IO N SYSTEM
5.1. L O G IS T IC A C T IV IT IE S T R A N S F E R R E D T O C O N S U M E R S
T ren d s concerning th e g ro w th of shops d u rin g 1964— 1974 prove th a t b ran ch es like cars and car services, household m achines, electrical appliances and electronic devices a re in progress, w hereas te x tile s and shoes, and food and non-food goods have decreased in nu m b er, as seen in figure 5.
It is expected th a t th e n u m b e r of stores in re ta il tra d e w ill — in general — dim inish by 1.7 p e r cent a y e a r d u rin g 1975— 1990. T here a re m ark ed differences b etw een th e d iffe re n t branches. In th e food and non-food b ra n c h a big red u ctio n is expected in th e n u m b er of stores, n am ely 40 p e r cent by 1990. Also th e te x tile and shoe b ran c h w ill h ave sm aller sales prem ises, th e red u c tio n am ounts to ab o u t 30 p e r
cent. The increase in o th e r branches, incl. c ar business, w ill be m uch sm a lle r — if a n y th a n u n til today.
This developm ent, th e so-called shop-death, is a severe problem in F in lan d , w h ere it is associated w ith people m oving from th e c o u n try
-Fig. 5. T re n d s in th e n u m b e r of shops by b ran c h e s in re ta il tr a d e d u r in g 1964— 1974
-sid e to u rb a n centers. F o r those w ho stay it m eans w orse services in satisfy in g th e ir daily needs th a n before. T hese people a re com pelled to c a rry out activities for w hich tra d e has o rig in ally been responsible.
Two h a n d lin g activities in p a rtic u la r, have been tra n s fe rre d to con-sum ers. One is th e tra n s p o rt of goods, th e o th e r is th e storage (of goods).
F irs t of all consum ers m u st som etim es tra v e l fa r to b u y w h a t th e y need, and a re th u s m ade responsible for th e tra n s p o rt of goods. This involves e x tra costs in tim e and m oney for consum ers.
Secondly, consum ers ten d to buy p ro ducts in big q u a n titie s and keep th em fresh for a long tim e before using them . Now consum ers a re responsible for storage of goods. This involves e x tra costs in q u a lity (e.g. food) and m oney (e.g. refrig e rato r).
S.2. T R A D E S E R V IC E S T R A N S F E R R E D T O C O N S U M E R S
T endency in th e g ro w th of p erso n n el in re ta il tra d e is m uch th e sam e as th a t in th e n u m b er of shops. B ranches rep re se n tin g th e m o-d e rn ty p e of living gain m ore sales people, a n o-d b ran c h e s rep re se n tin g th e tra d itio n a l ty p e of living lose them . In g eneral, th e p erso n n el in to ta l re ta il tra d e is expected to dim inish by 0.2 p e r cent a y e a r d u rin g 1974— 1990.
A lthough th e red u c tio n of re ta il force is n o t v e ry big, it m eans i r a n y case d e te rio ra te d services in re ta il trad e. It is associated w ith th e crisis of p ro fita b ility in firm s. P erso n n el service in sto res w ill be com -pen sated fo r w ith o th e r alte rn a tiv e s.
T h ere a re tw o a lte rn a tiv e s to m ake up for th e sh o rtag e of lab o u r in re ta il tra d e . One is p a rt-tim e lab o u rers, th e o th e r m echanization of shop w ork, i.e. self-service. B oth m eans of ratio n alizatio n lessen th e
S h a r e ot p a r t - tim e w o r k e r s
am o u n t of p erso n n el services in shops. T his m ig h t be called „contact- -d e a th ”.
T h ere a re big differen ce by b ran ch es in th e d em and for p a rt-tim e lab o u r in re ta il trad e. T ypical fe a tu re s can be seen in th e developm ent d u rin g 1969— 1974, as seen in figure 6.
I t seem s a p p a re n t th a t th e possibilities fo r th e use of p a rt-tim e help d iffe r v e ry m uch fro m b ran c h to branch. I t depends p a rtly on th e v a -ria tio n s in dem and, p a rtly on th e professional skills re q u ire d in c e rta in branches. In a n y case, th e use of p a rt-tim e lab o u r in re ta il tra d e is p red icted to increase consid erab ly in th e fu tu re , as p rese n ted in tab le 2. T a b l e 2 S h a re o f p a rt- tim e la b o u r o f hom e tr a d e (%) Forecast Home trade 1975 1980 1985 1990 Retail trade 14.8 19.0 22.0 25.0 Wholesale trade 1.9 2.0 2.2 2.4
T hus th e n u m b er of h a lf-sk ille d or u n sk illed sales p erso n n el in shops w ill increase, C ustom ers h av e to m anage on th e ir ow n w h en shopping.
T he self-service system m eans th a t m ost activ itie s associated w ith th e selling process in shops w ill be tra n s fe rre d to custom ers. T hey m u st activ ely acquire th e n ecessary in fo rm atio n ab o u t goods. T h ey seek su itab le a lte rn a tiv e s of th e pro d u cts available, a n d com pare prices and qualities. T hey m ake decisions, collect goods, even pack them . A ll th ese step s belonging p reviously to th e sales personnel, in th e new d e liv e ry system belong to th e consum er.
The self-service system has rap id y expanded in F in la n d as w ell as in o th e r S candinavian countries. See fig u re 7.
It seem s a p p a re n t th a t th e re is a p eak in th e cu rv e a fte r w hich th e increase of self-service shops w ill n ot continue. In F in la n d w h e re th e need of ratio n aliz a tio n still prev ails it is p red ic te d th a t th is peak w ill n o t be reached u n til 1985.
To accom plish th e self-service system th e re a re th re e k inds of steps of rationalization in re ta il trad e. T h ere a re technology, packaging and th e g ro u n d -p la n of th e shop. M odern technology h as b ro u g h t w ith it re frig e ra to rs, re frig e ra tio n room s and au to m atic w eighing-m achines in shops. It has in troduced also au to m atio n in stock a n d cash control. T he consum er m u st be able to m anage w ith these technological devices.
D evelopm ent in th e field of packaging is a basis for th e self-service system . T he m ost im p o rta n t functions of packaging a re protection,
S w e d e n
Fig. 7. T re n d s in th e d ev e lo p m e n t of th e se lf-se rv ice sy stem in th e food b ra n c h in S c a n d in a v ia n co u n trie s d u r ing 1960—1975
identification, sales appeal, and e c o n o m y 17. T hey give the necessar y in fo rm atio n for a custom er to close th e purchase. Sales personnel is not needed.
Design of th e gr ound p lan of a shop is also an im p o rta n t p rere q u isite for th e self-service system . To find th e com m odities a w ell-p lan n ed th o ro u g h fa re in th e shop m u st be designed. It m eans decisions concer-ning shelves on the w alls as w ell as stan d s and po in t-o f-p u rch ase m a-te ria ls in th e m iddle 18.
This m erchandising a c tiv ity is p a rt of a d v ertisin g w hich has been developed to replace personal service in the buying process.
It has to be born in m ind th a t ratio n alizatio n of an y kind of tec h - nology is expensive and heavy in v estm en ts are needed to m ake use of it. S till it is expected th a t th e level of au to m atio n w ill increase in th e future.
17 K i r k p a t ric k , op. cit., pp. 93—94.
6. CONCLUSION I
C hanges in society a re basic facto rs d e te rm in in g consum er dem and. T h e d istrib u tio n system is influenced by th e location of people, dem o-g rap h ic factors, socio-econom ic factors, as w ell as consum ption and b u y in g h ab its of consum ers. A p a rt of th e d istrib u tio n system also involves consum ers.
The s tru c tu re of sales by bran ch es in re ta il tra d e reflec ts th e con-su m p tio n s tru c tu re of th e w hole population. In ad d itio n one volum e of sales reflec ts th e b uying p o ten tia l of consum ers. A ccording to th e offi-cial statistics in F in la n d it is easy to a scertain th a t th e re a re b ranches in re ta il trad e, like cars and electric household m achines, w hich re p re -s e n t a fu tu re life--style, and b ran ch e-s, like food and non-food reta ilin g a s w ell as te x tile s and shoes, w hich re fe r to th e sta n d a rd of living of y e sterd ay .
T he role of consum ers as p a rt of th e d istrib u tio n system is a con-spicuous fe a tu re of th e new situation. It is associated w ith th e decreasing n u m b er of shops and personnel in hom e trad e. T h erefo re, consum ers h av e to tak e resp o n sib ility for some activ ities in th e d istrib u tio n p ro -cess w hich o rig in ally a re perfo rm ed by reta ile rs. T ra n sp o rt and storage of logistic activites as w ell as in fo rm atio n acquisition, collection of goods, and packaging w ill be tra n s fe rre d to custom ers. T he solution is a self-service store, a sym bol of m obile society and high technology.
K a le v i Piha
SPO ŁECZN E I EKONOM ICZNE IM P L IK A C JE ZM IAN W SYSTEM IE D Y STR Y B U C JI W F IN L A N D II
W o p rac o w a n iu dokonano oceny w p ły w u zm ian w sy stem ie d y stry b u c ji w F in la n d ii n a społeczną i ekonom iczną pozycję k o n su m e n tó w ; p rze an alizo w a n o ta k ż e ro lę k o n su m en tó w ja k o elem e n t sy stem u d y stry b u cji.
Z m iany w ty m system ie ro zp a trz o n o n a p o d sta w ie prognozy ro zw o ju h a n d lu w ew n ętrz n eg o w F in la n d ii do 1990 r., k tó ra za k ła d a w zro st ro li h a n d lu h u r to -w ego, kosztem detalicznego, -w procesie t-w o rze n ia p ro d u k tu n arodo-w ego b r u t t o. D użo’ m iejsca pośw ięcił a u to r ró w n ież czynnikom k sz ta łtu ją c y m system d y s tr y b u c ji z w rac ają c szczególną uw agę n a p rze w id y w a n y przyszły w zro st ro li k o n su -m e n tó w ja k o in te g ra ln e j i sta le ro sn ąc ej części sy ste-m u d y stry b u c ji.
