( Originally Published 1939 )
A retail store transfers the ownership of commodities from the storekeeper to the household consumer. It stores the article until the consumer calls for it, sells it in the amount and form desired by the consumer and often delivers it to his home; and it usually stands ready to reverse the process and take the article back if the buyer is dissatisfied with it. But it does a good deal more than this.
Instead of waiting passively for the customer to come in and make his wants known the modern retail merchant devotes a good part of his energies to "demand creation," not necessarily by offering lower prices than his competitor, but by aggressive advertising and promotional efforts to induce the consumer to buy whether he "wants to" or not. Sometimes, too, the retail store engages in processing, such as dissecting a side of beef and extracting the particular part which the consumer wants. Or it may freeze ice cream, or grind coffee, or fit and alter clothes bought by the customer. If it deals in coal, it may sell not only to homes but to factories, thus becoming to some extent an intermediary distributor. Often it is difficult to say in just what category a particular store should be classed, which accounts for considerable variation in otherwise dependable tables of statistics.
In the United States in 1935 there were more than 1.6 million retail stores employing nearly four million persons, exclusive of proprietors, and doing a business of $33.2 billion. This was about two-thirds of the $49 billion peak reached in 1929, but owing to the lower price level in the latter year the difference in the volume of commodities sold in the two years was not so great. There was an increase in the dollar value of retail trade to nearly $38 billion in 1936 and to $40.4 billion in 1937, according to Department of Commerce estimates. But even in 1937 retail trade was 18 per cent less in dollar volume than in 1929.
Consumer Purchases in 1929
To the $49.1 billion taken in by retail stores in 1929 (including restaurants and automobile repair shops) should be added $129 million of retail milk sales, bringing the total to $49.2 billion, the figure appearing in the Flow Chart in the previous chapter. As shown in the Chart, however, this total includes considerable quantities of goods (chiefly farm products) sold to wholesalers and manufacturers, fuel sold by retail distributors to commercial buyers, retail goods sold to other retailers, and $3.3 billion of farm supplies and equipment sold to farmers for productive purposes. This leaves a balance of $44.4 billion sold by retail establishments to consumers for which the latter paid $44.5 billion after inclusion of estimated delivery charges.
To this must be added an estimated $1.2 billion of products bought by consumers directly from farmers, $2.2 billion from manufacturers, and smaller amounts from wholesalers and extractive industries. These bring the grand total of recorded purchases of goods by consumers in 1929 to $48.7 billion.
Retail Sales by Size of Store
Of the total of more than 1.6 million retail stores in 1935, 60 per cent of them had sales of less than $10,000 apiece and as a group did only 11 per cent of the $33.2 billion volume in that year. In 1929, when retail volume was half again as large, only 44 per cent of the nation's stores were in this smallest size-class, but these stores accounted for only 6 per cent of that year's retail sales. At the other extreme of the size-scale, a small fraction of one per cent of all stores had sales averaging $1 million or more and ac-counted for 10 per cent of the volume in 1935 and over 12 per cent in 1929.
It is interesting to note that the decrease in total sales volume between 1929 and 1935 was accompanied by a downward shift in the percentage of stores in each of the size-classes above $10,000 annual sales and in the percentage of total sales of each size-class above the $50,000 level. Size-classes below these levels showed relative increases both in number of stores and in sales. Since this shift resulted[ chiefly from the decline in total sales volume the figures cannot be cited to prove a trend either toward large stores or small.
The fact that there were a greater number of retail businesses in 1935 than in 1929, however, makes it clear that there was no strong tendency toward concentration during this period. Even in 1929 the stores in the $10,000-or-less group averaged only $4,145 in sales and the far greater proportion of such stores at the bottom of the depression in 1933 averaged only $3,529, and in 1935, only $3,677. Since this is the average, it must be true that hundreds of thousands of our retail stores ring up sales of less than $10 or $12 a day. Out of this, they have to replenish their stocks, pay their rent, hire whatever help they must have, store commodities ready for the consumer to buy them-and reap their profits, if any.
Kinds of Retail Business
What was actually being sold in the more than a million and a half retail stores? The consumer paid out more for food than for any other class of commodity in both 1935 and 1929. Food stores head the list by a wide margin not only in the number of stores but in the total volume of sales, as can be seen in Figure 8 and in Table I of the Appendix. In 1935 about 25 per cent of total retail sales, and in 1929 about 22 per cent, were made in grocery and meat stores and stores dealing in candy, dairy products, bakery goods and similar lines. Consumers also bought large quantities of food in hotels, department stores, drugstores, and from mail-order houses, as well as direct from the farm. The food total would not be complete without adding restaurants, which accounted for 15 per cent of all retail establishments and for 7 per cent of sales.
It is interesting to note in passing that the proportion of retail business represented by food outlets in the United States is about one-half the percentage in Germany and considerably less than that in Denmark. Food stores accounted for 47.3 per cent of the retail sales volume in Germany in 1930 and 63 per cent in Den-mark in 1925,2 as compared with only 22 per cent in the United States during approximately the same period. The smaller proportion here does not mean that Americans eat less food, but that they have more money for other things.
What was next on the list? As shown in Figure 8 it was auto-mobiles and gas. Taken together, the filling stations and automotive group account for nearly 20 per cent of the patronage of all retail establishments in both 1935 and 1929. Since the total volume of retail sales in 1935 was only two-thirds as large as in 1929 these figures mean that we spent fewer dollars on automobiles in 1935. The motor car industry, in fact, suffered greatly during the depression. But the automobile occupied as large a part in the 1935 budget as it did in 1929. The figures speak eloquently, there-fore, of the nature of our American economy. This economy is not geared to the production and distribution of mere necessities, but is devoted in large measure to making available goods which con-tribute to a higher standard of living.
General merchandise stores constitute the third largest group of retail outlets. These include department stores and the mail-order houses, which are relatively few in number but account for practically 10 per cent of the entire retail volume of the country. Even though much apparel is sold in department stores, the stores specializing in clothing and allied merchandise represent the fourth largest group, with 8 per cent of all retail sales in 1935 and 1929.
The lumber and building material trades made up the fifth largest group in terms of sales volume. The depressed condition of the construction business in 1935 is reflected in sharp decreases not only in the volume of trade but also in the number of stores handling lumber and building materials.
Country general stores still loom large in the retail structure of the country, and together with farmers' supply stores, rank sixth in importance. The actual number of such stores, as well as of other kinds shown in the table, may not have declined between 1929 and 1935 to the extent indicated by the figures. Some of the discrepancies may be due to differences in coverage by the Census enumerators arising from the fact that replies to Census inquiries were required by law in 1929 but were voluntary in 1935.
The volume and the price of goods distributed have fluctuated rapidly. Not only has the character of the goods changed with the years but interesting, and sometimes spectacular, changes have taken place in the methods and channels by which they are distributed. However, in spite of the changes since 1929 and the substantial decline in volume, the basic structure of retail distribution, as reflected in the proportion of business done by different kinds of stores, appears to have undergone few major changes. The shares of the total business done by automotive, lumber and building material, furniture, farm supply, and jewelry stores, as might be expected, declined from 1929 to 1935, while stores dealing in necessities such as food, drugs, fuel and ice, as well as filling stations, increased their proportions. As consumer income shrank during the depression, economies were made first in luxury and durable goods.
Concentration of Retail Trade in Cities
More than 44 per cent of retail distribution in 1935 was carried on in cities containing less than 30 per cent of the total population -those with more than 100,000 residents. Nearly 38 per cent of retail trade took place in towns and cities of from 2,500 to 100,000 residents, which include less than 27 per cent of the nation's population. Although all of the remaining areas comprise 43.8 per cent of the population of the United States, they represent only 18.1 per cent of the retail trade.
In as much as each of these population areas contains approximately a third of the 1.6 million retail stores in the United States, it is apparent that not only is less business done in the smaller cities and rural districts but that more of the smaller stores are located there.
These figures demonstrate, not that country people consume less than city people do, but merely that people travel farther to shop, or shop by mail, if they live farther from urban shopping centers. It is still true of course that the modern farm produces many things which the farm family consumes and which, therefore, it does not have to buy. The generally higher per capita income levels of city residents and the concentration of purchasing power in metropolitan areas also contribute to the relatively larger proportion of retail business in large cities.
One cannot be sure, however, that the present concentration of buying in big cities will be continued indefinitely. Already many cross-road stores are becoming units in voluntary chains. Because of their improved service and the advantage of lower rents they can compete in prices on many items with the chain stores in the larger cities. Just as the centralization of industry seemed to lead in the end to a new kind of decentralization, it is now at least possible that centralized control of distribution may lead toward a decentralization of outlets.
Consideration of the various forms or types of retail operation is now in order. How the total volume of retail sales in 1929 and 1935 was distributed among different types of operation and the number of stores of each type are shown.
a. INDEPENDENT STORES
The traditional single store, or so-called independent merchant, still plays the dominant role in the retail structure of the country. He and his prototypes operated nearly 86 per cent of the stores in 1935 and accounted for slightly better than 65 per cent of the retail sales volume. Census figures show that independent single outlets increased in number by 190,000 between 1929 and 1935, and also slightly increased their proportion of the total retail business.
This apparent growth, however, may have been partially due to differences of coverage and store classification between the two Census years. For instance, "retailers-country buyers" and "retailers-wholesalers" were listed separately in 1929, but not in 1935. Then, too, about 110,000 drinking places and package beer and liquor establishments, predominantly independent, were recorded in 1935. These were either non-existent or were not counted or otherwise classified in the earlier Census years.
A brief review of the kinds of business in which the independent distributor holds the center of the stage shows the relative strength of his position in 1935 compared with 1929. Taking independent merchants as a group, and including two-store and three-store units as well as the single-store type of operation considered above, the 1935 Census showed that 73 per cent of the nation's retail business was in the hands of independents, as compared with 77.5 per cent in 1929. In certain lines of retailing independent operation is predominant. Independents accounted for almost 96 per cent of the motor vehicle trade, 95 per cent of hardware and implements sales, and 90 per cent of the sales in jewelry lines, as shown in Table 13. Independent operators also did over three-quarters of the retail business in furniture, fuel and ice, filling stations, and men's and family clothing-all of which have shown a favorable trend toward the independents since 1929. The same is true of radio and drug products, as well, although the independents' share in these fields has declined slightly since 1929. Except in variety items and shoes, both of which have been actively developed by chain organizations, independents in every other line accounted for half or more of the total business done in 1935.