Retail Structure

Gary Akehurst, Nicholas Alexander

• Publisher: Routledge
• Year: 2012
• Print ISBN:
  9780714641768
• eBook ISBN:
  9781136295065
• Topic: Business
• Subtopic: Business General
• Index: Business

First Published in 1996. The authors define retail structure in a retail distribution context as a snapshot of the state of play in the competitive struggle between retail companies and businesses, each of which is seeking to not only survive but to grow. The studies in this volume were first published in The Service Industries Journal. Taken as a whole they serve two purposes: first, they introduce the concept and process of retail structure taken from the viewpoint of a continuing competitive struggle for market supremacy; and second, they serve as an introduction to the wider study of retail development.

1

Contemporary Perspectives in
Retail Development

by

Nicholas Alexander

This article suggests that a fundamental shift in retailing has occurred in the last 40 years, and that developments have, to a considerable extent, invalidated certain orthodoxies of retail interpretation. The economic and social pressures of recent decades, coupled with evolutionary changes within the industry, demand a reorientation of certain ground rules, which have been, but are no longer, sufficient to explain the structure of, and trends within, British retailing. In order to indicate this reorientation of perspective, the article plots and evaluates the key determinants of change which have led to contemporary conditions.

Certain trends, such as the expansion of multiple store numbers, which have been identified as important factors in the evolution of retail structures in the late nineteenth and early twentieth centuries, clearly continued to have an effect into the mid-twentieth century. However, a metamorphosis was taking place and the developments pertinent to pre-1950 British retailing, which have been accepted to such an extent that they have become enshrined as the orthodoxy of retail change, are interpretative forms which no longer easily fit the patterns of late twentieth-century retailing in Britain. This article aims to identify key environmental and internal factors which have resulted in a realignment of retailing and thereby indicate the emerging retailing structures that have replaced the mid-century or traditional structure.

The retailing structures which Jefferys [1954] reviewed in the early fifties, and the patterns of development which he identified as pertinent to the preceding century, described evolutionary pressures which were, in the following decades, to be replaced as the determinants of change, by factors peculiar to post-war Britain. Jefferys’ seminal work provides the student of the subject with an unparalleled research work on the subject of retailing, both in terms of trade characteristics, and the forces for change within retailing, consequential to the economic and social upheavals of mid-nineteenth century Britain. The work, however, describes a system that was soon to be challenged by the new environmental forces of the following decades. Jefferys’ work, dominated as it was by the institutional pressures of multiple store retailing, provides a system of analysis of retail structures which, as changes have occurred, does not take account of new perspectives in the industry. Undoubtedly this approach has noticeably influenced thinking in terms of retail movements since the 1950s, not least because of the importance ascribed to the relative decline in numbers of independent retailers. Multiple chain expansion has continued to be seen as a crucial factor in the retail environment. The growth of multiple organisations and their increasingly dominant position within retailing is certainly of importance but their dominant position has been achieved not simply through the organic expansionist pressures enshrined in Jefferys’ analysis but because of a miscellany of factors which have lent a new bias to the growth and expansion of firms within retailing. The multiple store ‘numbers game’ is no longer of signal importance.

Those social and economic factors, which have revolutionised the retailing environment have been numerous, interactive and cumulative. Essentially, the retail units, their competitive stances, and the relationship between the retailer and the consumer which existed before these environmental changes were very different from those of the late-1980s. The unit of retailing itself has undergone crucial changes, and if individual retail units have not, they have been met with competition from units which have substantially shifted the ground upon which the ‘traditional’ retail unit operates. Not only have consumer demands had their effect, but also internal pressures have forced the retailer to redefine spatial and service orientations.

The changes in the structure of retailing since the 1940s have occurred within a market which has experienced the consumer boom of the 1950s and 1960s, and where real personal disposable income has risen from £70.1m in 1950 to £164.8m in 1984 (at 1980 prices) [Economic Trends 1987]. The period from the end of the 1940s to the economic crises of the mid-1970s brought about a considerable change in the markets within which the retail trade operated. In Doyle and Cook’s [1979] words: ‘It was an era of optimism in which retailers benefitted from rising living standards and adapted to freer life-styles and changing spending patterns’.

In 1950, the market for durable goods, an area of considerable expansion, was £2.5bn at 1980 prices; by 1985 the figure had reached £17.8bn [Economic Trends 1987]. The significance of these changes may be compared with the socio-economic pressures inherent in the context of industrialisation and urbanisation which sparked off the nineteenth-century revolution in retail development The economic challenges of the late 1970s and early 1980s have not resulted in a halt to the rapid changes and adaptations prevalent within the retail trade; if anything, the pace of change has increased as competition has become even more acute.

The last few decades have seen the rise of new forms of retailing, a process not unrelated to rising costs, both in terms of wages and overheads. The growth of the self-service system and its revolutionary impact on the food trades in a clear case in point [Mathias, 1967]. The growth of out-of-town, ‘one-stop’ shopping centres providing ease of access to a population in which 62 per cent of households have access to one car and 17 per cent have access to more than one (1985), compared with 41 per cent and 5 per cent only 20 years earlier (1965), epitomises the factors which have led to a shift in the public’s perception of retailing needs and consequently the service provided by the retailer [Transport Statistics].

The 1960s saw the emergence of many retail forms and attitudes derived from North American models, including the pace of change of retail life cycles, the expansion of mail order, the emergence of vertical marketing systems, and the growth of a newly enshrined force labelled ‘consumerism’ [Dawson, Kirby, 1977]. Coupled with such particular developments as the gradual erosion of Retail Price Maintenance (RPM), and finally the 1964 Act covering price maintenance, there has been an increase in competition within the retail sector which has in turn encouraged the adoption of new retail techniques and strategies [Dawson, 1979].

These changes in the social and economic climate, together with the technological developments within retailing provide the backdrop to the fundamental shift in the nature of retail development and, as a consequence, the competitive environment of the late 1980s.

The changes in the structure of the retail trade over the last 40 years have been considerable and have resulted in large-scale changes, in the ownership of retail outlets, their numbers, their size, and the nature of the employment structure within them. In the first Census of Distribution taken in 1950 there were around 400,000 retail businesses, administering over half a million outlets and employing nearly 2.4m individuals [Census of Distribution, 1950]. By the early 1980s there were only 230,000 businesses administering a third of a million outlets and employing 2.25m individuals [Retail Inquiry, 1982].

The decline in the number of retail outlets and the ascendency of the multiple store at the expense of the small trader need almost no introduction. Academic articles and trade journal reports have commented for decades on the declining fortunes of the small shopkeeper. Official figures for the amount of trade now in the hands of the single unit operations clearly show their limited degree of influence in the market place. In the 1984 Retail Inquiry, sales through single unit organisations were only 16.2 per cent in the area of grocery sales, and 18.2 per cent in sales of footwear. The scale of concentration of retail sales in the hands of multiple stores in 1950s, although notable at the time, does not resemble the high degree of concentration that has been noted and commented upon in recent years [Jefferys, 1950; Akehurst, 1983]. Akehurst [1983] through the use of published company information, has calculated that the ten largest retail companies increased their share of total retail sales from 16.54 percent in 1970 to 21.65 percent in 1978; while the share of the top 100 companies rose from 30.67 per cent to 45.51 per cent. In the Retail Inquiry of 1982, the ten largest enterprise groups in the footwear market controlled 52.8 per cent of sales, while the equivalent groups in the grocery trade controlled 47.5 per cent [Retail Inquiry]. By the end of 1983, Asda, Sainsbury and Tesco controlled two-fifths of the market for packaged groceries.

The Co-operative movement administered 4 per cent of retail outlets in 1950: by 1984 that figure had fallen to less than 2 per cent. Like the independent sector, the Co-operative Societies have fallen prey to the successes of the multiple store chains. Initially the multiples’ share of the market was achieved by a rapid expansion in the numbers of outlets administered: from the late 1960s even the multiples have seen a fall in absolute numbers, despite their increasing domination within the market [Census of Distribution, Retail Inquiries]. Considerable changes have, therefore, occurred in the volume of goods sold through retail outlets and the volume handled by the staff employed [Office of Fair Trading].

Productivity and Employment

The issue of productivity and the changing pressures on employment within retailing have greatly contributed to the reorientation of the industry. These changes have been fuelled by factors both external to retailing and also by operational changes which were in part stimulated by wider socio-economic developments.

It has been calculated that the volume of sales made through retail outlets increased at a significant rate throughout the decades of the 1950s, and 1960s. For the 20 years taken as a whole, the increase in sales amounted to an annual average of 2.5 per cent [Ward]. More specifically, this figure has been broken down to show that between 1954 and 1960, there was an annual increase of 3.4 per cent, slowing to 2.6 per cent between 1960 and 1965 and again slowing to 1.2 per cent in the period 1965–70. Although sales volume increases did not rise as quickly in the late 1960s as they had done ten years earlier, Reddaway argues that productivity saw an upwardly moving trend in these years. In the period 1954r-60, he maintains, productivity per annum rose by 2.2 per cent to be followed by 2.7 per cent in 1960–65, and 3.5 per cent in 1965–70. The connotations here are that productivity was bought at the expense of employment in the retail trade. Employment on the basis of the figures saw a 1.2 per cent per annum increase in the late 1950s, followed by a 0.04 per cent and 2.3 per cent per annum fall in the early and late 1960s.

The measurement of productivity within the retail trade is beset with problems. Although calculations may easily be based on considerations of sales per employee or indeed sales per square foot or metre, the service content of sales is less easily quantified. George [1966] and Ward [1973] both used the measure of sales per employee for assessing productivity, while Hall [1963] was prepared to describe it as ‘the most relevant measure of productivity’. Since productivity is often measured in this way, the changing retail systems and economic pressures are of vital importance to understanding the apparent increase in the productivity of the sector.

The need for greater productivity on the basis of employee economy was fuelled by rises in real wages. Allied Suppliers had in 1950 the same number of outlets as it had seven years later: its wage bill, however, doubled in those years from £7m to £14m. [Mathias]. Therefore, while productivity may be said to have increased markedly in these years, it may also be said that it did so as a result of the retailing sector’s reaction to a major change in the general economic climate of the post-war world, not unconnected with the introduction of the inherently labour-saving device of the self-service system. As McClelland noted in 1963, the move towards labour-saving systems, and the self-service system, was related to the fact that retail organisations were competing with industry for its work-force, in a market where unemployment rates often stood at less than 2 per cent [McClelland].

Dawson and Kirby [1977] in their assessment of shop size and productivity in the 1960s stated that, in the relationship of sales per employee against shop size, the grocery sector showed ‘a log-linear relationship with sales per employee increasing arithmatically while shop size increased geometrically’. This trend, they noted, was contrary to the situation in the household goods sector where they found that the size of shops and sales per employee were not ‘systematically’ related. This sector they described as being as that time ‘a more traditional retail sector’, where, in contrast to the grocery sector, ‘radical technical, operational and managerial changes have been less in evidence during the 1960s’. The emerging retail form, epitomised by elements within the grocery sector, was achieving a substantial lead over the traditional retail system.

While wage pressures were building up within the industry as a consequence of general economic prosperity, a fiscal pressure appeared in the mid-1960s with the introduction of SET (Selective Employment Tax). The tax was introduced in 1966 to cover male employees in the service sector. Initially levied at a rate of 25/-, it was increased by 50 per cent in 1968, and a further 28 per cent in the following year. The aim of the tax, as the White Paper clearly points out, was to encourage the use of labour in the service sector on an economically efficient basis [S.E.T 1966]. Estimates of the effect of the tax suggest an increase of 7–9 per cent of costs in the retail sector [Henley 1982]. If the productivity of the retail sector was rising anyway the effects of the tax are difficult to assess. An increase in costs of 7–9 per cent must have affected the thinking of retail organisations but whether it affected smaller marginal business which soaked up

elements within the labour market, but which operate on the basis of non-economic considerations, and do not calculate on the same basis ‘as growth minded businessmen’, is another matter [Hollander 1966]. However, as Reddaway [1970] noted, since SET did not cover the self-employed, the small shop was effectively exempt from the tax anyway. The tax was undoubtedly an encouragement toward rationalisation. In the larger shops part-time labour did become more of a feature, and proved a disincentive to an increase in the number of staff employed on a full-time basis [Dawson, Kirby, 1977]. The part-time employee had, however, become a viable alternative to the thoroughly trained ‘shop assistant’ as retail innovations such as self-service allowed part-time employees with a knowledge only of their set and restricted tasks to perform these functions free of a particular service and information content [McClelland 1963].

The effects of SET therefore, may be seen as part of an overall move toward a retail sector aware of the restrictions imposed upon it by the labour market and eager to take advantage of systems which did not depend on the staffing arrangements which had been satisfactory in an economy where labour costs were not at a premium. The system introduced into this context in the 1950s and 1960s, the supermarket, is a prime example of the changing conditions in the retail trade.

Physical Parameters

The inevitable result of the pressures on employment was the utilisation of a retail operation that would allow for the use of part-time, and consequently less expert staff, unsuited to a retailing operation where a high degree of service was expected, as well as a system which facilitated the cost-efficient use of a relatively expensive full-time labour force. These demands were met by the self-service approach epitomised by the supermarket.

The physical parameters of retail outlets have changed dramatically in the last 40 years. The physical constraints of pre-war retailing, and the shop assistant imbued with a service-orientated approach have been superseded by an emphasis on fast moving goods, an impersonal customer-staff interface, large operating units, and electronic point of sale systems designed to facilitate swift service, efficient distribution as well as generate marketing information. The High Street has seen the emergence of a potent competitive form, the out-of-town, one-stop shopping option, where the motorised shopper is given comparatively easy access to the retail items on offer. The physical changes in the nature of retailing should be clearly noted, for it has in many ways been a common and still developing thread in the changes that have occurred and are occurring.

Self-service in this country has been clearly linked from the start with the food and more precisely the grocery trade and hence the supermarket concept. Although the 1966 Census of Distribution contains elaborate details on the spread of self-service, it reported that: ‘Although the number of shops in other kinds of business operating on a self-service basis has increased slightly since 1961 the number is still insufficient for full details of them to be shown’ [Census, 1966].

The number of self-service grocery operations grew dramatically at the end of the 1950s and in the early 1960s. Co-operative Societies operated 28 self-service grocery shops of over 2,000 sq ft in 1957, the 2,000 sq ft point being considered the minimum necessary for a supermarket operation. In 1961 this figure had reached 308 stores and in 1966, 642. The multiples had also become interested in this retail form, expanding from 52 stores in 1957 to 424 in 1961 to 1,819 by 1966. The independent retailer was, as Dawson has commented, at a disadva...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• Introduction
• 1. Contemporary Perspectives in Retail Development
• 2. An Integrated Approach to Retail Change: The Multi-Polarisation Model
• 3. Concentration in Retail Distribution: Measurement and Significance
• 4. The Distribution Systems of Supermarket Chains
• 5. Leadership and Change in British Retailing 1955–84
• 6. Retailing Post-1992
• 7. Controls Over the Development of Large Stores in Japan
• 8. ‘Checkout’: The Analysis of Oligopolistic Behaviour in the UK Grocery Retail Market
• 9. The Outlet/Off-Price Shopping Centre as a Retailing Innovation
• 10. Spatial-Structural Relationships in Retail Corporate Growth: a Case-Study of Kwik Save Group Plc
• Further Reading
• Notes on Contributors