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 L IA OECONOM ICA 17, 1982
Lars Persson *
EVALUATION OF R ETA IL SYSTEM S**
T he su b je c t m a tte r of th is p ap e r a re geographical re ta il netw orks. Such n e tw o rk s provide producers w ith an o p p o rtu n ity to get th e ir goods closer to th e consum ers, w hich m akes th e m sell b e tte r. T he p rim a ry purpose of re ta il netw o rk s as seen fro m a societal p o in t of view is, how ever, to m ake it easy fo r consum ers to provide th em selves w ith th e goods th e y m ig h t need an d to get b e tte r in fo rm atio n ab o u t w h a t goods a re available.
F rom a consum er view point th e functioning of re ta il n e tw o rk s (re -ta il system s) has been of g re a t im p or-tance since th e beg in n in g of th e in d u stria l revolution. A w ell functio n in g re ta il sy stem is also a n im p o r-ta n t facto r for th e econom ic d ev elopm ent of a c o u n try a t a ll sr-tages of its developm ent. To fu n ctio n w ell, th e re ta il system has to be a d ju ste d to changes in society.
T his a rticle focuses on th e problem of evalu atio n s of re ta il system s fro m a consum er point of view . T he ideas p rese n ted a re based on Sw edish experiences. A t least to some e x te n t th e problem s are, how eve r, gen eral enough to m ake exchange of ideas fru itfu l. A few in tro -d u c to ry com m ents on -d evelopm ent processes in Sw e-dish re ta il system s m ay help in u n d e rsta n d in g th e re s t of th e paper.
1. SW ED ISH R E T A IL IN G AND IT S D EVELO PM EN T TRENDS/ O f special in te re s t is th e developm ent in food retailin g .
In th e e a rly 1950’s th e food stores in Sw eden w e re still sm all. A lt-hough th e re had been a tre n d to w a rd s bigger stores th e re w e re still
* P rof. D r, U n iv e rsity of S tockholm (Sweden).
** T he id eas of th is p ap e r h av e also been p re se n te d in a c h a p te r in F u tu re
directio n s jo r m a rk e tin g , ed ited b y F isk et. al., M a rk e tin g Science I n s titu te ,
4— 5 food stores p e r 1000 in h a b ita n ts x. T he intro d u ctio n of th e self- -service system , how ever, s ta rte d in th e 50’s a tre n d to w ard s a ccelerte d g ro w th in store sizes. It changed th e cost function of th e sto res m a-king new big self-service stores p o te n tia lly m ore p ro fitab le th a n th e old sm all stores. In new housing a re a s only big stores w ere s ta rte d b u t in areas w ith o u t rap id population g ro w th changes w ere slow for a long tim e. By 1960 nothing m uch had changed in m any ru ra l areas and older p a rts of big cities w ith a stab le or decreasing population. C hanges in th e ex istin g s tru c tu re proved to tak e a considerable tim e. F o r b u si-ness firm s to grow by tak in g a la rg e r sh are of a non-increasing m a rk e t is o ften a slow process.
The m ain changes cam e in th e 60’s. In 1970 th e n u m b e r of stores p e r 1000 in h ab ita n ts decreased to less th a n 2. In the 70th th is tre n d to w ard s few er and bigger stores continued b u t a t a slow er pace. G ra d u a lly consum ers an d re ta ile rs began to feel th a t th e developm ent m ight have gone too fast and too far.
The co n cen tratio n of food reta ilin g to a sm all n u m b e r of groups of sto res also has a long history. It s ta rte d w ith th e g ro w th of th e consu-m e r cooperatives e a rly in th e cen tu ry . T he th re a t froconsu-m th e successful cooperative stores w as one of th e facto rs th a t m ade th e v o lu n ta ry chains now organized in th e ICA group s ta r t to grow.
R educed costs a t th e w holesale level, increased b u ying pow er, b e tte r cooperation w ith local p lan n in g a u th o ritie s an d m ore efficient m a rk e -tin g a t th e re ta il level successively m ade th e g ro w th con-tinue. A lrea d y in 1955 th e cooperative stores and th e ICA g roup each h ad ab o u t one fo u rth of th e to tal convenience goods retailin g . T he rem ain in g p a rt, ho-w ever, ho-was not v e ry ho-w ell organized. Today th e re is th e th ird group D agab w hich is som ew hat m ore hetero g en o u s th a n th e o th ers b u t th a t still in m an y w ays acts p o w e rfu lly on b e h a lf of its m em bers. W hen it comes to stores selling a fu ll line of food p ro d u cts th e unorganized p a rt of re ta ile rs is alm ost elim inated.
A n u m b er of reasons fo r th ese tw o co n cen tratio n tre n d s could be identified. F irs t th e gen eral econom ic d ev elopm ent w ith increasing le-vels of consum ption, in creased consum er m obility an d su b sta n tia l po-p u latio n m ovem ents led to changes in th e dem and po-p a tte rn s.
A t th e sam e tim e th is g eneral econom ic d ev elopm ent led to changes in re ta il cost and op eratin g conditions. P rep ack ag in g and ad v e rtisin g m ade self service possible. Increasing lab o r costs m ade it necessary and self service itself changed rad ically th e optim al size of individual food stores.
Increasing lab o r costs also m ade changes a t th e w holesale level n e-cessar y. V arious form s of in te g ra tio n w ere one of m eans of red u cin g w holesale costs e.g. costs fo r p ersonal selling.
C om petitive forces of v arious kinds have been a t w ork. T he success of one group (the cooperatives) of d istrib u to rs in creased th e com petitive p ressu re on o u tsiders com pelling th em to re a c t an d fo rm o th e r groups (ICA and fin a lly th e D agab group). C om petitive p ressu re forced sm all h igh cost stores o ut of business. It s ta rte d slow ly in th e 50’s b u t th e ra te of change increased in th e 60’s p a rtly due to m ore aggressive m a rk e tin g a n d com petitive behavior.
All th ro u g h th e process v arious kinds of actions fro m n ational and local a u th o ritie s h ave e x e rte d a stro n g influence. H e a lth reg u la tio n s vhave influenced cost and o p eratin g conditions. C ity p lan n in g influences d em an d p a tte rn s an d com petitive relations. It also m ore d ire c tly m akes s tr u c tu r a l changes m ore or less feasible. As w ill be f u rth e r discussed a n increasing public sector of th e to ta l econom y leading to h ig h er tax es has also g rad u a lly stre n g th e n e d th e bigger stores in th e ir com petition w ith th e sm a lle r neighborhood stores. H igh incom e tax e s a n d w age re la te d fees to be paid by em ployers increase su b sta n tia lly th e cost d iffe-ren ces b etw een lab o r in te n siv e sm all stores an d h y p e rm a rk e ts often doing a sm a lle r p a rt of th e to ta l d istrib u tio n s task.
In im p o rta n t p a rts of th e non-food re ta ilin g sector th e re has also b een a co n cen tratio n tre n d . Two big d e p a rtm e n t-s to re chains, th e con-su m e r cooperatives and th e N K -A hlen chain, p lay an im p o rta n t p a rt in food reta ilin g b u t th e y a re m uch m ore im p o rta n t in som e lines of non-food retailin g . Also o th e r sto res ten d to becom e b igger ov er th e y e a rs and th e y get organized to an in creasing e x te n t in ch ain coope-ra tiv e s of various kinds. G eogcoope-raphically th e y also te n d to be m ore con-c e n tra te d in tow n con-c e n tres and in bigger con-cities also in su b u rb a n shopping c en tres.
T he governing facto rs b eh in d th is d ev elopm ent of non-food re ta ilin g a re not v e ry m uch d iffe re n t from those b ehind th e d ev elopm ent w ith in food retailing. Cost and m ark e tin g efficiency call fo r la rg e r o rg aniza-tions. A t th e sam e tim e v aried consum er needs m ake la rg e a sso rtm en ts of goods and th e re b y big sto res an d big shopping c e n tre s necessary. Increasing b u y e r m obility m akes th em possible.
2. A D JU STM EN T PR O C ESSES IN R E T A IL IN G SYSTEM S
C ontinuous a d a p ta tio n in th e re ta il system is n ecessary due to c h a n -ges in cost functions and b u y e r c h a ra c te ristic s as w ell as o th e r chan-ges
in th e en v iro n m en t of th e re ta il system . Some of these changes a re lin -ked to gen eral econom ic g ro w th in society in a w ay th a t m akes th em predictable. H ow ever, ad ap ta tio n of re ta ilin g system s tends to be p rim a -rily reactiv e r a th e r th a n offensive. T he system s m u st respond to u n fo r- seeable discontinuities.
In a m a rk e t econom y a d ju stm e n ts to new conditions a re governed by m a rk e t m echanism s. S ellers t r y to a d ju st in a pro fitab le w ay to changes in b u y e r behaviour, and b u y e rs re a c t in d iv id u ally to changes m ade by sellers. B oth p a rties rea c t to changes th a t d ire c tly affect th e outcom e of w h a t th e y a re doing. B uyers set lim its to w h a t sellers can do b u t th ey a re lim ited in a b ility to intro d u ce new solutions, e.g. stores in new locations or new ty p es of stores.
M arket m echanism s a re not unchallenged governors of changes in re ta il system because even in m a rk e t econom ies, m easures ta k e n by official a u th o ritie s g re a tly influence re ta il system s. P ublic m easu res ta k e n to shape th e services offered by re ta il system s also yield effects in re ta il system s as a secondary resu lt. Of th e first kind a re various special reg u la tio n s of store sizes, opening hours, sa n ita ry re q u ire m e n ts and asso rtm e n ts w hich d iffe r from c o u n try to country. Such reg u la tio n s raise difficulties for some re ta ile rs b u t m ay help o thers. C ertain kinds of stores even get d ire c t su p p o rt from som e offical a u th o rity as is exem plified b y th e special su p p o rt given to stores in sp arsely po p u lated a re a s in Sw eden. In m ost co u n tries th e re a re also city p lan n in g re g u la -tio n s th a t can influence th e loca-tion an d degree of geographic concen-tra tio n of re ta il facilities. O ften, how ever, th e secondary effects on re ta ilin g of city plan n in g activ ites governing population m ovem ents, population density, segregation b etw een incom e groups in housing a re a s and public and p riv a te tra n sp o rta tio n facilities a re even m ore im p o rtan t.
The effects of th ese m easu res a re fa irly obvious. Less obvious, ho-w ever, m ay be m easures in flu en cin g in d u stria l s tru c tu re including im p o rt regulations, m ark e tin g law , incom e d istrib u tio n , w orking hours, population m ovem ent, em p lo y m en t of w om en, and th e im pact of ta x e s on th e p erfo rm an ce of re ta ilin g tasks.
3. TH E WHY, W HEN AND HOW OF EVALUATIONS
T he fact th a t re ta il system s a re influenced by a n u m b er of decisions m ade by various a u th o ritie s a u to m a tic ally m akes evalu atio n s im p o rtan t. E valuations fro m a societal point of view a re needed as guidelines fo r th e decision-m aking. If m a rk e t m echanism s could p e rfe c tly govern th e
a d ju s tm e n t processes one m ig h t arg u e th a t ev alu atio n s w ere u n n ece-ssary. N othing could be done to im prove th e system . H ow ever, th is is only a th eo retical possibility. In th e re a l w orld com petitive p ressu re on th e individual firm s m ay fail to force re ta ile rs to a d ju s t to e n v iro n -m en ta l changes and to hold prices close to costs. O ften re ta ile rs can choose b etw een d iffe re n t developm ents. E v alu atio n s fro m a societal point of view m ay th e n suggest changes th a t a re good for consum ers as w ell as acceptable to re ta ile rs .
E valuations a re h e re reg a rd e d as guidelines for decisions. T hese d e-cisions som etim es influence re ta il system s on a n ational scale and som etisom es only locally. E valuations should th e re fo re be som ade of th e to -ta l re -ta il system in a c o u n try as w ell as of local p a rts of it. In th e follow ing I am going to s ta r t w ith some g en e ra l ev alu atio n s and th e n go on w ith a discussion of some m ethods for e v alu atio n of local n e t-* w orks.
T he fact th a t evalu atio n s a re reg a rd e d as guidelines for decisions does n ot m ean th a t th e y a re to be m ade only in situ atio n s w h en th e re is a w ell defined problem of decision. T h ey m ay and should be m ade also as m ore or less re g u la r a u d its th a t m ight point a t problem s th a t should be ta k e n care of.
On th e o th e r hand, decision orien ted evalu atio n s in m y opinion should com pare a lte rn a tiv e achievable resu lts. C om paring a c tu a l sy stem s w ith utopian ones seldom solves an y problem s. N ot given, ho w -ever, is w h a t should be com pared, a lte rn a tiv e a d ju s tm e n t processes or th e d iffe re n t end re su lts i.e. th e re ta il n etw orks. I am going to illu s tra te this sta te m e n t la te r on.
D ifficulties in m aking evalu atio n s te n d to be ignored in public d e-bate. F in d in g inadequacies is only a first step to w a rd s a rea l evaluation. I t is essential to d e te rm in e th e e x te n t to w hich it is possible to elim
i-n ate problem spots w ith o u t g e ttii-n g ii-nto m ore serious problem s. To know th a t req u ires know ledge of how th e w hole system w orks. In d i-vidual p a rts of th e system ty p ic a lly have sev eral functions and effects and th e effects m ay be d iffe re n t fo r d iffe re n t groups of consum ers. E lim ination of one effect w ith o u t changing a n o th e r is often not possible. F u th e rm o re th e m easures th a t have to be taken, e.g. som e kind of r e -gulation, usu ally in th em selves have m ore effect th a n th e one you w an t th em to have. Som e of th em a re often difficu lt to d e te c t in advance. S e ttin g perfo rm an ce goals is u su a lly th e m ost d iffic u lt p a rt of th e evaluation. Im p o rta n t goal dim ensions m ay be deduced from an alysis of functions reta il system s serve from a consum er view p o in t and th e m ain kinds of effects such system s have. Am ong th e im p o rta n t goal dim ensions are: 1) kinds of goods to be offered, 2) p ro d uction and d
is trib u tio n coistis, 3) price level and price is tru c tu re , 4) inform ation tra n is -m itte d by re ta ile rs in all directions, 4) b u ying convenience specifica-tio n s for consum ers, 6) tra n sp o rtin g and in fo rm aspecifica-tio n gath erin g , and finally, 7) effects of re ta il system s on th e g eneral im age and fu n ctio -ning of tow ns, cities and suburbs. The w eighing problem is, how ever, th e m ost difficu lt elem ent in se ttin g p erfo rm an ce goals. E ffects pu llin g in opposite directio n s have to be com pared to each other, som ething th a t often seem s im possible. To m ake th e ta sk even m ore d ifficult, d e-cisions have to be m ade as to if and in w h at w ay negative effects for som e consum ers m ay be tra d e d off for positive effects for others.
4. PRO BLEM S FACED BY SW EDISH COM M ISSION ON D ISTR IB U TIO N The problem of m aking an evalu atio n of th e Sw edish d istrib u tio n system , especially th e n etw orks of food (or ra th e r convenience goods) sto res in th e w hole S w eden w as faced by th e Sw edish G overnm ent com m ission on d istrib u tio n problem s w hich published its final re p o rt in 1975 2. T he task of th a t com m ission w as to stu d y th e tre n d tow ards bigger stores and ev alu a te th is tre n d from a consum er view point. The com m ission w as also supposed to suggest rem edies if p rese n t s tru c tu re s o r fu tu re developm ents w ere considered to be d eterim en tal to v ital con-su m e r in terests.
Som e serious problem s w ere a n tic ip a ted as an effect of th e re ta il developm ent. C onvenience goods sto re sizes grew and th e n u m b er of sto res dim inished v e ry m uch d u rin g th e sixties. A m ark ed tre n d in th is d irection continues. This m u st m ean th a t consum ers have to tra v e l lo nger distances to b u y food and o th er convenience goods. W ith in cre a -sing car ow nership th is m ight not be too m uch of a pro b lem fo r a m a-jo rity of households b u t how about old people, low incom e groups, and o th ers w ith lim ited m obility? R etailers could point to cost savings in sto res and a t th e w holesale level due to increased store sizes. Tp a large e x te n t these cost savings w ere passed on to th e consum ers as price red u ctio n s or perh ap s m ore fre q u e n tly as h idden price increases. T h e re seem ed, how ever, to be a w idespread feeling am ong consum er rep re se n ta tiv e s th a t th e developm ent to w ard s bigger stores w as going too fa r because cost savings w ere not enough to p ay for th e reduced consum er convenience. B ut, th a t was ju st a feeling calling for fair evaluation.
The in te re s t w ith in th e com m ision w as m ain ly focused on th e re ta il
n etw o rk s them selves i.e. th e end re s u lt of th e a d ju s tm e n t processes. G oal fo rm u latio n s concerning th is re s u lt w ere a tte m p te d b u t th e y w ere not v e ry successful. To th e e x te n t th a t th e y could be agreed upon th e y w e re r a th e r vague and not op eratio n al enough to give a clear guidance.
A t th a t stage m y ow n in te re s t as a m em b er of th e com m ission s ta r -te d focusing not on th e re ta il netw o rk s th em selves b u t on th e a d ju s t-m e n t processes w ith in th e re ta il systet-m s. W ere th e y producing a good re s u lt th a t could be expected or w ere th e re w eak spots or biases th a t could force th e developm ent in w rong direction? Could such w eaknesses be elim inated? W hat I found w as expecially one point of in te rest, espe-cially from th e econom ic point of view. T h a t w as th e effect of th e ta x sy ste m and th e risin g ta x levels in Sw eden.
.5. SU PER M A R K ET S H O P P IN G AS A D O -IT -Y O U R SE L F TREND PR O PE L L E D BY H IG H TA XES
D istrib u tio n of goods fro m m a n u fa c tu re rs to th e place w h e re th e y a re consum ed m ay be th ro u g h t of as w o rk p a rtly done by business firm s and p a rtly by households on th e ir ow n behalf. If huseholds pick up th e goods a t th e m a n u fa c tu re r th e y perfo rm alm ost all of th e d is tri-b u tio n jotri-b th a t has to tri-be done and if th e goods a re deliv ered a t th e ir doorsteps (e.g. by th e m ilkm an) business firm s do alm ost all of th e job. In th e sam e w a y th e sm all neighborhood sto re m ay be th o u g h t of as doing m ore of th e job th a n th e big s u p e rm a rk e t to w hich consum ers o fte n d riv e several k ilo m eters and w h e re th e y b u y in fa irly larg e q u an tities.
Som e household consum ers b u y in su p e rm a rk e ts because th e y like it b u t m an y do it to save m oney b y p ay in g lo w er prices. C osts a re co n siderably lo w er in bigger stores. T his m ay be due to th e fac t th a t su c h stores tak e over a sm a lle r p a rt of th e d istrib u tio n job from house-holds th a n th e neighborhood stores do. On th e o th e r h a n d s u p e rm a r-k ets tar-ke over p a rt of th e job th a t is o th erw ise done b y w holesalers.
In a m a rk e t econom y th e neighborhood stores com pete w ith su p e r-m a rk e ts, b u t th e y also cor-m pete w ith households fo r doing th a t p a rt of th e d istrib u tio n job th a t is n o t done b y su p e rm a rk e ts. N eighborhood sto re s are p u t a t a v e ry h eavy d isadventage by th e ta x system in such com petition, a t least in p re se n t day Sw eden.
A law -abiding business firm in S w eden w hich h ire s a person to do a job has to pay:
2) th e incom e ta x of th e em ployee w hich m ay be 20— 50% of th e salary,
3) a series of fees to th e s ta te re la te d to salaries paid am ounting to ab o u t 30% of th e salary,
4) a sales tax of about 20% on th e costs th a t are included in th e price of th e goods.
T he to ta l am o u n t is th u s about 3 tim es th e n e t salary.
A household th a t pays a business firm to do a job has to pay ab o u t th re e tim es th e n et incom e of those doing th e job. If som ebody in th e household does th e job th e re w ill be no tax e s due. W hat th e house-hold loses if som ebody has to sta y hom e from w ork is th e n et incom e. As long as business firm s on an average a re not th re e tim es as e fficien t in doing th e job as th e household itself, th e optim al decision for th e average household ten d s to be to m ake, not to buy. T h at is to shop in su p erm ark ets.
T his reasoning applies to all kinds of jobs th a t households can do fo r them selves. T he d o -it-y o u rself tre n d is n ot only due to w a n t of consum er satisfaction in solving problem s and w orking for them selves. S u p e rm a rk e t shopping is a kind of d o -it-y o u rse lf tre n d p ropelled b y rising taxes. Som e 20 y ears ago w hen sm all neighborhood sto res still d om inated in food re ta ilin g in Sw eden, ta x e s w ere m u ch low er th a n today. I am convinced th a t th e re ta il system today w ould be m uch less dom inated by big stores if th e ta x level w as th e sam e as it w as in 1950.
T his opinion is of course d iffic u lt to prove. In te rn a tio n a l com pari-sons b etw een co u n tries w ith d iffe re n t ta x levels could be m ade b u t th e p ictu re w ould be m uch d isto rte d by all kinds of o th e r differences b e-tw e e n countries. If a cost d ifference b ee-tw een a big s u p e rm a rk e t and a sm all neighborhood sto re of say 4% of sales could be reduced to 1 or 2% , and th e d ifference of 2— 3% of sales p u t into th e pockets of th e sm all shopkeepers, m an y of those w ho had to close th e ir sto res could have m anaged to sta y in business. A t th e sam e tim e I am th e firs t to agree th a t big stores a re e fficien t and co n v e n tien t fo r m an y consum ers to shop in an d th a t th e y a re n o t e n tire ly a p ro d u ct of r i-sing taxes.
6. SHOULD SOM ETH ING BE DONE ABOUT T H IS TA X EFFE C T ? It w as th e questioning of this tre n d to w ard s bigger stores and lo nger distances b etw een stores and hom es th a t w as th e m ain reaso n fo r ap p o inting th e com m ission on d istrib u tio n in Sw eden. Is it good o r
bad for consum ers th a t th e rise in tax e s effects re ta il system s? Should so m eth in g be done ab o u t it? T he com m ission did not decide.
M y reasoning w hich w as p rese n ted fa irly la te d u rin g th e com m is-sio n ’s w o rk w as not accepted by th e m ajo rity of th e com m isis-sion be-fo re its re p o rt w as presen ted , b u t m y ow n conclusions a re as be-follows: Looking firs t at th e fact th a t because of d ifferences in ta x a tio n , th e sam e ty p e of w ork is p riced d iffe re n tly if it is done w ith in business firm s or w ith in households, w e have to conclude th a t it has to re s u lt in an in efficient division of labor. E fficiency is u su a lly ta k e n to be one of th e m ain goals of th e econom ic system . It is, th ere fo re , d iffic u lt not to tak e th e position th a t such pricing has to be defen d ed on special grounds. F o r o th er ty p es of w o rk such a defense lin e m ig h t be th a t d iffe re n t prices a re n ecessary to com pensate for some opposite effect. F o r instance, people a re not enough a w are of th e g rea t satisfaction th e y them selv es (and th e ir fellow citizens) get for w orking on th e ir ow n • behalf, so pricing m eans should be used to induce th em to do it. N obody
proposed th a t in th e case of b uying in su p erm ark ets. O nly s u p e rm a rk e t o w n ers and m aybe some m an u fa c tu re rs seem to w a n t to encourage su -p e rm a rk e t buying.
I th e re fo re conclude th a t a m ore efficient re ta il system w ould e m e r-ge if th e effects of th e ta x system could be elim inated. On th e o th e r hand, I have to ad m it th a t th e re a re v e ry good reasons for hig h taxes. A t th e sam e tim e th e possibilities to c o n stru c t ta x system s w hich do n ot have such effects are sm all. T here a re also good reasons to avoid a com m unistic p lan n ed econom y in w hich problem s of th e kind discussed h e re w ould be easier to avoid.
W hat could th e n be done? M y suggestion w ith in th e go v ern m en t co m m ittee w as to introduce a kind of com pensation system tak in g m o-n ey from big stores ao-nd give it to som e k io-nds of sm all stores. A lthough su ch a com pensation w ould be feasible, it is d iffic u lt to c o n stru c t and to im plem ent. To avoid sudden unex p ected changes in w orking condi-tio n s for ex isting stores, a g rad u al in tro d u c condi-tio n w ould be helpful.
7. O THER B IA SES IN A D JU STM EN T PRO CESSES
T he analysis p rese n ted in th e preceding p a ra g ra p h is p a rt of a n eva-lu atio n of th e economic processes w hich form sto re netw orks. The ta x sy stem introduces a bias in th e processes ste e rin g aw ay fro m w h a t m ay be th o u g h t of as th e best possible netw ork. O th e r biases in th e p ro -cesses seem to go in th e sam e direction. F o r exam ple, re ta il services a re sold as a p a rt of o th e r goods, n o t as a m erch an d ise in itse lf w ith
its ow n price. If neighborhood stores could charge m ore in those si-tu atio n s w h en consum ers re a lly need th e m and less w h e n s u p e rm a rk e t shopping is a good a lte rn a tiv e , th e ir possibilities for su rvival w ould probably be b etter. Now consum ers m ake sm all last m in u te purch ases in th e neighborhood re ta il sto re th u s providing a v e ry tin y rew ard. The neighborhood re ta ile r trie s to com pensate by raising all his prices, th u s d efeating his e ffo rts to com pete for larg e p ro fitable purchases. A n o th er kind of bias in reta il netw o rk s is in tro d u ced because a d ju stm e n t p ro -cesses take considerable tim e. W hat is once b u ilt affects re ta il n etw o rk s for y ears and even decades. In Sw eden you could a t least in th e six ties find re m a rk a b ly d iffe re n t re ta il s tru c tu re s in living areas b u ilt d u rin g d iffe re n t decades. D ifferences still exist today, b u t th e y a re less m arked.
The p lan n in g processes a re th e re fo re im p o rta n t w ith in re ta il orga-nizations. In Sw eden a t least city p lan n in g processes are also im p o rta n t because th e y cre a te possibilities an d set lim its to p lan n in g b y r e -tailers. M ore and m ore of political pow er and resp o n sib ility is going into th e p lan n in g of re ta il netw orks. This creates an im m ediate need for evaluations of a lte rn a tiv e local n e tw o rk s in a ctu al com m unities. I w ill, th ere fo re , r e tu r n to a b rief account of problem s and possibilities in such evaluations.
8. M ETHODS OF EV ALU A TIN G LOCAL R E T A IL NETW ORKS
E valuations of re ta il n etw o rk s could be a m a tte r of com parisions b etw een a lte rn a tiv e designs for th e sam e set of e x te rn a l conditions (e.g. population location p a tte rn s, consum er preferen ces for ty p es of re ta il ou tlets and cost functions in stores). In some cases, how ever, som e of these conditions should be tre a te d as p a ra m ete rs th a t could be c h a n -ged in th e 's a m e w ay as th e re ta il netw orks. Com parisons w ould th e n be m ade b etw e en re ta il n etw o rk s designed to serve in som ew hat d iffe -re n t environm ents.
I am going to s ta r t from sim ple m ethods th a t tak e into account only a sm all p a rt of th e differences in effects b etw een netw orks. T hey are, th ere fo re , unsatisfacto ry , b u t it should alw ays be rem em b ered th a t no single m easure can give th e w hole picture.
In th e case of convenience goods (p rim a rily food) th e am o u n t of tra v e llin g consum ers do to b u y goods and to tra n sp o rt th e m to th e place w h ere th e y a re to be consum ed seem s to be im p o rtan t. O ne m e-thod of tak in g th is into account could be to say th a t th e best re ta il n etw o rk is one th a t m inim izes th e su m m ated distances (m easured one w ay or th e other) b etw een hom es an d th e n e a re st sto re w ith some m
i-n im um a sso rtm e i-n t of coi-nvei-niei-nce goods. S uch a goal could, how ever, lead to a n e x tre m e ly dense n e tw o rk of stores and v e ry high costs in stores as w ell as in e a rlie r d istrib u tio n links. It w ould be b e tte r to t r y to m inim ize to ta l a ctu al tra v e llin g fo r convenience goods shopping done b y consum ers because consum ers do n ot alw ays shop a t th e n e a re st store. It is som etim es w o rth w hile for th em to do som e e x tra t r a -velling to get low er prices and or b e tte r goods. In th ese w ays only tra v e llin g costs of consum ers a re included. A n o th er step fo rw ard w ould, th ere fo re , be to add to g eth e r th ese costs a t th e consum er level and o th e r d istrib u tio n and m an u fa ctu rin g costs. A re ta il n e tw o rk leading to low er such to ta l costs should th e n be reg a rd e d as b e tte r th a n one leading to h ig h er costs. C alculations of th a t kind w ere m ade by L eif W idm an of Stockholm U n iv ersity in a doctoral th e s i s 3. In spite of th e fact th a t re ta il costs w ere co n siderably low er in th e big stores he found to ta l costs to be low er in system s w ith sm a lle r stores, a t lea st in some ty p es .of c ity d istricts. D ifferences, how ever, w ere r a th e r sm all.
To consider on ly cost aspects of d istrib u tio n seem s, how ever, not to be satisfactory. T here m ay be o th er values in shopping and buying th a n cost savings. W hat values th e re a re is not easy for e x p e rts to d e-cide. Econom ists a re used to le ttin g consum ers do th e e v alu atio n by choosing b etw een a lte rn a tiv e s and to use preferen ces th u s revealed as a basis for evaluations of larg e system s. C onsum ers show p refe re n c e s in th e ir choices of place of shopping. M odels d escribing consum er shopping beh av io u r could th e re fo re be used as a basis also fo r e v a -luations. A ttem p ts in th a t d irectio n have been m ade som e y e a rs ago by m yself in th e case of re ta il system s for shopping goods 4.
I s ta rte d by show ing th a t a kind of g rav itatio n m odel re la te d to th e R eilly law of re ta il g rav itatio n and th e m odels by H u ff could describe aggregated b ehaviour fa irly w ell. In la te r analyses s ta rtin g fro m m odels of individual shopping b ehaviour in specified b u ying situations, th e fact th a t g rav itatio n m odels can describe aggregated shopping beh av io u r w as explained. I, th ere fo re , fe lt it reasonable to assum e th a t th e sam e g rav itatio n m odel could show how consum ers on a n average value shopping opportunities. D istances on one h a n d and asso rtm e n t and o th e r factors positively c o rre la ted w ith size of a shopping cen tre, on th e o th e r hand, seem to be of m ain im p ortance as th e y d e te rm in e th e draw in g pow er of shopping centres. T he to ta l d raw in g pow er of all
’ W i d m a n , L., A lte rn a tiv a D istrib u tio n s S y s te m , S to ck h o lm 1976.
4 T his w o rk s ta rte d w ith em p irica l stu d ies p u b lish ed in th e book K u n - d e r n a i V ä l l i n g b y , L a ter theoretical analyses are on ly available in m
shopping d istric ts on one c o n s u m e rs could th e n be reg a rd e d as a m ea-su re of how good th e shopping possibilities of th a t conea-sum er are. To aggregate over all consum ers I took th e la g a rith m of th is m easu re and sum m ed over c o n s u m e rs 6.
My proposition is th a t his sum w ill m easure consum er b enefits from re ta il n etw o rk s for shopping goods provided th a t th e v ariables a re d e-fined so th a t th e g rav itatio n m odel describes ag gregated shopping be-haviour. The h ig h er the value for one consum er th e b e tte r th e shopping possibilities for h im /her. A t th e sam e tim e an increase of say 10% of his shopping possibilities (through b e tte r com m unications or in some o th er way) is tra d e d off for a 10% decrease in th e shopping possibili-ties fo r some o th e r consum er w hen th e sum to tal fo r all consum ers is used as th e value to be m axim ized.
9. TH E W EIG H IN G OF G O ALS AND CONSUM ERS
T radeoffs of increases fo r some consum ers for decreases fo r o th e r points to a tro u b le spot in th e p reviously m entioned ev alu ativ e m easu -res. These allow th e p la n n e r to com pensate bad shopping possibilities for some consum ers by giving still b e tte r shopping possibilities to those consum ers w ho a re a lre a d y fa irly w ell off in th is respect. This is q u e -stionable. Good reasons should be given before an ev alu ativ e m easu re
of th a t kind is used.
Goals th a t do n ot lead to th is kind of problem have to be satisfy in g goals. Ą p la n n e r or e v a lu a to r of a re ta il system could th u s say th a t all consum ers should reach a defined level of re ta il service, e.g. a con-venience goods sto re w ith a m inim um a sso rtm e n t of goods w ith in a c e rtain distance from th e ir hom es. T he m ain d ifficu lty w ith goals of th a t kind is th e se ttin g of these m in im u m req u irem e n ts. C onditions d iffe r b etw een areas, e.g. b etw een r u ra l areas and d en sely populated city d istricts. Goals th a t are u n a tta in a b le in some areas w ill not d isc ri-m in a te a t all b etw een a lte rn a tiv e s in others. The th re sh o ld s ri-m u st th e re fo re be d iffe re n t fo r areas of d iffe re n t types. G oals of th is kind o ften have to be som ew hat vague b u t th e y can easily get too vague to give an y re a l guidance.
w h e re sj = size of shopping d istric ts; a n d dij = d istan c e from co n su m er i to shopping d istric t j.
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i j
H igh th re sh o ld s m ay be d esirable b u t th e y easily get too high to be a tta in a b le w ith available m eans and w ith reasonable sacrifices. U sually som e exceptions have to be accepted. Low th re sh o ld s often do not d scrim in ate b etw een a lte rn a tiv e s. Com bined w ith m axim izing (or m inim i-zing) goals of th e kinds described above, th e y m ay, how ever, offer th e best possible solution to th e problem of fo rm u latin g goals th a t can serve as a good basis for evaluations of re ta il system s from a consum er point cf view .
10. FIN A L COM M ENTS
In conclusion, I w ill how ever point to th e functions of re ta il stores th a t a re not d ire c tly geared to th e d istrib u tio n of goods. Even if those functions a re secondary it m ay som etim es be w o rth -w h ile not to try to develop th a t re ta il system w hich is m ost efficient in d istrib u tin g goods, b u t one th a t m akes it possible to gain some o th e r quality. R etail system s form an im p o rta n t p a rt of life itse lf in m ost kinds of living are a s and even m ore so a p a rt of life of re ta ile rs and th e ir em ployees. T he system th a t is m ost efficient in d istrib u tin g goods m ay not alw ays be th e best system . In line w ith w h a t I have been try in g to do in this a rticle is to point to w h a t could be th o u g h t of as „side effe c ts”. It is im p o rta n t to be able to ev alu a te how re ta il system s fu llfil th e ir p ri-m a ry function of d istrib u tin g goods to consuri-m ers, b u t it is also iri-m por-ta n t to know ab o u t and por-tak e side effects of various public policies (e.g. ta x system s) on reta ilin g into account.
L ars Persson
OCENA SYSTEM U HANDLU DETALICZNEGO
W a rty k u le a u to r z a p reze n to w ał w y n ik i sw oich b a d a ń pośw ięconych ocenie ro zw o ju szw edzkiego h a n d lu detalicznego. Szczególnym p rze d m io te m za in te re so w a n ia a u to ra był w p ły w p o lity k i fin an so w ej p a ń stw a n a k ie ru n k i ro zw o ju h a n -d lu -detalicznego w S zw ecji, a zw łaszcza n a k sz ta łto w a n ie jego form .
A u to r om aw ia rolę p la n o w a n ia sieci d etalicz n ej oraz n ie k tó re m eto d y po ró w n a ń a lte rn a ty w n y c h ro zw iązań służących o p ty m a liz acji sieci d etalicz n ej z p u n -k tu w id zen ia -k o n su m e n ta oraz in n y c h ogniw d y stry b u cji. P o d -k re śla, że ocena sy stem u d y stry b u c ji w in n a być d o k o n y w an a n ie ty lk o w asp ek cie w y k o n y w a-n ych fu a-n k c ji i zadań, ale w ia-n a-n a rów a-n ież u w zględa-niać w a ru a-n k i, w ja k ic h system te n działa.
