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THE NATURE OF POSTWARRETAIL COMPETITION
VICTOR LEBOW
Chester
H. Roth
Co.^
Inc.
EDITOR'S NOTE:
AS ivith the preceding article, thiscontribution by the Sales Manager of Chester H. Roth Co.shouldpromke discussion and, perhaps, dissenting opinionto which the Notes and Communications section mil he
open.
G
REAT CHANGES took place in retail-ing in the decade
1931
to
1941;
newareas of competitive conflict were devel-oped. The war has both intensified andin some cases distorted these trends^Their projection into the years ahead willhelp us discern the nature of postwarretail competition.No one who sets down his thinking ofthe times to follow the war can do sowithout making some basic assumptions.For the purposes of this article, the au-thor has assumed: (i) that Americanbusiness will come through the war withits vitality still "bunyanesque," with itscapacity for enterprise and venturing un-diminished; (2) that American businessleaders are still capable of learning, andthat they have drawn sharp lessons fromthe events of the last twenty years; (3)that the goal of industry will be fullproduction for an expanding marketprovided by a people on a rising livingstandard.The third assumption is of particularimport to retailing. The degree to whichthis goal is realized may determine, forexample, how desperate must be thestruggle for existence on the part ofsmaller independent retailers. For re-tailers in general, the more nearly weapproach a state of full productivity andfull employment, the higher will be therewards for success in the competitivestruggle and the less grave will be thepenalties for failure. Realization of thatgoal will have profound effects on thenature of retail competition, but evenits
complete
realization will not diminishthe degree of retail competition.Change breeds change in the field ofdistribution. The technique, forms, andcompetitive relations in retailing are al-ways subject to the influence of new de-velopments. When drug stores addedsoda fountains and candy cases to theirequipment, for example, the confec-tionery stores and ice cream parlors de-clined in importance. There are more re-tail food stores than any other type ofretail establishment—well over half amillion—yet in ten years the supermar-ket, a new type of outlet, so altered thepattern of food distribution that a
isw
thousand self-service "supers" today aredoing
25%
of the nation's food business.*But the changes and trends which in-fluence retailing are not always generatedwithin the pattern of distribution. Thecommodities produced and the peoplewho buy have obvious efl'ects on dis-tribution, which serves to bring themtogether. Therefore it is necessary totake a look at some of the relevant fac-tors in production and consumption;these will set the frame, so to speak, forthe picture of postwar retail competition.
PRODUCTION
The demonstration of America's pro-ductive capacity which the war efforthas unveiled is a lesson the Americanconsumer cannot forget; by such an
^ M. M. Zimmerman, "Supers as Mass Oudet forDrugs and Cosmetics,"
Supermarket Merchandising,
November, 1943, p. 41,
11
12
THE JOURNAL OF MARKETING
achievement American industry
has un-
dertaken
an
obligation which
it can
never henceforth deny.Even assuming
a
postwar national
in-
come
of
150 billion dollars
or
more,
how-
ever, the economy faces a vast complex ofcontradictions.
The
fact
is
that
the con-
centration
of
economic power
has
beenhastened
by the
war.
In the
words
of the
Senate Education
and
Labor Commit-
tee:
"America,
a
land
of
giant corpora-tions before
the war,
will emerge fromthis
war
with
a
larger share
of its
vastlyexpanded economy controlled
by a
smaller number
of
firms."^ This concen-tration
has
been accompanied,
not
onlyby
a
huge addition
to the
national plant,but also
by the
introduction
of
newerand much more efficient labor-savingand automatic machines;
new
materialssuperseding
old
materials that called
for
greater expenditure
of
labor,
as for ex-
ample, plastics
and
laminated plywood;and
new
processes, like centrifugal cast-ing, which
are as
economical
in man-
hours.
Thus we have
a
network
of
forceswhich tend toward reduced employmentcoupled with
the
national determinationto achieve "full employment."Without
a
huge multiplication of com-modities
and an
income distributionwhich will permit
the
consumption
of
this output,
we
shall face crises darkerthan even 1930-1933.
On the
part
of the
giant industries, such
as
aluminum, elec-trical equipment, glass,
and
perhapssteel,
a
number
of
totally
new
decisionswill
be
called
for:
relaxation
of
patentmonopolies, licensing
of
additional
pro-
ducers,
and
especially
the
renunciationof superprofits
and
planned restrictionof production.
Of
immediate concern,however,
is the
effect upon retailing
of a
nation
on a
rising living standard with
'
Quoted
by
Vice-President Henry
A.
Wallace,
"We
Must Save Free Enterprise,"
Saturday Evening Post,
October
23,1943.
mote
leisure
and
security than ever
be-
fore.
There
are
likely
to be
changes,
for
example,
in the
character
and
number
of
retail units through which this doubledor trebled production
of
consumers'goods will flow,
and
developments
in the
extent
to
which large manufacturers
par-
ticipate directly
in
distribution.
CONSUMPTION
What will
be the
ability
of the con-
sumers
to
absorb
the
increased produc-tion?
The
answer
to
this question
de-
pends
in
large part on
the
distribution
of
postwar income.Even
if
we assume that employment,together with income, will be maintainedat wartime peaks,
it
must
be
remem-bered that
the
present prosperity
is il-
lusory
for a
large part
of the
population.The OPA study, "Civilian Spending
and
Saving,
1941 and
1942," shows that
61.8%
of the
families
in the
countrylived
in 1942 on an
income
of
less than^50
a
week,
and
this was
a
year
of
highprices.'
The new
high records
of
depart-ment store sales reflected
the
heavyspending
of the
four
out of
every
ten
families
who had an
income
of
over
^2,500.
The OPA
tells
us
further thatover
88% of the
savings
by
individualsin
1942
were made
by
people
in the in-
come level above $2,500, savings
of
22.4billion dollars
out of a
total
of 25.4
billions.*An uneven distribution
of
income
is,
of course,
not a new
factor
to be
reck-oned with;
we
have always
had it. The
point
is
that
it is
still with
us;
that
the
doubled
or
trebled income we
now
enjoyhas
not
changed
it,
except
in
degree.In 193 5-1936, according
to the Na-
tional Resources Committee, 87%
of the
families
in the
country lived
on an in-
' O.P.A. Division
of
Research,
Civilian Spending and
Saving,
ig/fj and1942,
p.
16.
*
Ibid.,
p. 17.
THE JOURNAL OP MARKETING
come of less than |2,5oo a year.* Obvi--oasly, the reduction of this- gfoup toaround 60% of the population means atremendous rise in the national standardof living. We have seen such a rise; de-spite a higher price level, more of ourpopulation have had enough to eat andwear in 1943 than ever before. But it isalso clear that even now more than halfof the people are living below what isgenerally considered a minimum stand-ard of living for Americans.The families and single individuals inthe income classes below ^2,500 a yearin the years 1935 and 1936 made uproughly 89% of the population. Theybought 67% of the clothing, 68% of thefurnishings, 72% of the housing, and
79%
of the food.* It is probable that thepercentage of commodities bought bythose now in the income classes below^2,500 will continue in about the sameratio to the percentage of the populationthey represent. Therefore, if in 1935 and1936 the 89% of the population in theincome brackets below ^2,500 bought
67%
of the clothing, the 60% of thepopulation now probably in that cate-gory can be expected to buy about 44%of the clothing, and similarly with theother items. In other words, eyen if in-come is maintained at wartime heights,close to two-thirds of our families willprovide a restricted market for commodi-
ties.
The trends in consumption will havea determining effect on the price rangesof the goods to be sold at retail, the typesof stores through which the greatestvolume of commodities will
flow,
and alsothe area of the most intense competition.
' National Resources Committee,
Consumer Incomes
in the United
States
—
Their Distribution
in
1935-1936.
(Washington, United States Government PrintingOffice, 1938), p. 18.
^
Idem,
Consumer Expenditures
in
the United
States
—
Estimates
for
ipss--ipj6.
(Washington, United StatesGovernment Printing OiEce, 1939), pp. 83, 90.
ANALYSIS
OF
RETAIL COMPETITION
With this appraisal of production andconsumption in mind, it should be easierto understand the forces which will shapethe nature of postwar retail competition.For purposes of analysis, the competi-tive situation can be broken down into aseries of "relationships of active opposi-tion":(1) The independent merchant vs. thechain store.(2) The smaller independent
vs.
the largerstore.(3) The general department store vs. thelimited-price variety store.(4) The new unorthodox channels for agiven commodity
vs.
the traditionaloutlets for the same commodity.(5) The drive for higher net profits andthe acceptance of higher expenseratios vs. the trend toward lowermarkups.(6) Brands, name, and product monop-olies vs. lower cost distribution.In the sections of the discussion de-voted to the first three of these "relation-ships" the trends in retail competitionare assessed for their effect on differenttypes and sizes of outlets. The develop-ments cited in these sections will serveto suggest and point up the more fun-damental nature of the trends as theyare analyzed in the discussion of thelast three "relationships."
The independent
merchant
vs.
the chainstore.
The 1939
Census of Business
re-vealed that in the decade following 1929the number of independent stores in-creased both relatively and absolutely.On the other hand, the number of chainstore units declined from 148,000 in 1929to 123,000 in
1939,
or from 9.8% to 7.0%of all stores.^ The share of the total retailbusiness taken by the chains shows only
'
Census
of Business, Volume I, Retail Trade:
p.
9.
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