Store Choice, Store Location and Market Analysis (Routledge Revivals)

Neil Wrigley

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317567738
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

This book, first published in 1988, brings together leading researchers from both the retailing business and the academic world to discuss the latest techniques of analysis and forecasting in the fields of store choice, store location, and market analysis. Its rationale is the major restructuring of the UK retailing industry which has taken place over the past twenty years, and the profound implications of that restructuring for the type of research necessary to understand, maintain and enhance corporate responsibility.

The contributors present accounts of the development of new and original methods for retail analysis and forecasting purposes. They lay stress upon practical methods which are accurate and robust, and which can operate with the type of data typically available to retailers. The book will provide a major work of reference for retailers, market researchers, retail analysts, estate managers, urban planners and geographers in many countries.

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PART 1

The Context

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CHAPTER 1

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Retail restructuring and retail analysis

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Neil Wrigley

Introductio

This book presents, with just two exceptions, the contributions made to a workshop on ‘Methods of retail analysis and forecasting’ held at the University of Bristol, in February 1986, and sponsored by the UK Economic and Social Research Council. The purpose of the workshop was to bring together researchers from both academic institutions and commercial firms to discuss techniques of analysis and forecasting in the fields of store choice, store location, store performance assessment, and market analysis. Its rationale lay in the major restructuring of the UK retailing industry which has taken place over the past twenty years, and in the profound implications of that restructuring for the nature and organisation of the research which is necessary to understand, maintain or enhance corporate profitability. These concerns informed the wide-ranging discussion which took place at the workshop, and they provide a common, but often implicit, agenda for all the chapters in this book. To capture some of this common agenda, and to place the individual chapters into a wider context, this introduction will consider, first, the nature of the retail restructuring in the UK and, second, the research imperatives which this restructuring implies for the techniques of retail analysis and forecasting used in the commercial sector.

Retail restructuring in the UK

As many commentators on the collapse of the traditional manufacturing base of the UK economy have been at pains to point out, capitalism is a system which requires the continual restructuring of the accumulation process. There are few clearer examples of what Harvey (1985, p. 25) has referred to as the ‘perpetual struggle in which capital builds a physical landscape appropriate to its own condition at a particular moment in time, only to have to destroy it … at a subsequent point in time’ than the retailing industry. Indeed, as the British economy has shifted from an industrial to a post-industrial phase, and the service sector overall has expanded to employ more than 65 per cent of the workforce, so the British retailing industry has undergone a major organisational and spatial restructuring which has contributed significantly to the transformation of the urban landscape.

Some of the key elements of this restructuring process are best understood in the context of specific sections of the industry and, below, we take as examples grocery retailing and the DIY/home improvement trade. However, there are several recurrent themes which can be treated, at least initially, in general terms. Of these, four stand out.

The concentration of the capital

In the post-war period, the number of retail outlets in Britain has fallen by 40 per cent, from 583,000 in 1950 to just 342,000 in 1984, with most of this fall occurring since the late 1960s. Yet this decline has taken place against the background of an increase in the real volume of retail sales; from £40.6 billion in 1950 to £57.4 billion in 1982, when measured in constant 1980 prices (Institute of Fiscal Studies, 1984). There have been two major results of these trends: first, a significant rise in the average size of stores: and, second, a marked increase in the concentration of capital.

Large corporate chains (those operating ten or more branches) have more than doubled their share of total retail sales, from 22 per cent in 1950 to 56 per cent by 1982, and they have captured this trade at the expense of single-outlet retailers and smaller corporate chains. Within this large-chain category, it is the biggest firms which have grown most rapidly. Those retail groups with 100 or more outlets accounted for 37 per cent of a total GB retail turnover of £69,784 million in 1982, and the ten largest groups alone accounted for no less than £15,356 million or 22 per cent of turnover. Moreover, these overall figures mask even greater degrees of concentration, and more rapid increases in concentration over time, within particular sectors of the industry. A particularly good example of this is grocery retailing where, by 1982, out of a total retail food market worth about £25,000 million, the largest five trading groups alone accounted for almost 43 per cent of sales. This example will be discussed in more detail below. At this stage it is sufficient to note that the trend towards concentration has been exacerbated by the capital requirements of investment in new larger stores, often on new sites, and by the capital requirements associated with investment in technological change both within stores and within organisations.

The concentration of capital in the industry has resulted in the emergence of a group of what might be termed retail corporations, with profit levels, employment levels, and sheer market and political power sufficient to rival the traditional giants of UK manufacturing industry. Moreover, the relative importance of these retail corporations within the UK economy has increased progressively during the recession of 1979–83 and the slow recovery in employment since 1983; a period which has seen the decline or collapse of many traditional manufacturing corporations but has left the emerging retail corporations largely untouched. (A good example of this can be obtained by comparing the manufacturing corporation GKN, which.employed 69,000 workers in 1979 but only 23,000 in 1986, with the retail corporation J. Sainsbury, which increased its workforce from 35,000 to 64,000 during the same period.)

Several of the retail corporations either did not exist or were just tiny organisation^ in the early 1960s. Some have grown by a process of takeover and merger (the Dee Corporation is a good example) but several have grown by a most remarkable and sustained rate of organic expansion. Classic examples in this latter category are Sainsbury, which, on a turnover of £3,575 million and a profit level of £208 million in the year to March 1986, had increased its profits by over 20 per cent per annum for each of the last seven years, and Kwik Save, which achieved an average annual pre-tax profits growth of 24 per cent in the ten years to 1986.

The emergence of these retail corporations has also led to a fundamental shift in the balance of power between retailers and their suppliers (manufacturing companies/producers) which has almost completely reversed the balance typical in the inter-war years and 1950s. The inter-war years in Britain saw the growth of large-scale manufacturers supplying the retail trade, together with a rapid increase in the practice of branding goods and developing trade-marks. This, in turn, led to a growth in the importance of the identity of the manufacturer of the product and, via resale price maintenance (RPM), manufacturers were able to control the final retail selling prices of many of their goods. Indeed, by 1938 the proportion of consumer spending on goods subject to RPM had risen to 38 per cent. This situation, which helped to sustain the single-outlet independents and the relative power of the manufacturers vis-à-vis the retailers, continued into the 1950s. However, in the late 1950s and early 1960s RPM came under increasing pressure and was ultimately abolished in 1965. This gave the larger retail firms the freedom to set their own prices for the goods they sold, and the ability to pass on their lower operating costs to the consumer. It coincided with, and was partly a mechanism within, the expansion on the market share of the large corporate chains and the decline of the single-outlet independents; together, these trends led to a fundamental shift in the balance of power in the industry towards the rapidly expanding retail corporations and away from the manufacturers. By the early 1980s many retail corporations were much larger and more profitable organisations than even their largest suppliers, and the shift in power had progressed so far that the typical debates concerning the power relationship between manufacturers and retailers centred upon such issues as: the ‘discriminatory’ discounts demanded from manufacturers by the large retail corporations; the intense pressure being placed upon manufacturer’s second- and third-ranking brands by the growth of ‘own-label’ trading; the much smaller display space being given to branded products than to ‘own-labels’; and the flexing of retailer muscle in the field of distribution from suppliers to stores (see Davies, Gilligan and Sutton, 1986; Sparks, 1986).

The intensification of production

Alongside the concentration of capital in UK retailing has come a marked increase in the productivity of labour. However, as Table 1.1. shows, this increase is masked if just total numbers employed in retailing are considered. The retailing industry employs a large number of part-time workers and, therefore, a more sensitive measure of labour input is obtained by converting total numbers to full-time equivalents (where a FTE is defined as 39 hours or more per week). FTEs show a significant decrease since 1950, paralleled by a marked and continuous increase in labour productivity.

Table 1.1 Employment and labour productivity in retailing in Great Britain

	Numbers engaged in retailing		Labour productivity (sales per FTE)
	Total (000s)	FTE (000s)	(£000s)
1950	2,392.2	n.a.	n.a.
1957	2,529.6	2,158.2	24.01
1961	2,484.6	2,158.8	25.78
1966	2,555.7	2,138.2	27.44
1971	2,541.4	1,995.4	31.36
1976	2,503.4	1,897.0	36.62
1977	2,441.7	n.a.	n.a.
1978	2,424.0	n.a.	n.a.
1979	2,429.0	n.a.	n.a.
1980	2,368.0	1,780.0	39.92
1982	2,202.0	1,680.0	40.66

Sources: Census of Distribution, Retailing Inquiries, IFS.

Note: Labour productivity measured by retail sales revalued by the Retail Prices Index to 1982 prices and divided by FTEs (full-time equivalents).

Once again it is the biggest firms, the emerging retail corporations, that have achieved the highest levels and most marked increases in productivity. Moreover, there is little sign that such increases are levelling off. The 1980s have seen massive investment by the retail corporations in computerised stock, distribution, and financial control systems and this has already resulted in some corporations reporting their biggest gains in productivity for many years (e.g. in 1985–6 Sainsbury reported productivity at a record level and the best annual improvement for seven years). With the advent of advanced management information systems built upon the data supplied by EPOS (electronic point of sales) cash tills with scanners, further high-technology based labour-shedding by the corporations is inevitable.

Paralleling the increase in labour productivity, and as a direct consequence of the changing structure of the retailing industry and the nature of retail outlets, there has been a progressive de-skilling of the labour force. In the large self-service high-tech retail outlets of the 1980s, few staff are required to offer personal service to consumers or to have a specialised knowledge of the products they are selling. Instead a large proportion of retail labour is required for the relatively unskilled tasks of shelf-filling or till operation, and must be matched to periods of peak demand. The consequence has been a rapid increase in the proportion of retail...