2000 Euro-Med TDS Assembly, reports by speakers

THE DISTRIBUTION OF GOODS AND SERVICES, AND TRENDS IN THE EURO-MEDITERRANEAN NATIONAL MARKETS, introductory report by Mr. Ruder Friganovic, Croatian Chamber of Economy, Director of Trade Department
In almost all countries distribution is characterised by the presence of a large number of companies which employ a significant share of the total workforce, which makes it an unavoidable factor in all aspects of economic life. Despite its great importance in terms of the number of companies and employees it also has a strategic role considering the process of selection of the products offered to the final consumers.

The analysis of this table shows that, in comparison with the overallEEA (European Economic Area) data, distribution in the Mediterranean region is less developed. Namely, the most modern distribution systems in Europe show an increase in the number of wholesale enterprises comparing to the number of retailers. In those countries (e.g. A, D, NL, UK) there is approximately one wholesale enterprise for every two retail firms. The situation is quite different in the Mediterranean region, where the percentage of retail firms is relatively higher and there are three or four retail firms for each wholesale enterprise on average. The only exemption is France, whose structure is even better than the EEA average.

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It is obvious from the table shown above that Mediterranean countries are characterised by a heavy density of enterprises (more than 10 firms per 1,000 inhabitants), each with a small number of persons employed (less than four persons per enterprise on average). Once again the exception is France, which shows a modern structure in this aspect as well.

The data for Croatia show that it has an inferior distribution structure in comparison with modern European countries. It has a hypertrophied wholesale structure and an underdeveloped retailing structure, which makes it extremely vulnerable to competitive challenges of internationalisation. This is due to the fact that concentration processes and internationalisation did not take place and that traditional retailing is still very strong. Although there are no precise data, it can be assumed that the situation would be very similar in other Mediterranean ring countries (Middle East, North Africa).

With reference to the above-mentioned it is not difficult to predict that Mediterranean countries will have to go through the processes which have already happened (and are still happening) in Europe. Last years in Europe show a slight increase in the number and employment in the wholesale sector and a decrease in both segments in the retail sector due to very strong trends of internationalisation and concentration. These processes are in strong development in the Mediterranean EU member-countries (E, EL, I, P), and it is highly predictable that they will affect others in the near future.

However, one of the decisive factors for the development of different distribution formulas and internationalisation is national legislation. It is interesting to notice that almost all Mediterranean EU member-countries (E, EL, F, I, P) introduced certain restrictive provisions into their laws related to commerce, which are mostly aimed at limiting the development of large retail outlets, i.e. trying to protect traditional ways of trading (small shops) which are characteristic for all of them. There is also an intention to keep employment on a higher level and also to protect domestic retailers before international competitors.

TOP In this aspect, generally speaking, it can be noticed that European countries in transition (B&H, HR, SLO, AL) are more liberal while Middle East and North African countries are more conservative (restrictive). Consequently, more rapid changes can be expected in the transitional countries (which we witness today).
Regarding the main activity of enterprises some major trends can be noticed as well. The percentage of specialised food firms is particularly high in Mediterranean countries (I, P, E) comparing to the rest of Europe. France is well above the Mediterranean average by the number of enterprises specialised in the sale of health, hygiene and beauty-care products.
The average percentage of non-salaried employees (i.e. self-employed) is 28% in the EEA; however, it is particularly high in Spain (49%) and Italy (66%). In these two countries the major chains have a much lower market share than associated retailers (voluntary groups, buying groups and co-operatives). During the nineties there was a slight increase in the share of paid employees as a proportion of total employment in the sector.
This growth was the result of the gradual replacement of traditional trade, generally consisting of single retail outlets, by small and medium-sized chains. This process was particularly noticeable in Portugal, Italy and France. As a general rule, the average sales per enterprise tend to rise over time, reflecting a process of concentration of enterprises that is in progress in several countries, particularly France. Productivity, expressed in the form of sales per person employed, which reveals the economies of scale and standardisation achieved by enterprises, especially chains and other forms of mass retailers, shows particularly high values in France.

Supermarkets, the principal food formula in virtually all EU countries where their growth is already stagnating, continue to grow in all Mediterranean countries (I, G, P, E, EL, HR) except in France, thus taking the market share form traditional distribution and neighbourhood self-service units. Hypermarkets have strong growing potentials in Italy, Greece and Croatia (and in other MED countries) and somewhat lower potentials in Portugal and Spain due to penetration of French hypermarkets. In France hypermarkets are saturated and there is no more space for that formula (their spreading is even restricted by legislation).

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In all countries there is a strong potential for the development of discount outlets. The figures shown below summarise the situation - current and as foreseen - of the food formulas in some MED countries.

Sales by mail, teleshopping and most of all Internet will affect strongly the distribution channels in all countries. Although the differences between MED countries are significant, all of them will have to face the same logistic problem - home delivery i.e. to answer the key question of responding to the needs of consumers while holding costs at the low level. This will undoubtedly change the whole structure of distributive trade (for the USA some studies predict that 55% of retail sales will be made "of premises" by the year 2010), causing that less developed countries will have to skip some phases in the development of distributive trade to cope up with developed countries.

It is obvious from the above-mentioned that there are two main trends in distributive trade in Europe today. Those are concentration and internationalisation both with heavy potentials to impact less-developed Mediterranean countries.

In the Mediterranean basin, France shows strength and potentials to have a leading role as the country of origin of the main international chains, and Italy is trying to follow. However, there is considerable possibility that chains from Northern European countries will enter the game, especially those from Germany.

Traders in less developed countries will have to follow one of the two generic strategies to consolidate and resist the pressure from abroad i.e. cost reduction strategies (concentration, reducing procurement, logistics and administration costs) or differentiation strategies. National legislation in those countries will also play an important role in future developments.

After consolidation in domestic markets the recommendation for the national chains in less developed countries is to consider the possibility of joining so called "Associated groups" i.e. the structures that on European level play the role that buying groups, voluntary groups and other forms of national alliances play in their respective markets. These groups already play a significant role in the distribution of purchasing power in Europe in their competition with "Integrated groups" which belong to a single internationalized company.

Some of the representatives of "Associated groups" are EMD, AMS, EUROGROUP, NAF etc.

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One of the major problems which Associated groups have to face, contrary to the Integrated groups, is the balance between necessary centralisation of decision making against the preservation of the autonomy of various members.
The preparation of this report highlighted the scarcity of reliable, accurate and complete data on wholesale and retail trade in the Mediterranean countries. In many countries, data are collected in an uncoordinated manner by a wide variety of bodies, each of which only provides information on particular aspects of the sector and is unable to draw a more general picture of the situation.
The available data are often not comparable and it is difficult to extract uniform information because of the absence of a single methodology for statistical recording that would make it possible to develop a complete picture of their wholesale and retail sectors.
The decision of the Euro-med TDS Steering Committee of creating the Euro-Med Observatory on Distributive Trades (EMODT) gives the appropriate answer to such a lack of knowledge. EMODT will collect, process and disseminate accurate data and improve the understanding of commerce in the Euro-Mediterranean area. As a first step, the Euro-Med TDS Secretariat has sent a Questionnaire to the member organisations. Although the number of responses to the Questionnaire makes it difficult to draw a complete picture of the situation concerning statistics on trade and distribution for the 23 countries bordering the Mediterranean, the information that did emerge reveals a need for systems to ensure the diffusion of data and information on trade and distribution.

The diffusion of statistical information on trade and distribution
All the respondents except Malta indicated that data on trade and distribution is made available both by national statistics institutes and other organisations (chambers of commerce, business associations). The variables generally covered by the statistical system include value added, employment and structural information on firms, while data on demand is lacking or incomplete. As regards quality, there was broad balance between replies indicating complete information and those reporting inadequacies, while one respondent reported a lack of timeliness.

Availability and use of data Nearly all respondents underscored the need for a broader range of data, since that currently available does not provide an updated view of developments in trade and distribution. TOP The categories specified include:
developments in value added and sector employment
imports/exports
household consumption
wholesale and retail price indices
developments in firms and segments, disaggregated by type of goods and geographical location
sector legislation and regulations
investment and innovation in commercial enterprises
issues of specific interest to small firms (management, credit, training) Respondents also indicated an interest in reports on economic developments and information bulletins prepared by business associations.

Characteristics of trade and distribution activities

In all the countries involved in the survey, trade and distribution are governed by national laws. Only a few indicated the existence of local laws in addition to national legislation. It was not specified whether such supplementary legislation was regional, provincial or municipal (e.g., Spain, Bosnia, Turkey, Greece) or whether there were customs and practices that played a role in governing trade and distribution (e.g. Spain and Yugoslavia). All of the respondents indicated the presence of modern retail outlets, such as supermarkets, discount stores and shopping centres. In most cases, such outlets are run by domestic firms, but foreign firms also played in role, both directly and through affiliates (e.g. Turkey, Portugal, Morocco, Spain).

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The answers to the Questionnaire have unanimously confirmed a broad support for the decision of the Steering Committee to launch the Observatory on Distributive Trades. The answers to the Questionnaire underlined also the general agreement on having cooperation among Euro-Med TDS members on the Distributive Trades related problems, and holding a seminar on the systems for collecting statistical data on trade and distribution. It is up to the Secretariat to follow the satisfacion of these requests.
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