Measuring Retailing's Contribution
culating the contribution food retailing makes to society [editorial "Food Retailing's Contribution to Society Is Little Known," SN, Sept. 20, 2004], I would like to suggest a relatively straightforward approach that could help capture the proper magnitude of food retailing's substantial contribution to society.
It's an approach that I've seen applied convincingly in other fields and one that suggested itself to me during my business trip last month to visit with our farmer-partners in Peru, a country that clearly does not enjoy the benefits of a modern, competitive food retailing sector like we have in the United States. That observation applies even to a wealthy society like Japan's, where regulations and traditions have, I'm told, slowed the emergence of large-scale, multi-unit retailers.
The idea is simply to compare a society that has a food retailing sector like ours to one that doesn't, and look for the associated pros and cons that can reasonably be associated with this factor. Many benefits [of organized retailing] leap to mind, and they're of greater importance than ones listed in the Templeton College study [cited in the editorial]. For example, that study talked about the role of employment, but folks are going to be employed in retailing food no matter what because it's an essential activity.
I think it's more interesting to look at the benefits that can be associated with the type of food retailing we experience by comparing a system that's modern, highly organized and competitive to one that's under-capitalized, inefficient, and so on.
In no particular order, I'd list:
Hygiene: While I lived in Guatemala, I could not reliably buy meat or dairy products. There's a big difference between having meat and not, or between a healthy population and one that often has bouts of food poisoning and dysentery.
Price: Japanese consumers consistently spend much more for comparable goods than do Americans.
Selection: While we don't need 100 types of cereal, the lack of selection can also reflect and reinforce a lack of competition, which in turn dampens the impetus for competition. Look at the dairy case. When stores stock only one stockkeeping unit of whole milk, how can consumers express a preference for an alternative, like organic milk? And when they can't, that sector is likely to stay stuck in the status quo. Likewise, my sector, specialty coffee, could have never emerged if stores only stocked two or three types of coffee, instead of 15 to 30. More selection doesn't guarantee competition and innovation, but it is a prerequisite. Further, there's even an interesting manifestation of this in some inner-city neighborhoods. I've read that a lack of competition amongst supermarkets at the neighborhood level has lead to higher prices than in the more coveted suburban markets.
Efficiency: I'm not a fan of having my lettuce shipped 3,000 miles, but I have to say that our modern food system is incredibly efficient at the basic job of collecting, distributing and retailing goods from every corner of the world to almost every corner of the 50 states. It, of course, enjoys the benefits of an entire transportation and communications infrastructure, but it is part and parcel of that infrastructure and has made massive investments in its own specialized infrastructure and technologies. In contrast, in many developing countries, it's common for 10% to 20%, or more, of farmers' harvest to rot before it gets to market. Efficiency is one reason groceries are relatively inexpensive in the U.S.
It should also be said that the calculus can go both ways. For example, in rural areas, Peruvians eat much more fresh fruit and vegetables and many fewer high-fat, highly sweetened, over-processed foods. Also, the food distribution system uses much less energy there as food there is not typically transported thousands of miles, but rather is more often produced and consumed locally.
Likewise, the social fabric of Japanese neighborhoods is enhanced by the intimacy between small, family-owned shopkeepers and their regular customers.
West Bridgewater, Mass.
Caution on RFID
Thanks for the practical insight on radio frequency identification [editorial "RFID's Value May Be on Hold Until Bugs Get Removed," SN, Sept. 27, 2004]. While the benefits of RFID, once matured, should indeed help retail, retailers should be cautious not to chase this technology, but rather to just be aware of it.
As we continue to work with many of the supermarket industry's most savvy executives, we are seeing a very healthy, more focused attention to programs and processes to run smarter stores; teaching managers to optimize every store profit opportunity; and implementing smarter methods for program/process, together with policy compliance both for Sarbanes-Oxley and smarter store operations control.
I think we need to give kudos to retailers who fight today's battles first; who break out of old, unproductive habits; and who protect their businesses by taking pro-active and pre-emptive action.