Concepts in

Comparative Retailing

EDWARD W. CUNDIFF

An increasing volume ofdescriptive nnaterial aboufmarketing in various nationshas become available in re-cent years; few attemptshave been made to gener-alize about all nations.

This article, focusing onone aspect of this broadproblem, presents a frame-work for generalizing aboutretail operating methods indifferent marketing systems.

Journal of Marketing. Vol. 29 (January,1965), pp. B9-6S.

THE marketing systems that have evolved in different partsof the world clearly share certain common characteristics, but

they also differ from each other in many important ways. Littleis known about the degree and magnitude of these differences,and the degree, if any, to which they follow a logical, predictablepattern.

An understanding of such a pattern would be of great value tobusinessmen who wish to enter new markets or to predict develop-ments in their own markets. At present, it is necessary to makea detailed study of each new market the businessman may proposeto enter, because only rudimentary bases have been devised forcomparing and generalizing about marketing systems.

These systems are at different stages of development through-out the world; and just as there are underdeveloped economies,there are underdeveloped marketing systems. By comparing eco-nomic systems at various stages, economists have attempted todevise ways of predicting future development in underdevelopedeconomies.! No equally comprehensive attempt has been madeto explain the development of marketing systems.

Despite the lack of a theory of marketing development, market-ing scholars have sometimes found it necessary to make predic-tions about foreign marketing systems by generalizing from theirown systems.

An analysis of marketing in Finland indicated that, "Socio-economic conditions in Finland and the United States are suffi-ciently similar that our past is Finland's present and our presentis seen evolving as Finland's future."- In their predictions forfuture retailing in Europe, Jefferys and Knee do little more thanproject existing American development.^ To improve the valueof such predictions, a better understanding of the evolution anddevelopment of marketing systems is needed.

Bartels has made an important preliminary contribution to thisproblem, by suggesting alternative methods of approaching thecomparative study of marketing.* However, the preparation of

1 W. W. Rostow, The Stages of Economic Growth: A Non-CommunistManifesto (Cambridge, England: The University Press, 1960), p. 4;Colin Clark, The Conditions of Economic Progress, 1st edition (Lon-don: Macmillan and Co., Ltd., 1940), pp. 337-338.

2 A. J. Alton, "Marketing in Finland," JOURNAL OF MARKETING, Vol.27 {July, 1963), pp. 47-51.

3 James Jefferys and Derek Knee, Retailing in Europe, Present Strue-ture and Future Trends (London: The Macmillan Company, 1963).

* Robert Bartels, Comparative Marketing: Wholesaling in FifteenCountries, sponsored by the American Marketing Association (Home-wood, Illinois: Richard D. Irwin, Inc., 1963), pp. 1-6.

59

60 Journal of Marketing, January, 1965

a comprehensive explanation of the interrelation-ships among comparative marketing systems is amajor job. One way of contributing to such anexplanation is the development of hypotheses con-cerning specific aspects of marketing which mayultimately help to fill in the total picture. Sinceretailing is important in all systems, the hypothe-ses described herein were developed to help explainthe comparative evolution and adaptation of re-tailing practices.

Evolution and Adaptation in RetailingAn orderly process of evaluation and adaptation

of important retailing innovations in separate mar-keting systems seems to exist. An explanation ofthis process requires four postulates:

1. Innovation takes place only in the most highlydeveloped systems. The retailers in othersystems have more to gain from the adoptionand adaptation of developments already triedand tested in the most highly developed sys-tems.

2. The ability of a system to adapt innovationssuccessfully is related directly to its level ofeconomic development. Certain minimumlevels of economic development are necessaryto support anything beyond the most simpleretailing methods.

3. When the economic environment is favorableto change, the process of adaptation may beeither hindered or helped by local demo-graphic-geographic factors, social mores, gov-ernmental action, and competitive pressures.

4. The process of adaptation can be greatly ac-celerated by the actions of aggressive indi-vidual firms.

Tbe following discussion is a test of these hy-potheses, by measuring the stages of adoption ofsome retailing innovations in a selected group ofmarketing systems.

Operating Methods versus InstitutionsNew retailing institutions would seem to be a

logical kind of retailing innovation to study, sincenew institutions, such as supermarkets, are foundin many nations. Yet such institutions are oftentoo different from each other to justify comparison,having little in common beyond a name.

For example, there is little value in comparingAmerican supermarkets with European supermar-kets. Even a casual examination of the newly-de-veloped "supermarkets" in Italy or England showsthat the European institution is usually smaller, hasa much more limited selection of merchandise,places far less emphasis on price appeals, makesless use of advertising, and makes no provision forparking.

American retailers themselves have used the termso loosely that it is necessary to define "real" super-markets in terms of physical and operating criteria.

Although institutions may evolve so differently asto preclude comparison, the basic retail operatingmethods are often the same in all marketing sys-tems. The term "supermarket" may have differentmeaning in different markets; but a basic methodof retail operation, such as self-service, has thesame meaning everywhere. For this reason, thefour hypotheses will be tested against new meth-ods of retail operations, not against new institu-tions.

Identification of New Retail Operating MethodsFor the purposes of this analysis, a new retail-

ing development may be described as a new methodof operating retail establishments, something thatcould be adopted by existing or newly-developedinstitutions, but that in no sense describes specificinstitutions. In this analysis it is necessary toconfine attention only to recent innovations, be-cause there is not enough historical informationavailable about marketing methods in other na-tions to trace the pattern of adoption of earlierinnovations.

At least four really new retail operating meth-ods have evolved in the past half century. Thebest known and most widely adopted of these isself-service, which involves the displaying of mer-chandise in a manner so that the customer may,if he wishes, examine it and make his purchaseselection without the help and supervision of storeemployees. The aspect of self-service that is reallynew is not the open display of merchandise (whichis as old as retailing itself), but the provision forcustomers to handle and select the merchandisethemselves without supervision.

A second innovation is the use of unusually lowmarkups made possible by strict limitation of in-ventories and strong emphasis on high stockturn.The new development here is the price-inventory-stock-turn relationship, and should not be confusedwith price reductions resulting from other im-provements in efficiency, such as increasing pro-ductivity of personnel.

A third development is the placement of largeretail outlets or groups of retail outlets in subur-ban locations away from city congestion, as ex-emplified by planned shopping centers in the UnitedStates.

The fourth new development is automated re-

• ABOUT THE AUTHOR. Edward W.Cundiff is a Professor of Warkefing atThe University of Texas. He becameparticularly interested in the study cfcomparative marketing during the year1960-1961, when he served as marketingconsultant to the European ProductivityAgency of O.E.C.D. in France and Italy.He received his Bachelor's, Master's, andDoctoral degrees from Stanford Univer-sity.

Concepts in Comparative Retailing 61

tailing, providing the substitution of machines forpeople in the process of paying for and deliveringpossession of merchandise.

Selection of Marketing Systems of ComparisonThe paucity of information on marketing in

other nations limits the comparisons that can bemade. Census data are available for a large num-ber of countries, but statistical information onretail operating practices is very limited. Forthis reason, it is necessary to rely to a large ex-tent on descriptive material about foreign mar-keting institutions published by Americans whohave visited and worked abroad.

Twenty nations were selected for comparison,including eleven European nations (Belgium, Den-mark, Finland, France, Germany, Italy, the Nether-lands, Spain, Switzerland, and the United King-dom) ; four American nations (Canada, Mexico,the United States, and Venezuela); three Asiannations (India, Japan, and the Philippines) ; Aus-tralia; and the U.S.S.R. Unfortunately comparableeconomic information was not available for theU.S.S.R., and so it is not placed in rank orderwith the other nations.

Testing the HypothesesOf the four new developments, self-service has

been the most widely adopted in marketing sys-tems around the world, so it provides the bestinformation for comparison between systems. Forthis reason it will be considered first as a meansof testing the four hypotheses. To the extent thatinformation is available, the other three innova-tions will be used to check the experience withself-service.

Evolution and Adaptation of Self-ServiceSelf-service, as an accepted method of retail

operation, evolved in the United States primarilyduring or after the 1920s. Its development anddissemination in most of the highly-developed mar-keting systems throughout the world provides somesupport for the four hypotheses stated previously.

Hypothesis 1. The development of self-servicesupports the hypothesis that retailing innovationsevolve only in highly developed marketing systems.On a purely a priori basis, the American market-ing system is widely accepted as the most ad-vanced in the world today, and was at least amongthe most advanced in the 1920s when self-servicewas first widely introduced.

Furthermore, there is no evidence of subsequentindependent evolution of this method of operationin other marketing systems. The method appearsto have spread primarily through adaptation ofthe original American idea.

Hypothesis 2. The spread of self-service intoother marketing systems seems to support thehypothesis that the ability to adapt innovations

is related direetly to the level of economic develop-ment of a system. However, the identification andclassification of stages of economic developmentis a problem challenging a number of economiststoday. A further complication is the wide varia-tion in economic development that occurs withinan economy. Just as the stage of economic de-velopment differs widely between New Englandand the Appalachian Mountain regions of theUnited States, so does it vary between the Amazonregions and the Rio de Janeiro-Sao Paulo areasin Brazil, and between the Piedmont and Sicilianareas of Italy. Thus, statistics on average economicdevelopment ignore the importance of highly de-veloped subareas that may offer great potentialfor retail innovation.

Although it is beyond the scope of the presentarticle to solve this problem of describing economicdevelopment, it is in order to have some basis forrelating changes to economic differences, a numberof factors for which comparable international datawere sought. Only two factors were found—otherdata which showed promise of relating to economicdevelopment were not available on a current basisfor all or most nations.

The first factor is an index of per-capita indus-trial productivity—percentage of value added inworld industry divided by percentage of worldpopulation. The second is a measure of a nonessen-tial semi-luxury good (telephones). These twoeconomic factors, although offering promise asparts of a complex measure which may some daybe devised to identify stages of economic develop-ment, are presented in this instance only as in-dicators of levels of economic development. Table1 shows the measures of production and consump-tion, and the percentage estimates of self-serviceretail stores in all countries where information isavailable.

When the nations are ranked with respect toindustrial production and with respect to telephonesper capita, the similarity in order is fairly close;in most instances where the change in rank orderis more than two or three, the differences can beexplained in terms of noneconomic factors. Forexample, the United Kingdom, which drops fromsecond place on the production ranking to seventhplace in telephones per capita, has a tradition ofheavy reliance on mail and telegraph in situationswhere other nationals might more likely use thetelephone. Also, the nationalized telephone systemprovides unusually extensive public telephonefacilities.

A comparison of the data on production andconsumption with self-service in the 20 countriesshows a relationship between these factors. Forexample, 5 of the 6 leading nations in productionare also leaders in penetration of self-service, or,to move further down the list, 11 of the top 12

62 Journal of Marketing, January, 1965

TABLE 1A COMPARATIVE RANKING OF SELECTED NATIONS WITH RESPECT TO ECONOMIC INDICES

AND PER CENT OF SELF-SERVICE STORES'

Country

United StatesUnited KingdomSwitzerlandCanadaGermanySwedenDenmarkAustraliaBelgiumFranceNetherlandsVenezuelaItalyFinlandSpainJapanMexicoPhilippinesIndiaU.S.S.R.

Index of •productionPer capita

7.76.86.75.65.34.44.34.13.73.23.0b2.8c1.91.61.051.00.70.050.03

Rank

123456789

10111213141516171819....

TelephonesPer capita

.42

.16

.32

.315

.12

.36

.245

.215

.133.101.1495.0285.0805.1464.062.065.016.004.001

in useRank

1734

11256

1012

81613

91514171819

Self-service% of Total>10.0

1.32.4

>6.03.65.351.41.00.130.241.350.0050.021.10.014(NA)0.1(NA)None

<0.1

storesRank

1852436

101211

71613

914—.15

19....

a Sources: Production and Telephone usage data were frorn Statistical Yearbook,1962, Fourteenth Issue, Statistical Office of the United Nations, New York, 1963.Data on self-service penetration were collected from 16 sources.

b Production data understate level of economic development in this primarily tradingnation.

c Production data overstate level of economic development because of the large pro-duction of oil for export.

are leaders in both. It would also be useful toknow what level of productivity constitutes anabsolute minimum below which there will be noself-service; but since this list comprises almostentirely highly developed or developing nations,there are insufficient data to locate a possible cut-ting point.

Hypothesis 3. The spread of self-service alsoprovides some support for the hypothesis thatnoneconomic factors may affect the level of mar-keting development that might otherwise have beenpredicted in terms of economic factors. At leastsome of the variance between rank in productionand consumption and rank in use of self-servicecan be explained by such factors. For example,the United Kingdom, second in value added Inindustry, is only eighth in penetration of self-service. The British government maintained rig-orous restrictions on consumption long after theend of World War II, which served as a barrierto the introduction of new methods of retailing.Credit restrictions, for example, were not removeduntil 1958. The wide variance between productionand consumption (as measured by installation oftelephones) would appear to support this view.

As another example, Australia, which ranks sixthon the consumption index and eighth on the pro-duction index, is only tenth in adoption of self-service. This discrepancy can be explained at leastpartly by social pressures against strong business

competition, and a history of cooperative actionamong retailers and manufacturers to opposechanges that might affect the status quo.

Hypothesis i . As long as a marketing systemhas reached the minimum stage of developmentnecessary to support retailing innovations, it seemslikely that this process can be hastened by theactions of aggressive individuals or firms.

For example. Sears Roebuck has dramaticallyinfluenced the retailing climate in Mexico sinceWorld War II, and may partially be responsiblefor the development of self-service in that na-tion at a more rapid rate than might be expected.

Also, in those instances where strong noneconomicforces may operate to prevent or delay the in-troduction of retailing innovations, an individualor firm may at least partially counteract theseforces. Switzerland is a case in point where Gott-lieb Duttweiler, through his Migros cooperative,worked almost single-handedly to overcome theorganized opposition to change by entrenchedretailers and wholesalers. Self-service has not de-veloped as rapidly as might be expected in Switzer-land, as indicated in Table 1; but might be nearlynonexistent without the Migros retail outlets andthe examples set by Migros.

The Price-Inventory-Stock turn Relationship

The discount house provides the best exampleof an application of the price-inventory-stockturn

Concepts in Comparative Retailing 63

relationship in most marketing systems, since itis by definition a price promoter. Other institutions,such as supermarkets, which emphasize price ap-peals in the United States, do not use this appealconsistently in different nations. Thus, the dis-count house provides a better basis for measuringthe spread of the price-inventory-stockturn methodof operation in all marketing systems.

Subjective descriptions of the development ofretailing in other marketing systems provide evi-dence that discounting and the price-inventory-stockturn appeal has been adopted in the samemanner as self-service—in a direct relation to theeconomic factors mentioned before. In those mar-kets where it has met with almost no success thusfar, there seem to be either legal, competitive, orsocial barriers to its adoption. In Melbourne, Aus-tralia, for example, new discount houses that wereoperating successfully were forced out of businessby conventional retailers who were able to bringpressure on manufacturers and wholesalers to shutoff their supplies of goods.

Decentralized LocationsThe decentralized location of retail stores also

appears to be related to the stage of economic andmarketing development. But it may be morestrongly affected by noneconomic factors than theother retailing innovations.

For example, there seems to be a relationshipbetween population concentrations, land costs, andthe development of planned shopping centers, lnBelgium, high population density and land costhave restricted the availability of parcels of landlarge enough for planned shopping centers. In ad-dition, most decentralized retail locations arestrongly dependent on the automobile as a meansof transportation for the patrons. In those nationswhere excessive government taxes and restrictionshave discouraged widespread ownership and use ofautomobiles (such as in Great Britain until re-cently) planned shopping centers have been slowto develop.

Automated RetailingSince an important end-result of automated re-

tailing is the reduction of labor costs, it is poten-tially more valuable in those systems where laboris costly relative to capital. Also, it will flourishbest in those systems where the level of consump-tion is high enough that there is a high priorityon consumer convenience.

Australia provides an example of a situationwhere noneconomic factors can hasten the adop-tion of new developments. Union pressures forshorter working hours have resulted in legisla-tion forbidding operation of retail stores on Satur-day afternoons, Sundays, and evenings; and soretailers have turned to automatic vending of cer-tain convenience goods (such as gasoline), to servethe needs of customers when stores must be closed.

ConclusionsRetailing institutions provide a part of the en-

vironment in which marketing decisions must bemade. A better understanding of their evolutionin different marketing systems helps to providea framework for generalizing about comparativemarketing systems. One factor, however, has beenconsciously ignored in this simplified explanationof retailing innovations. Retailing and the broaderfield of marketing are not only affected by thetotal economic environment, but, in turn, they maythemselves affect this environment.

In societies with high discretionary income andabundant goods there are pressures for improve-ment in retailing efficiency. The degree to whichthese economic pressures result in the evolutionand adoption of new methods of retailing opera-tion depends on the total environment. Culturalacceptance of or resistance to change, demographicand geographic infiuences, the political and legalframework, the strength of pressure groups suchas business competitors and unions—all of thesemay have an effect on retailing innovations. Whenthese pressures are negative, the actions of ag-gressive individuals or firms may do much to achieveand hasten change.