r::: ·-..0 .c::l ·-I.. ..tn ·-c The EC distribution sector is undergoing considerable restructuring. Changes include concentration, reduction in the number of traditional wholesalers, transformations c: in the retail sector and a tendency towards 0 ·-~ diversification and internationalisation. :::J Moreover, the future of the distributive sector will be ..a influenced by the achievement of the internal market ·-1.. and the opening-up of Eastern Europe. ~tn The Economic •!• wholesale distribution (NACE 61 ), defined ·-c importance of the as "units exclusively or primarily engaged

industry in the EC in the resale of goods in their own name

economy to retailers or other wholesalers, to manu-

In analysing the overall importance of the facturers and others for further process- sector within the economy, the major pro- ing, to professional users, including craft-

blems are those of definition and of adequ- smen, or to other major users."

ate statistics. The definition issue is chiefly •!• retail distribution (NACE 64 and 65) , due to the fact that the divisions between defined as the distribution to final con- the sub-sectors concerned (manufacturers, sumers of wholesalers, transporters, agents, retailers) - food, drink and tobacco;

are becoming less clear. These actors are - dispensing chemicals; tending to overlap, and the fact that manu- - medical goods, cosmetics and cleaning facturers or transporters are fulfilling roles materials; which were typically those of wholesalers - clothing ;

means that this activity is not recorded in - footwear and leather goods; the official NACE statistics for th is sector. - furnishing fabrics and other household tex-

This consequent lack of reliable statistics tiles;

makes it difficult to assess the value of - household equipment, fittings, appliances, the sector in the Community economy. hardware and ironmongery;

Nevertheless, it can be stated that the sec- - motor vehicles and cycles; tor represents about 13% of both output - motor fuels and lubricating oils;

and employment in the European Com- - books, newspapers, stationery

munity. These figures have remained rela- and office supplies; tively constant over the last ten years, - photographic, optical , jewellery showing that the distribution sector has and other retail distribution. grown in line with economy. These definitions describe the

Description of the function and product areas char- industry acterising wholesalers and re-

The industry is divided into two sub-sectors tailers. They do not cover the

P A M A 23-1 fact that many organisations perform both rise in franchising and a proliferation of - franchisees are moving into services functions, or that the ownership of whole- forms of distance selling are prominent (travel, financial services etc) as well as salers and/or retailers may reside in oper- features; goods. ators from another sub-sector of the - a tendency towards diversification of acti- Diversification of activities is occurring, supply chain (such as manufacturers), or vities into other service areas and some whereby producers (typically non-food) set that manufacturers in some areas carry specific moves towards internationalisation. up retail operations, or where retailers out their own wholesaling and retailing - Geographic variance remains of great im- offer services such as travel, financial ser- and are not thus covered by the statistics portance in the structure of the distribu- vices, restaurants etc. for the latter sector. tion industry. lnternationalisation tends to occur towards

A further important point is that the defini- The concentration phenomenon is more neighbouring Member States at first, be- tion of wholesalers ignores the increasingly evident in northern Member States, with cause of cultural similarities. Non-food re- wider role that many operators within the not only a rationalisation in the direct re- tailers are the operators most prone to sector are playing. For example, the tail sector, but also the emergence of pur- internationalise, with great attention having change in manufacturing to tightly-managed chasing groups and voluntary chains to to be paid to national consumer tastes. production techniques (such as Just-In- benefit from economies of scale. The Euro-consumer does not yet exist,

Time) means that the whole distribution Wholesalers are often thought of as being even if consumption patterns are moving chain is becoming more sophisticated, and things of the past, in that the traditional closer together. that wholesalers are also taking on tunc- operator now often finds himself squeezed Geographical features tions such as packaging, quality control out, either through a manufacturer's wish The most obvious influence of geography and administration. None of these is in- to control distribution himself or through on the sector is in the differences of defini- eluded in the NACE definition, but they the large retailer's practice of upstream ex- tion of what a wholesaler is, and in the nevertheless affect the contribution to the tension. role of the small retail outlet. economy of the sector as well as the However, some forms of wholesaling are In Germany, for example, wholesaling profile of the wholesaler. on the increase, such as wholesaler- tends to be thought of as the distribution

Structure of the industry owned voluntary chains and specialist oper- and procurement activity of manufacturers.

There is great change occurring within ators who focus on specific end-users In France, the tendency of manufacturers and between the sub-sectors of the dis- (such as schools and hospitals). "Tradi- to subcontract sales activities and of re- tribution industry. This can be summarised tional" wholesaling does survive in raw ma- tailers to subcontract buying, results in as: terials and bulk products, because of the wholesaling being seen as a large growth

- concentration, expressed in terms of a re- logistics involved. sector. The Dutch import-export agencies,

duced number of larger operators, and The structure of retailing continues to which are major economic operators, con-

closer vertical links between manufac- evolve, with marked differences between tribute to that country having the feeling

turers, wholesalers and retailers; the north and the south of the Community. that the sector is dynamic, while in the

- a general reduction in the number of tradi- In the north, concentration and larger out- United Kingdom, a more restrictive view is

tional wholesalers, bearing in mind the lets are the new trends. In the south, smal- taken, namely that of the old-style "middle

fact that the concept of wholesaling ler shops remain very prominent. man" between manufacturer and retailer,

seems to have different meanings within An interesting trend is emerging within the now in decline.

different Member States; retail sector, whereby Taking these differences of perception into

- a series of transformations in the retail - retail groups are the typical operators in account, the major feature of geographical

sector, with significant differences be- food retailing variance in wholesaling is that the north-

tween Member States. Overall a slower in- - voluntary chains feature in non-food retail- ern Member States exhibit much more evi-

crease than before in hypermarkets, a ing, and dence of a blurring of activities between

p A M A 23-2 manufacturer, wholesaler and retailer then While the achievement of an integrated The problem is, of course, for smaller do those in the south. EC market will require a European distribu- players, who may find that the investment

As for retail, large food and non-food tive systems (and the Community's actions in technology required is too great for

shops are steadily increasing their domin- in the transport, competition, investment, them to support.

ance of the market in northern Member structural funds and enterprise policy The opportunities created for logistics plan­

States (including France) while the small areas are helping this to come about), dis- ning and management by the abolition of

operator survives tenaciously in Italy and tributive sector operators face two conflict- internal frontiers should contribute to ex-

Spain. The overall importance of the small ing pressures in seeking to meet the pansion in physical distribution activities.

outlet should not be underestimated; for challenge. The first is the increased com- Taken together with the liberalisation in example, the 80 largest food retailers in petition from other Member States as the road transport, this area should see major the Community do less than 60% of the concentration and integration in the sector, change. This will in turn produce a situ- total business. encouraged further by cost reductions fol- ation where distribution strategies will in-

Concentration in retailing is thus correlated lowing the completion of the Internal Mar- fluence consumption patterns, and where with the level of economic development of ket, forces them to broaden their horizons marketing activities typically performed by the Member State, except for Italy, which and seek cross-border opportunities. manufacturers may be taken on by distribu-

retains its high number of small shops. The second feature is the continuing re- tors and traders.

Franchising and non-shop retailing are quirement to respect local culture in de- Finally, the trend towards a lower percent- also notable for some geographic variance, livery of services, a feature which reduces age of household income being spent on explained in the monograph on retail dis- the scope for rationalisation and interna- retail goods (and more on housing, tribution. tionalisation. leisure, travel and other services) will con-

Risk and opportunities The key may thus be effective streamlin­ tribute to ever more aggressive fights for

for the future ing of operations through technology, enab- market share and continued change in the

The changes inherent to the sector itself ling the operator to carry out more sector as a whole.

(concentration, increased use of techno- activities at an overall higher level of soph- logy, vertical integration and diversifica- istication. Electronic Data Interchange tion) must be seen together with (EDI), Electronic Point-of-Sale (EPOS), extraneous developments such as the ere- and Direct Product Profitability (DPP) tech- ation of the Internal Market by 1 January niques are used widely as essential tools

1993 and the potential opening-up of East in upgrading activities. Written by: DRT Europe Services

European markets.

p A 23-3 The traditional role of the wholesale sector in t: supplying warehousing and transport services 1s 0 rapidly being eroded by the development 1n ·-... technology and logistics management. Traditional :::J .c wholesale services are still in demand, but increasingly only as part of a sophisticated package ·-1.. ... of services including marketing know-how, financial tn services and training. The completion of the Single ·--c Market is expected to increase competition as well as the need for strategically located warehousing. New Cl) -as information technologies will force wholesalers to tn examine their relationships with suppliers and Cl) customers and will probably lead to closer - relationships if they are to survive. Increased 0 competition and new information technologies are .£:: expected to lead to greater concentration in the 3: sector. Employment opportunities remain high, but re-training in the new technological applications is increasingly necessary.

Description of the sector of the wholesale trade as the suppliers of

Wholesale distribution is defined, accord- warehousing and of transport services,

ing to NACE 61, as: "units exclusively or with particular emphasis on the bulk sup-

primarily engaged in the resale of goods in ply of consumer goods to the industrial

their own name to retailers or other whole- and agricultural sectors. However, it has

salers to manufacturers and others for fur- become more difficult and less useful to

ther processing, treatment, packing or define the boundaries between wholesal-

unpacking to which they are usually sub- ing and other commercial activities. In prac-

jected by the wholesale dealer. Generally tice, the NACE definition, and the

speaking, the latter's role involves, on the statistics collected in accordance with it no

one hand, the storing of goods and, on the longer reflect properly the nature and ex-

other, taking title to and/or having the right tent of activities of bulk distribution.

to dispose of the goods in question." Wholesaling should be viewed in the tunc-

This definition reflects the traditional role tion that it performs in the supply of

p A M A 23-4 goods to the market place. All goods pass the product. It is economical to distribute saler often also acts as the importer, along a supply chain, starting as raw ma- at a local level bulk items, steels, chemi- usually with exclusive sales arrangements terials, processed into commodities (such cals and fertilisers which are expensive to with the manufacturer. Often such whole- as iron), converted into equipment or con- store and transport relative to their value; salers are regarded as technical special- sumer goods and ultimately used by the •:• commercial and marketing pressures. The ists and are likely to provide a range of final consumer. greater the pressure for a manufacturer value added services such as installation,

At each stage of the chain, companies to preserve a brand image and market po- maintenance and training. In general, com-

"add value" to the product and sell at a sition, the greater the incentive to control panies tend to be medium-sized and oper- higher price in order to make a profit. This downstream operations. ate either regionally or within a single

"value added" can take many forms and is It has already been said that it is perhaps country. not necessarily a manufacturing function. more convenient to view wholesalers in However, manufacturers often feel that

Frequently, it is a service function such as terms of the functions they perform within traditional wholesalers are unable to offer the provision of knowledge, technical sup- the value chain. However, an issue second- the quality of service for their products port, a wide range of goods, a delivery ser- ary to this is the question of ownership. that they would wish, and that the whole- vice, training or maintenance. For example, if we look at the food sector, saler also stands between the manufac-

The manner in which wholesalers operate a food wholesaler could be owned by an turer and his customer. As a result, and the extent to which they provide ser- independent wholesaler, a consortium of re- exclusive distribution agreements are often vices, depends on several factors: tailers (buying group), a retail chain or a established, or the manufacturer estab-

•:• the number of customers and the degree manufacturer. The food wholesaler, owned lishes his own distribution operation. This

of concentration in the market place. A by the different categories, provides the development is particularly strong in the

small number of customers and a large same function to all of them, but its owner- computer industry and allows the manufac-

concentration reduces the role for whole- ship, and therefore, the manner in which it turer direct access to his markets.

salers (food wholesalers have almost dis- shows up in the statistics, is very difficult. •:• In the consumer durable sectors, whole-

appeared in several countries as retail The role of wholesalers varies from pro- salers are bypassed as there is a high

chains have vertically integrated and con- duct stream to product stream. Below we concentration in the retail sector. This is

cent rated); briefly examine the nature of each of particularly true for furniture, electrical

•:• the service level demanded by cus- these: goods, footwear and toys. Exceptions to

tomers. The higher the service levels de- •:• With raw materials and bulk products the this are textiles and gifts, where whole-

manded, the greater the role for whole- role for the wholesaler remains strong, salers react quickly to changes in fashion

salers (e.g. in the pharmaceutical indus- mainly because of two reasons: transport and style;

try, chemists dispensing drugs demand costs are high relative to the value of the •:• The food and fast-moving consumer

high service levels as they cannot afford products and customers demand high ser- goods (FMCG) sector is being radically

to have their own stocks and the manu- vice levels with short delivery times. The changed by the intense concentration in

facturer cannot provide the delivery ser- logistics elements of supply dominate in the retail sector at the expense of the

vice); this sector with emphasis on the minimis- traditional family wholesalers. Retail oper-

•:• the geographical spread of customers. ation of transport costs. There is little ators have centralised their distribution

The more geographically spread out the "value added" to the product. This sector functions, thus taking over part of the pro-

greater the role for wholesalers (e.g. agri- tends to be concentrated on a few large cess formally undertaken by wholesalers.

cultural cooperatives still thrive in many international companies, often closely Similarly, independent retailers have fa-

rural areas, supplying a wide range of ag- linked with a producer; voured purchasing cooperatives, again at

ricultural products); •:• Industrial and capital goods wholesaling the expense of the traditional wholesaler.

•:• the physical characteristics and value of is mainly import based, where the whole- The remaining independent wholesalers

p A M A 23-5 Figure 1 Wholesale distribution The value chain

ISSUES u TRANSPORT BULK u SERVICE MATERIALS ¢ 0 0 u SUPPLIER RELATIONSHIP u EXCLUSIVE SALES INDUSTRIAL AGREEMENTS GOODS ¢ u VALUE ADDED SERVICE PRODUCTS u VERY FEW CONSUMER DURABLES 0 0 u NICHE MARKETS FAST MOVING u BREAK BULK FUNCTION CONSUMER u VALUE ADDED SERVICES GOODS 0 u VARIED OWNERSHIPS Raw Manufacturer Retail Consumer Source DRT Europe Serv1ces Materials

have concentrated on specific market seg- vice schools, hospitals, office users and the definition of the sectors and the collec-

ments such as the independent catering specialist retailers; tion of statistics difficult and even meaning-

market, replenishment of petrol stations •:• Trading Houses: these are often import/ex- less.

and the chilled food sector. Mail order port agencies who specialise in procuring No reliable information is available on the

and telemarketing operations, freight car- a wide range of products from overseas role of non-profit making organisations in

riers, commercial agents and other sup- and selling them in domestic markets. wholesaling. However, it is clear from the

pliers of distributive services (who do not Traditionally, they may have been associ- types of wholesalers described above that

necessarily take title to the goods) have ated with a large trading house that may the majority of enterprises exist to make a

also decreased the role of the wholesaler. have started by supplying commodities profit. This is underlined in table 2 which

The different types of wholesalers, arising such as tea, coffee and even raw rna- emphasises the small, family nature of from the function they perform, can be terials. However, they have expanded many wholesale operations. The major ex- classified as follows: their operations over the years to include captions to this may be voluntary chains

•:• Traditional Wholesaler: specialised in a consumer durables such as clothing, cars and purchasing cooperatives which exist

particular product category. As described and electrical products. Many of these as a service to their members. However,

above this sector is rapidly disappearing, have established very close links with par- no reliable data exists to help identify

but is still strong in bulk goods, pharma- ticular manufacturers and in some in- these as a separate category.

ceuticals and seems to be reemerging in stances could be regarded as "distribu- Current situation

certain FMCG areas. In the FMCG sector, tors" rather than wholesalers; Manufacturers, who are both suppliers to

wholesalers primarily "break bulk" and •:• Procurement Agencies: these specialise and customers of wholesalers, are consoli-

take several forms: traditional independent in identifying particular markets, finding pro- dating their operations into fewer specialist

wholesalers, voluntary chains, purchasing ducts and suppliers to satisfy them. facilities and adopting just-in-time (JIT) pro-

cooperatives, cash and carry operators, up- As discussed in the overview, distribution duction techniques. This has the effect of

stream retail distribution operations, down- is increasingly viewed as a "supply chain" both physically lengthening the supply

stream manufacturing operations; in which manufacturers, wholesalers and chain and making the service requirements

•:• Specialist Wholesalers: these focus on retailers all play a role. As a result, the of the supplier of crucial importance. Both

particular end users and seek to meet all distinction between these has become in- of these factors represent an opportunity

their requirements. Such operations ser- creasingly blurred in recent years, making for the wholesaler who is prepared to

p A M A 23-6 become a close business partner with a Table 1 Wholesale distribution manufacturer. This involves not only de- (except dealing in scrap and waste materials) Main indicators veloping a business relationship, but also Number of Turnover Gross value added Number of installing IT communications links directly enterprises , (exci.VAT) at market prices persons with each other's computers and control Mio~ ECU) (excl. VAT employed Mio. ECU) systems. 2 Belglque/Betgi~ 1987 44891 80 718.7 6 355.0 (l) 112135{ ) The buyers of these services are becom- Danmark 1986 24060 50 681.6 121 492 (2}' BR Deutschland 1986 108856 363 279.2 58 109.5 (1) 975167 ing increasingly sophisticated and will spec- Hell as 1988 90085 Espana 1988 ify strict standards of service, stock levels, 355118 France 1987 80405 232496.9 30 460.5 894267 ordering procedures, delivery lead times Jreland 1988 44563 ltalia 1981 109057 629136 3 and invoicing and financial arrangements. Luxembo~.;~rg 1987 1335 3053,7 275.9 ( ) 8857 Nederland 1987 39995 126946.3 11 434.7' 333®6 Wholesalers will need to respond to these Portugal 1988 00 507 (3)' United Kingdom 1987 114978 265489.7 806631 demands by developing high quality ser- 1 ( ) Estimation based on turi'ICWer and total amount of putehaSes vices based on good control and sound (2} 19B8- Based on "labour Force Survey" (") 1985 Soure&: Eurostat technical knowledge. They may also be able to respond by offering other value ators from one country to operate entirely effectively acting as agents for their clients. added services such as packaging, quality within another. Finally, the recent developments in Eastern control, assembly and essential administra- In addition, the harmonisation of key cost Europe have opened up a number of op- tive procedures. elements such as diesel tax and road tax portunities for the wholesale sector. While

Trends in trade (currently under discussion) will ultimately trade has been limited up until now, the

There are a number of important factors encourage operators to locate according to privatisation of state enterprises and the which will affect trading patterns over the the demands of the market and not encouragement of commercial enterprises next few years. necessarily according to other cost factors. has opened the door to the setting up of

The implementation of the Single European Consequently, operations are expected to operations, especially where this is accom-

Market in 1993 is widely expected both to become centralised on major warehouses panied by investment. A major expansion increase the flow of goods to be traded at strategically significant locations. These of trade in the medium-term is expected. within the Community while at the same will form the basis of European Logistics Employment trends time increasing competition within the sec- Networks which will undertake far more Table 1 indicates that there is a total of tor and leading to a restructuring of dis- intra community trade than exists at pres- about 4.45 million persons employed in tribution operations. A number of ent. the wholesale sector in the EC. This figure legislative changes being implemented will These types of operations generate a seems to have been fairly consistent have the effect of producing a more "level greater need for well-managed warehous- throughout the last few years with total em- playing field", enabling distribution oper- ing and transport operations. This of ployment changing hardly at all in the ations to be set up along logistics lines course is the traditional role of the whole- years 1984 to 1988. rather than on national lines. saler but when manufacturing and retail Table 2 provides a more detailed break-

In, particular, the removal of bi-lateral companies do not wish to use a whole- down of employment. Traditionally whole- quotas for international journeys will en- saler they will frequently place the physi- saling has been an industry of small able operators to make better use of their cal distribution into the hands of a organisations, often serving specific geo- vehicles for cross border trips and should contract distribution company. Most of graphic areas or occupying niche markets. ultimately result in reduced transport these companies have grown from road Such organisations have often been family costs. This will be further enhanced by the haulage operators, but many of them now owned and run. This is clearly identified in introduction of "cabotage" - enabling oper- operate pan-European distribution services the table that shows the relatively low

*** P A N *0* G1 R*A* M A * * *** 23-7 Table 2 Employment in wholesale distribution (except dealing in scrap and waste materials), 1987

As% of total employment Ratio of self As% of total working population In wholesale distribution employed to employed persons

Men Women Men Women Total

Belgique/BelgiEl 74.2 25.8 1: 3.8 2.12 0.74 2.86 Dan mark 69.7 30.3 1; 8.8 3.10 1,35 4,45 BR Deutschland 63.7 36.3 1; 1().3 1.93 1.10 3.()3 Hellas 74.8 25.2 1: 2.7 1.n o.~ 2.36 Espatia 7$.2 20.13 1: 4.6 2.27 0.59 2.86 France 69.4 30.6 1: 12.6 2.69 1.18 3.87 Ireland 80.0 20.0 1: 6.7 2.85 0.71 3.57 Luxembourg 72.3 27,7_ 1: 14.1 2.93 1.13 4.06 Nederland 73.7 26.3 1: 12,6 4.99 1.78 6.77 Pprtugal 78.7 21.3 1: 4.5 1.51 ' 0.41 1.92 United Kingdom 69.5 30.5 1: 10.2 2.16 0.95 3.11

EC11 70.2 29.8 1: 7.4 2.35 1.{)1 3.36

Source: Eurostat

ratio of self employed to employed per- Data communications systems are increas- tions of inventory control, order entry and sons. Some 30% of the work force are ingly being used for direct company to warehouse control systems. women, a statistic that varies from 20% in company contact. Electronic Data Inter- Information technology systems now oper-

Ireland to 36% in the Federal Republic of change (EDI), defined as the transfer of ate throughout the entire supply chain and

Germany. A number of conflicting press- structured information in electronic form be- provide many benefits to client users. ures exist in employment opportunities in tween computer systems belonging to sep- Examples are: the wholesale sector. On the one hand, a arate companies, reduces the •!• EPOS (electronic point of sale) uses bar declining working population will make re- communication chain by greatly speeding codes and laser scanners to identify sold cruitment of suitably qualified staff more dif- up order processing and the distribution products, automatically triggering replen- ficult. On the other hand it is anticipated cycle, and reducing time and distance con- ishment requests. Users of these systems that the industry will move increasingly to- straints. However, for data communication are only just beginning to appreciate the wards high levels of automation and will re- use to develop, method and technologies value of the information generated by duce the demand for labour. This later have to be standardised. Frequently this is EPOS systems (shelf management sys- trend will be accompanied by a structural developed at an industry level with cooper- tems and direct product profitability (DPP) change in the industry which will mean ation between suppliers, customers and systems). EPOS can also be linked to fewer and larger companies. This in turn in- competitors. This is particularly true for di- EFTPOS (electronics funds transfer at creases the opportunities for the successful rect customer/supplier links and of elec- point of sale), which aids cashflow control; implementation of highly automated oper- tronic shopping systems which display •:• Radio data terminals in modern ware- ations which will demand a smaller but various supplier prices. EDI is increasingly houses control the flow of goods. Product more highly qualified workforce. used for order processing, invoicing and flow around warehouses is monitored and

Investment and stock control. Its benefits are that it is instructions are communicated to fork lift

technology trends fast, reliable and accurate. truck operators via onboard screens, help-

While most wholesalers have computerised The major areas of investment are ex- ing to optimise the operations of the fork their commercial systems some years ago, pected to be in the use of scanning equip- lift trucks. it is only relatively recently that technology ment, EDI links and radio data systems in All these systems influence the provision has started to take over some key logis- warehouses. All these technologies play a of a flexible, responsive supply chain and tics functions. major role in supporting the logistics func- represent challenges that wholesalers

p A 23-8 need to confront. However, these systems The wholesale sector is therefore under enough to provide their own distribution in- effectively shorten the supply chain and pressure from a number of areas and will frastructure. Such wholesalers will need to thus reduce the opportunities for whole- need to respond by: continue to invest in modern technology, in- salers to "add value". In addition, the in- •:• being more efficient and reducing opera- eluding communications links with sup- vestment required is often too great for ting costs; pliers and customers as well as smaller companies to be able to support. •:• being more aware of customer require- sophisticated logistics control systems.

As well as investment in Information Tech- ments and "Value added" needs. The next decade will therefore be a period

nology, investment is needed in physical Outlook of investment together with a period of facilities. Warehouses, more correctly The changing structure of the industry in evolution to meet the demands of modern

referred to as distribution centres, are in- the European Community and develop- supply chain techniques.

creasingly developed at strategic locations ment of advanced information technology In this way the wholesaler will become an

and accommodate highly automated equip- (IT) has forced wholesalers to reappraise essential part of the customer's business

ment. Sophisticated control systems en- their relationships with both their suppliers and will remain an integral part of the

sure that the equipment is effectively and their customers. total supply chain.

utilised and that the product is always The demand for the tasks and services

available for the customer. provided by wholesalers is expected to in-

Structural changes crease in the next few years. Indeed, as

As shown in table 1, warehousing consists the general volume of trade increases, so

of nearly 1/2 million companies in the EC will the demand for distributive services.

employing some 4.4 million people. While The issue however is who will perform

it has been suggested that some degree these tasks and provide the services.

of consolidation in the industry ought to There is strong evidence to suggest that

be taking place, it is very difficult to detect as large companies seek to control their

such changes in official statistics. supply chains, they will increasingly take

However, a number of factors would indi- over the traditional wholesaler role them-

cate that consolidation is inevitable over selves. Thus many of the major retailers

the next few years: have already sought to control their supply

•:• a move towards European Logistics Oper- chains by undertaking their own "whole-

ations as opposed to local operations; sale" functions and by developing close

•:• the cost of the necessary investment in in- supply relationships with manufacturers.

formation technology and advanced sys- Likewise, manufacturers will seek close re-

terns will be too high for small companies; lationships with their customers and there-

•) pressure from the large retail groups, fore, assisted by sophisticated

who are beginning to develop their own communications links, will begin to bypass

"wholesale" functions in the guise of cen- the traditional wholesaler or insist on

tralised distribution. This will lead increas- greater control of the wholesaler's func-

ingly to independent wholesalers being tions.

superceded; However, these options are only currently

•:• the ability of advanced IT systems to by­ available to large companies and tradi-

pass the wholesaler entirely; tiona! wholesalers will continue to provide

•:• The economics of scale, especially in the services, either in niche markets or to re- Written by: DRT Europe Services I Planned consumer goods and sector. tailers and manufacturers who are not big Warehousing division

P A M A 23-9 Retail trade in the European Community is characterised by marked disparities of structure and level of development. Nevertheless, some overall trends can be seen at Community level: Movement of concentration of companies, development of logistics, technological , ·-- change and the use of new tools of management. as Furthermore, the impending arrival of the Single ~ Cl) Market presents new opportunities for distributors and a: faces them with new choices of strategy: external growth, diversification or internationalisation.

Description of the sector Present situation

The retail trade sector, as defined in European distribution, strictly speaking,

NACE categories, includes retail distribu- does not exist; the disparities of the re-

tion of the following merchandise: spective levels of development of the differ-

•!• food, drinks, tobacco; ent countries and regions of the

•!• dispensing pharmaceuticals; Community are reflected in marked structu-

•!• medical goods, cosmetics and cleaning ral differences in the retail trade sector.

materials; And although there may be convergences

•!• clothes; inside the European jigsaw puzzle, both

•!• shoes and leather goods; with regard to forms of distribution and

•!• furnishing fabrics and other household tex- modes of consumption , they have to inte-

tiles; grate national peculiarities linked to the his-

•!• household equipment, household fittings tory and culture of each nation.

and household appliances, as well as iron- The flow of modernisation of distribution

mongery; circuits in Europe, born of the Northern

•!• cars and bicycles; countries at the start of the 1960s, has

•!• motor fuels and lubricating oils; spread gradually and sluggishly in the Me-

•!• books, daily newspapers, stationery and diterranean countries. This development, fa-

office supplies; vouring an organised and concentrated

•!• photographic, optical and jewellery goods, method of distribution, has given rise to

etc. the emergence of new protagonists charac-

P A M A 23-10 Table 1 Retail trade in Western Europe, 1988

Population Retail sales Retail sales · Commercial (millions) (miiHonECU) per inhabitant Shops (thousand) (ECU)

Belgique/Belgi~ 9.88 34.8 3522 113.7 87 Oanmark 5.13 17.7 3450 41.7 123 BR Deutschland 61.14 233.0 3811 415.0 '147 Hellas 9.98 17.6 1764 171.5 58 Espal'la 38,91 81.9 2105 540.0 72 France 55.75 207,6 3724 418.2 133 1retand 3.54 7.1 2006 31.5 ' 112 lta!ia 57.4 182.3 3176 871.3. 66 Luxembourg 0.37 1.4 3784 3.7 101 Nederland 14.72 39.3 2670 156.2 94 Portugal 10.23 18.8 183& 97.5 105 United Kingdom 57.07 156,9 2750 343.4 166

Austria 7.61 23.6 3101 39.1 195 Norway 4.21 15.2' 3·Ei10 39.1 1oS Sweden 8.41 34.4 4090 63.4 1'33 Switzerland 6.56 32.1 4893 54.4 121

Total 299.25 1103.7 3688 3399.7 1821

~: Retailing In Europe (1990), The Corporate IntelligenCe Group, london

terised by all or some of the following fea- whereas the independent traders retain a stores, this percentage drops to below

tures: large market share in rural or less de- 50% in Italy or Spain. On the contrary, the

- very large outlets (supermarkets, hyper­ veloped areas. The concentration of the most powerful distribution groups are found

markets, specialist large outlets ... ). It food trade is found especially to have a di- in Northern Europe and France. This corre-

should be noted that no European stand- rect correlation with the economic level of lation is found again with regard to sales

ard exists concerning the sales area of re- countries, which explains the strong an- area per inhabitant: over 2,000 m2 per

tail outlets: for example, it is found that chorage of specialist distribution in south- 10,000 inhabitants in France as against

the countries new to distribution, such as ern Europe: whilst in Scandinavia, 75% of 453 in Italy. Finally, the share of turnover

Spain and Italy, have the highest aver- food products are sold in general food achieved by independent trading in general

ages of hypermarket sales area, with over

7,000 m2; Table 2 Retail food trade in Europe - a high degree of automation of operations; Classification according to turnover, 1989

- retail outlet networks enabling effective Company Turnover 1~ (million ECU} covering of the region or of the national Metro-Gruppe BAD 11473 territory; Leclerc F 9948 lntermarche F 9238 - a considerable shopping space and in- Carrefour F 9214 J Sainsbury creasingly sophisticated sourcing UK 9049 Aewa..Leibbrand BAD 7858 methods, especially in relation to the in- Aldi SRD 7836 Marks and Spencer UK 783'e creased weight of branded retail products; Ahold NL 1e13 Vendex Jntemationat Nl 7587 - the creation of exportable concepts. Tengelmann BRD 7520 Tesco UK 7195 This movement is occurring at rates which Asko~Scltaper.-Massa BRO 7038 tsooe:les UK 6917 vary according to countries, relative to the Promodes F 6566 Migros Switzerland 6$)0 stage of economic development, life style CoopAG BRD 5568, KFGroup Sweden 5280 and consumption habits of the inhabitants. Argyll .UK 5273 · Kesko Anla~ 5264 The richest countries have recorded a Source: Institute of Grocery Distribution rapid concentration of retail distribution,

p A M A 23-11 foodstuffs varies greatly from ont. s·;untry centrations are frequently accompanied differentiated for retail distribution: to another: from 30% in Italy to only 2% by diversifications, especially for the - isolated independent trading, in which the in France. groups in which department stores were firms have no ties with co-ordinating or

It is nevertheless necessary to moderate their original activity. centralising organisations for their selling this statement. For instance, the relatively - the internationalisation of distribution by or buying activities. These, in the majority small sales area per inhabitant in the southern Europe: the markets of northern of cases, are specialist trades;

United Kingdom does not constitute an Europe are occupied by some powerful - concentrated or integrated trading, which, index of under-development, but reflects a groups, which limits the possibilities of ex- at least some of it, performs wholesale specific distribution of private consumer pansion to external growth through mer- and retail functions at the same time: de- consumption: this country, in fact, has the gers, take-overs or partnership agree- partment stores, discount stores, multiple highest consumption outside the home in ments, whereas the Mediterranean coun- chains, consumer cooperatives, mail order

Europe, and the restaurant trade there is tries have to catch up in respect of the companies (at least those which offer a seen as the main competitor of the super- modernisation of their sales machinery. general catalogue), supermarket manage- market. Incidentally, recent studies In this context, the completion of the large ment companies. Commercial groups are

("2000 Distributors" Study carried out by internal market constitutes a complex chal- found within this organisational format, i.e.

GIRA) have revealed the low concentration lenge for the retail trade during the next groups of companies characterised by a of distribution at EC level: the 80 leading few years. Management of the change uniformity of management and whose con- multiple food chains achieve less than becomes an essential condition of survival tours are defined by financial links, shares

60% of the total turnover. for operators forced to conciliate local trad- of control and shares of interest;

Despite pronounced differences, the differ- ing format and international competition - associated independent trading, which is ent channels of distribution in Europe are strategy. characterised by a concentration of re- developing according to some major trends Structure of the sector sources without financial integration in a of a transversal nature, with variable The structure of the retail trade sector single organisation in which the traders effects according to countries: varies considerably from one country to an- are still the owners of their capital and

- a decrease in the number of general other in the European Community. On the are responsible for their own manage-

food stores, in the region of 30% be- one hand, the definitions of the different ment. This category includes retailers' co-

tween 1976 and 1985, recorded every- distribution formats, especially those based operatives, voluntary chains and franchis-

where except in Spain and Italy, where on selling space, are not homogeneous. In ing.

comparatively very low reductions are addition, there are channels specific to a A certain specialisation of business ap-

seen; given country, which limits international pears notable amongst the three associ-

- an increase in the number of hypermar- comparisons. On the other hand, with com- ated trading families, which tend to be in

kets, the strongest growths having been parable distribution formats, the operating food for the retailers' cooperatives, non-

found in the Mediterranean countries and methods (organisation of relations with sup- food for the voluntary chains and with an

the United Kingdom. On the other hand, pliers, corporate identity, ownership, etc.) increasing trend towards the sale of ser-

there is a fairly clear difference in the are likely to cover a wide diversity of vices (offered on their own or simulta-

case of the Netherlands: there, the small forms. A hypermarket can, for example, be neously with merchandising of a product)

number of hypermarkets is explained by created and run by independent retailers, for franchising.

the strong presence of self-service in food- generally associates in a purchasing The aforesaid organisational formats of

stuffs; group, firms with subsidiaries, companies the retail trade apply to different distribu-

- the accentuation of the phenomenon of running supermarkets, consumer coopera- tion formats, the main ones of which are

concentration, particularly clear in the tives, or even department stores. briefly described below:

foodstuffs field. It can be seen that con- Three main organisational formats can be - the hypermarket:

23-12 This is generally defined as a retail sales Figure 1 Retail trade establishment with a minimum selling Supermarkets space of 2,500 m2 offering, mainly by the c 0 self-service method and at very competi- en ~ca B tive prices, a wide range of food and non - e ·u D ... 0 ;;::en E food products (25 ,000 to 50 ,000 ..... en -----··=-·· _____..:..______.~ 358 ca F references , 4,000 of which are in the food 0 ...... 67 ~ ~ trade) , and which in addition have parking .a .a NL facilities. In certain countries this term des- E E :I~ p ignates stores with selling space of over zE ... UK ~ 5,000 m2 , whilst retail outlets with selling a. 40 80 120 160 200 240 280 320 360 400 space between 2,500 m2 and 5,000 m2 in-

elusive are called "superstores".

The preferred location of hypermarkets

and superstores is out-of-town, bearing in 18.8%

mind the necessary space. The hypermar- 29.4%

ket mostly plays the "locomotive" role of a

shopping centre , where it exists alongside

specialist trades and service businesses.

The hypermarkets occupy an important L 29% place in all the European retail markets, --- __I____ -- !79.6% but the rapid growth recorded during re-

0% 10% 20% 30% 40% 50% 60% 70% 80 % cent years appears to be slowing down. In

France, the initiator of the concept, they Source: Groupement Europeen des Entreprises de Distribution lntegree (GEDIS) play a preponderant role and achieve over

19% of the turnover of the whole of the re- tries with a strong traditional type of trade products and services, whilst the "hard dis-

tail trade. Hypermarkets have set foot in (as in Spain , Italy or Greece), this sales counters" (Aidi and Lidel in Germany; Eda

the Mediterranean countries, where they format has expanded the most rapidly dur- in the Netherlands; Europa Discount, Le

have been introduced by French groups ing the past ten years, such that it en- Mutant and Ecomarche in France) are cur-

and they are in a period of sustained abled a transition towards modern rently achieving considerable success with

growth in Spain and, to a lesser extent, in methods of distribution to take place by very spartan formulas (very plain presenta-

Italy. adapting itself to local situations (large tion and range limited to 600 references).

- the supermarket: number of medium-sized towns, areas of In those countries where modern distribu-

This is a retail sales store operated on a limited market radius, attachment to tradi- tion is already strongly established, the

self-service basis, with a sales area be- tion). supermarkets constitute a large share of

tween 400 m2 and 2,500 m2 inclusive, In northern Europe the number of openings the selling apparatus. It is observed that

and offering a complete range of food- is increasing at a slower rate and distribu- all the large food chains in France (Ca-

stuffs - including perishables - to which tors appear to favour amalgamations and sino) , the United Kingdom (Sainsbury,

may also be added other large consumer mergers of businesses. The location of Tesco, Asda) , in the Federal Republic of

items. shop brand names is also becoming in- Germany (Aidi) or the Netherlands (Ahold) ,

The development of the supermarkets is creasingly segmented. New formats place own a powerful network of supermarkets.

variable in Europe. In the southern coun- the accent on proximity, offer of ultra-fresh - the consumer co-operative :

p A M A 23-13 Table 3 space, offering a wide range of products Buying and services groups in Europe (especially household goods and clothing), Organisation Country Retail Turnover Wholesale Turnover - Number of Sales presented in several departments and mill. ECUs mifi.ECUs Members- Outlets generally sold over the counter, and also Zentgens D 32613 11 562 124470 149100 Edeka D 10294 7349 12372 14 558- offering various types of services to its cus- Crai I 7264 1466 6000 6800 UFCC F 5575 1555 7437 8856 tamers. The department stores, which ap- Conad t 3673 1374 12000 12070 peared in Europe at the end of the XIXth Codec F 2365 1 395 984 1088 Uda E 2066 826 9950 10100 Century, have had to carry on in the face Sigma I 955 341 3650 3650 Sperwer NL 625 255 477 490 of an environment completely overturned Hokl OK 522 203 665 672 Enkabe--Unika NL 395 181 622 660 by the appearance of the modern distribu- ANCD t 312 112 660 700 Ucrepa p 237 136 6000 6000 tion formats. VAC 8/L 119 90 620 660 After attempting to export the concept of Source: Union Europeenne des groupements d'achat et de services cooperatifs the city centre department store to me-

dium-sized urban centres or out-of-town

This is a distribution enterprise in which the retailers' co-operative. The voluntary shopping centres, the Groups have lost the customers are the owners, conducting chain consists of a form of collaboration ground against the competition of the retail selling, working on the legal bases between one or more wholesalers and re- hypermarkets and specialist multiple of the cooperative system. In the United tailers for the purchase and sale of pro- chains. The sector has seen large concen-

Kingdom, France, Belgium and Germany, ducts, generally carried out under a joint tration and restructuring movements and consumer co-operatives are declining, los- name or brand and accompanied by techni- has started to diversify its traditional acti- ing market shares in the face of more com- cal assistance to the retailer. A more wide- vities (to banking in Germany, real estate petitive chains, whereas they are enjoying spread system: a vertically structured and travel agencies in Spain, for example). good health in Italy and Denmark. Con- commercial company with a central control The market share of the department stores sideration at European level leads to the unit, one or more wholesalers and retailers today shows a tendency to stabilise, or mention of countries outside the EC where who commit themselves to making a mini- even regress, especially in Germany (ap- powerful cooperative movements are to be mum percentage of their purchases from proximately 5%) and France (less than found: Switzerland, with Migros and Coop each other. 2%). It is observed that the very big depart-

Suisse, and Finland, with Keske, Fineka The retailers' cooperative, on the other ment stores (from 8,000 m2 to 30,000 m2) and Sok. hand, consists of an amalgamation of inde- record good results, obtained after reloca-

In France and Germany, this sector is cur- pendent retailers associated for the pur- tion of businesses, internal reorganisation rently experiencing a difficult situation. pose of making common purchases and and up-dating of their image.

Firstly, the consumer cooperatives have collectively running a certain number of The leading department store chains are suffered the full brunt of competition from services. Very common in the Nordic coun- found in the United Kingdom (Marks & the new forms of distribution and many of tries, the retailers' cooperatives are also Spencer, Harrod's), Germany (Karstadt, them have disappeared. Secondly, the Ger- active in Germany, where they claim over Kaufhof, Hertie), the Netherlands (Vendex man "Coop Ag", the former leader of the 30% of the market. In France they amount International) and, to a certain extent, in

European cooperative movement, is today to over 13 °/~ of the retail turnover, almost France (Printemps, Galeries Lafayette, Nou- collapsing under debts and is planning half of which can be put down to the Le- velles Galeries) - countries whose capital large transfers. clerc Group. cities have high densities of population. AI-

- the purchasing group: - the department store: though department stores are less

This type of organisation consists of two This is defined as a sales establishment numerous in Spain and Italy than else- different formats: the voluntary chain and with a minimum of 2,500 m2 of selling where, they are nonetheless "beacon" busi-

p A M A 23-14 nesses and are included amongst the ten Figure 2 Retail trade leading ones in the European classification. Franchises - franchising :

Franchising is a method of collaboration

between a firm (the franchisor) wishing to distribute a trade mark, brand name or pro- ducts, and an independent operator (the I (1) ~~~~::::=~'-======<1 franchisee). It entails for the franchisor: NL (1)

•:• ownership of or the right to use signs for UK Norway winning customers: trade mark, brand Sweden name, commercial name, etc.; 0 100 200 300 400 500 600 700 •:• possession of a certain know-how;

•:• a range of products and/or services. G) G) The combination of these three factors con- en :.Ca» stitutes the concept of "franchisable", on u­ c ftl E ca en . --· ___030000 the basis of which the franchisor develops F ~'!!!!ll!ir-=-- ...... 0 ------~: 9400 a franchised network, the perpetuity of -~------~------1 '0.:! NL ~F~--==-·=·~-~--~--C:-::.:_=___=_=_J~. ]=82=5·2--"'------c...:...======which he must ensure. Franchisor and fran- .. c G)"------~=-- ~n 23000 .aO UK -- chisees are bound by a contract the con- E a. Norway :I tents of which are very close to those of z Sweden the commercial dealership, and which dif- 0 6000 12000 18000 24000 30000

ferentiates from it only in the payment of ------a charge by the latter to the former. .. B !!1111!,..,~------__-_---112.9 G) "Franchising" Europe consists of approxi- >::::. ou D ~~--_____:_c:.=--=~------_] 4.8 mately 2,000 franchisors and 90,000 fran- Ew E :a .. 14.5 chisees. However, the situation appears to .. 0 F G) c vary considerably from one country to an- G)en.- 0 other, by the extent to which the develop- ·--.c: u.a UK c c ment of brand names has taken place l!·- Norway unequally over the past ten years. France 11. Sweden

0 5 10 15 occupies a dominant position in this niche,

strengthened by a long tradition: franchis- (1) Including concession ing was born as early as 1929, on the Source: French Franchising Federation

initiative of the big wool merchants of the Europe, where they can be traced to the of mailshots which are addressed to each

North. In Belgium also, franchising is long- origin of the boom which has been taking individual potential purchaser;

established. On the other hand, the take- place in franchising for a few years now. •:• agreement by the consumer expressed

off of this formula is more recent in the - mail order: by an order;

Netherlands and Germany, where it is Mail order differs from the other forms of •:• dispatch of the products or carrying out

rapidly increasing. A large presence of selling by the absence of direct contact be- of the services after receipt of the order.

foreign chains can be seen in the United tween seller and buyer and is defined At European level, mail order only occu-

Kingdom, dominated by American master through three criteria: pies a significant place in the retail trade

franchises, and in the southern countries of •:• offering of products or services by means in Germany, France and the United King-

23-15 Figure 3 1985, France in 1987, and Germany, Retail trade Great Britain and Belgium the following Mail order selling in Europe, 1989 year. It is a real industry which is in the

:".:11532 process of seeing the light of day throug­ B(1) ~:r=::531 OK . ] 12288 hout the whole of Europe. -::t --·----~----- .. CJ 5640 Remote selling is currently becoming the Cl) w F > en most strongly established in France, c0 c NL .. thanks to a voluntarist policy of develop- :I .~ - UK ... - ment of the minitel system. By consider- ·- Finland ...... E Sweden ably enlarging the size of the market open Switzerland to enterprises, the Europe of 1993 should 0 2000 4000 6000 8000 10000 12000 favour the emergence of large tele-distribu-

tors controlling four types of activity:

B(1) •:• distribution; OK ·--ftl •:• television and cable television; 0 ..Cl) F •:• banking and finance; .. Cl) II- "a 0 ftl •:• physical delivery of goods. Cl) .. NL .... UK - home selling: ftl .c Finland This is based on human relations and con- rn Sweden sists of taking the initiative of direct, physi- Switzerland

0% 1% 2% 3% 4% 5% cal contact with the end consumer and

offering him products or services outside (1) 1988 Source: Association of mail order and long-distance retailers premises normally reserved for selling (at

dam, which three countries alone achieve ing formats: sale by video-magazine (sup- home, in the place of work, etc.). Home

over 80% of total sales. In the other coun- plement to the traditional catalogue), by selling is not limited to mere canvassing; it

tries, mail order business represents ap- video-catalogue (completely autonomous, is becoming increasingly orientated to-

proximately 2% of retail turnover, either this method is associated with a telephone wards two types of format. The first is

because its development has been re- ordering service, generally open 24 hours based on "parties", of the type organised

stricted by a limited market (Belgium, a day), home supermarket (orders by tele- by Tupperware. The second is multi-level

Netherlands), or because its expansion is phone or minitel based on a catalogue of selling, which is based on sponsorship. In

hampered by various difficulties (problems approximately 1 ,200 products, delivered to the case of the first method, the turnover

with postage, transport, etc., in southern the home), electronic sales centres and achieved at each "party" enables the

Europe). The main companies are there- tele-shopping. organiser to receive a percentage. With

fore found in the countries where mail The principle of tele-shopping is simple: the other method, each distribution agent

order occupies strong positions, especially from a television studio, a presenter sug- has to become a "sponsor" and recruit

in Germany (Otto Versand, Schickedanz - gests directly to viewers that they tele- one or more "proteges", whose purchases

Quelle), the European leader, where sales phone in to purchase immediately a will procure a commission for him. In

per capita are twice as high as in France product, the characteristics and qualities of 1988, the turnover of home selling in-

(La Redoute, 3 Suisses, Camif), or in which he describes in just a few minutes. creased in France to over 6 billion Francs,

Great Britain (Great Universal Store). Originating in Italy more than fifteen years achieved by 250,000 sellers, 90% of

The development of telecommunications ago, tele-shopping subsequently developed whom were women. However, this form of

has enabled the advent of new remote sell- in Japan. It reached the United States in selling represents less than 1% of the turn-

*** p A N*O' R*A M A * ' * 23-16 *** over of retail trade in all the countries of Figure 4 Europe. Retail trade Door to door selling, 1988 - itinerant trade: c 0 This sector is withstanding the competition += 0 ca of the other distribution formats, especially e·u ,!: 0 in the sector of fresh produce. Subject to .... fn .... fn many regulations in the majority of coun- ....o ca CD CD tries, the activities of the mobile shop and ,a .a market trading are becoming effectively re- E E ~ CD z E stricted to authorised street markets. In .. Southern Europe this trading format repre- CD a. 0 10 20 30 40 50 60 70 sents a significant share of the retail mar- ket, in an effort to fill the gaps of modern

B distribution. i 1168 D ------~ Structural changes ...... GR ·=-CD() j421 One of the most salient characteristics of Cilll E ~~~======~~---~-~--­ fn F i'·<.,;,.,------~~~------~___:---=~ 793 retail distribution during the past ten years c -ca ·-0 IRL consists of the movement of concentration ..o= - t- E NL of businesses, which have consequently ...... p become less numerous but more powerful, UK and which control larger market shares. 0 400 800 1200

This trend, which affects all sectors of the Source: European Federation for Door to Door Sell1ng and Serv1ces retail trade in varying degrees, is sus- tained by a strategy of growth based on creased competition whilst bearing the in- term, large-scale restructurings should the increasing of market shares. This phe- crease of certain running costs (com- take place. This is already the case in nomenon appears particularly marked in puters, logistics, advertising, etc.). France, where mergers and acquisitions the food distribution world. The markets For example, in Europe, Portugal, Belgium have multiplied during recent years. The today tend to become saturated and house- and, outside the EC, Switzerland, are dis- movement is taking place less rapidly in hold consumer consumption is no longer in- tinguished by a high concentration of their Italy, West Germany, the Netherlands and creasing much. Upstream, furthermore, the retail food distribution: the three leaders also in Spain, the latter countries being large consumer product industries (espe- there represent over 65% of the market characterised by the weight of the co-oper- cially agro-foods) are concentrating at a (relative to the ten leading distributors). A atives and purchasing groups. sustained rate on European and also point common to these three countries is This logic of concentration is making its world bases. Finally, adoption by the dis- the limited condition of the national market. full effects felt in the field of purchasing: a tributors of discount policies (especially in Great Britain, Denmark and Ireland form a decrease in the number of national buying

France, Germany and Spain) has been re- second group, where the leaders exceed groups and maximum centralisation on the fleeted in a reduction of margins, whilst at the 50% threshold. Here also the size of one hand, and the setting up of interna- the same time, investment was becoming the market has played a determining role. tional buying groups and "Euro-buying increasingly costly. The combination of The third and last group, consisting of groups" on the other hand. Concerning the these structural factors leads inescapably France, Italy, the Netherlands and Germany, first aspect, for instance in Great Britain, it to concentration: only the size of the val- consists of four countries with more trag- can be seen that the distributors, con- umes handled enables them to withstand in- mented distribution systems. In the medium fronted very early on with concentration of

p A M A 23-17 the agro-food industry, have reacted simi- Table 4 Retail trade larly: only seven decision-making centres Food distribution: weight of the three leaders amongst the top ten in each country for the five leading brand names. This com- Country pared to two hundred in Germany, where The Top Mark&t $hare whitin Three thetopten the five leaders control 60% of the turn- (%) over of the retail food trade. Portugal Sonae Supra 79 As for the Euro-buying groups, resulting PingoDooe from the amalgamation of several national Switzerland Mlgros 76 Coop buying groups with the Single Market in UsegoAG mind, they pursue three aims (besides Belgique/Belgii GBGroup 65 that of increasing the purchasing power of Delhaize le Lion MakroNV their members): the search for manufac- United Kingdom Sainsbury 56 turers essentially established in the EC, Tesco Gateway joint prospecting, and the pooling of logistic, Dan mark FOB administrative, financial and marketing re- 52 Dansk Supermarket sources in order to optimise purchasing. At trma (FOB branch} the present time there are eleven European Ireland Power Supermarkets 52 National wholesale buying groups. It can be seen that other in- Musgrarn itiatives preceded the creation of the France Leclerc 49 lntermarcne Euro-buying groups: buying groups within a Carrefour sector (lntersport International, lntercoop) ftaJia Coop luana 47 or partnership arrangements (the Casino- Vag~ La Rlnascente Ahold - Argyll association). Nederland Ahotd 44 Large-scale distribution, predominantly of Vendex SuperUnie food, sets an example to the specialists, who are gaining some experience: for BR Deutschland Metro 43 Leibbrand example, the French Phox chain (photo- Aldl- graphic, video and electronic equipment) Sol.lfCe: Eurostat has just joined six European associates in a Federation called Euro-Activ. tion of information flow. The combination Regulatory environment

The logic of concentration of distribution of these conditions enables distributors to Generally speaking, all the countries,. with gives rise to the appearance of two major improve ranges and undertake a true mere- the exception of Italy, possess a more or stakes: the development of logistics and handising role. For instance, central less powerful arsenal designed to guaran- the transfer of the merchandising skills of buyers tend to enter into direct competi- tee free competition, recently completed industry to commerce. Future increases of tion with their suppliers: distributors' brand by the introduction of control of concentra- productivity will no longer be obtained names, generators of profit and image, in tions at Community level. Discriminatory, through purchasing power and tariff negotia- fact, are steadily increasing their market restrictive and promotional commercial tions alone, but more by nationalising stock share. Distributors and producers will doubt- practices are the subject of very varying management, transport and handling, and less be increasingly led to enter into rela- attitudes according to the Member States: conditions of delivery and of payment. The tions of a partnership nature and jointly to discriminatory practices are, for example, crux of this development lies in the optimis- develop new products, as is already hap- defined and generally prohibited in the Me- ation of logistics, associated with centralisa- pening in northern Europe. diterranean countries (France, Greece, Por-

p A M A 23-18 tugal and Spain), or generally permitted or Table 5 Retail trade forbidden in the individual case elsewhere. Concentration of buying groups, 1988

Opening hours and conditions of estab- Country Top5 Orga- Distribution of Decisions nisations Tumover lishment and location are subject to widely % diversified systems. BR Deutschland Aldt In 1989, retail stores stayed open an aver- Edeka Leibbrand >60 200 age of 53 hours a week in the eight Euro- SelexA&O +Tania pean countries (the Twelve less Greece, Tengelmann

Denmark, Ireland and Luxembourg), with France Auchan Carrefour peaks of 56 hours in France and 58 hours Casino 30-60 100 in the United Kingdom. The shortest open- fntermarcM Leclerc ing hours are seen in Spain (45 hours), United Kingdom Avgyll Germany (48 hours) and Italy (49 hours). Asda Gateway 30~60 7 Non-extension of opening hours is gener- Sainsbury Tesco ally justified by compulsory administrative

regulations and high social costs. Ger- ltalia CID Conad many, Denmark, the Netherlands and Italy, Coop ltaUa <30 261 Crai in fact, have very restrictive legislation on Vega part-time work and overtime. With regard Espana Alcampo Blbo to licences for opening hours of large re- IFA <:30 5 tail outlets, certain countries have intra- Pryca Sandisa duced laws protecting the small Source: NielSen independent shopkeeper, as in Belgium,

Italy (Act 426) and, to a lesser extent, Ger- In Southern Europe, on the other hand, also connected with the social and convi-

many and France (the Royer Act). From consumer protection appears to be a rela- vial aspect of the shopping relationship. the taxation point of view, VAT rates vary tively new concept and has only de- New technologies considerably from one country to another, veloped very recently. The retail trade is today passing through a from a reduced rate of 0% in Portugal, Although the law influences the structure phase of profound technological change

Ireland and the United Kingdom to a maxi- of distribution in the different countries, characterised by the continuous search for

mum of 38% in Italy, through standard nevertheless it has to be noted that one increased productivity. The improvement of rates ranging from 10% in Ireland to 22% and the same measure can lead to vari- the information systems of the distribution in Denmark. However, they tend to tally - a able and unforeseen consequences, con- enterprises enables better availability of fact which could in time lead to the disap- nected with other parameters (economic the necessary data for decision-making pearance of the frontier shop. apparatus, transport infrastructure, cultural and the implementation of new tools of

Finally, protection of the consumer does characteristics, etc.). Commercial planning management (Direct Product Profitability) not attain the same degree of maturity in rules, unfavourable to large retail outlets, (DPP), expert ·systems, simulation all the States of the Community. In the ma- for example, are reflected in Germany in models .. ). In Europe, retailers have mainly jority of the countries of northern Europe, the development of an important mail invested in systems enabling the gathering especially in the United Kingdom, the order sales sector, made possible by the of data at the retail outlet, especially retail

Netherlands and Denmark, effective legisla- efficiency of the German road and railway outlet electronic processes (EPOS) and tion exists, subjecting products on sale to systems. This has not happened in Italy, electronic funds transfer at point of sale the public to a set of strict requirements. where the infrastructures are less efficient, (EFT-POS). In both cases, the initial moti-

p A M A 23-19 vation was based on definite advantages, Table 6 Retail trade i.e. the savings connected with the in- European buying groups

crease of productivity (reduction of in-store European buying groups Base

unit marking operations, reduction of collec- ERA {European retail aftiance) Luxembourg Mold {Nl} Avgyll {UK) tion costs). The potential of these systems Casino(F} today lies in the possible gains resulting AMS {Associated marketing service) Switzerland Migros (SWitzerland) from indirect repercussions, which are far Dansk Supermarket (OK) La Rinascente (I) more difficult to evaluate and which are ob- ICA (Sweden} Kesk.o (Finland) tained over a long period of time. The use Mercadona (E) EMO (European marketlng dlstrrb.) SWitzerland GB(B} of optical mark reading, thanks to informa- Parldoc {F) tion in real time on unit sales of merchan- Sooadip{F} Markant (0 with coperation dise, production of which this system extension in 7 foreign countries}

makes possible, can in fact have IGDS (Intergroup of departement $tores) Switzerland Karstadt (0) Printemps. (F) numerous applications: a reduction of un- Jelmoti {SWitzerland) Selfridges (UK) known marking down, management of sea- Vroom & Oreesmann {NL) sonal goods, as well as of sales, stocks Eurogroup Rewezentral (D) and supplies, management of installations, Vendex-Food (NL) GJB (B) customer studies, etc. Sodei France Paridoc {F) EPOS has penetrated food distribution GIB{B) better than non-food distribution. In the for- lntercoop OK Coop(O} mer, its adoption has been favoured by Coop (SWitzerland) Coop (Austria) the rapid increase of marking at source of Coop (I)

large consumer items by printing a bar CEM {Cooperation europeennede marketing) B Codec(F} Conad (I) code directly on the package. This rapid in- Crai (I} UDA(E) crease has itself resulted from good co- Edeka (D} operation between producers and Spar Unigro {NL) distributors in national organisations with lntergroup Finanz (Switzerland} lntemationale Spar equal representation (such as Gencod in Centrale (NL} Intergroup Trading (NL) France). In the second case the difficulty Spar lntemationale Financierung (Nl} of setting up universal standards for families of non-food products constitutes a Tengelmann 0 U>wa (Austria} Skala Coop (Hungary) major obstacle. KD-France (F) Hermans (NL) Moreover, EPOS diffusion is to be made Superal (I} A&P (United States} available to small chains and independent lsoceles (UK) Gateway {UK} groups, which have developed a syste-

matic equipment policy. Thus, for instance, Difra F Rallye{F} CFAO{F) the rapid increase in Italy of the rate of Montlaur {F) Anaud {F} equipping with scanner cash stations is Catteau {F) Monoprix {F) attributable to the strategy of the associ- Genty..(;athiard (F) Delhalze {B) ated trade, pushing its members to improve Zanm (I) their productivity. The leading big chains

have shown great caution with regard to

*** p A N *0* G1 R*A* M A 23-20 * *** * Table 7 Retail trade Commercial legislation of the twelve Member States

Country Compulsory Closing Commercial Development Commercial Property

B 24 hr. weekly rest Act of 1.7.1975 Capital value determined by court valuer~ on request Strict control Commercial leases subject to regulations.

OK Closed on Sundays Delegated to th& communes No special legislation on and Saturday afternoons who set up their own commercial property and commercial leases. development plan

FAG Ctosed on Sundays Authorisation necessary in Value of goodwill. and Saturdays afternoons certain urban zones No special legislation. (selling space over 1200 m2)

GR Opening hours fixed No special legislation. Value of goodwin by the Prefects, Building licence issued Special legislation on As a general rulef by the Prefecture. commercial leases. Sunday closing

E Freedom of principle Competence of the municipalities · No legally protected at national level. within the framework of general value of goodwill. CommerciaJ Special legislation town planning programmes. leases subject to regulations. in Catalonia and Valencia.

F Sunday closing Permit requiered for creation Protected commercial property. (except for 3 Sundays or extension of any Commercial leases subject a year) space greater than 1000 m2 to regulations. (in communities with less than 40000 inhatritants) or 1500 m2 (in communities with over 40000 inhabitants). Royer Act of 1973.

IRL Freedom of Legislation on town planning Commercial property opening days and the environment. (General Right of Transfer Act). Control of large outlets. Commercial leases subject to regulations.

Sunday closing Very strlct regulations. Control of commercial property. + 1/2day Act426 Special legislation on commercial leases.

L Closed on Sunday Control/Regulations by the Protection of commercial property. aftern<:>ons Department of Economy. Special legislation on commercial leases.

NL Closed on Sundays No specific regulations No protection of the goodwill value. and national holidays regarding to commerce. CommerciaJ leases subject to regulation. Derogation: 4 days a year.

p Opening possible 7 No speclffc legislation Protected commercial property. days a week. subject MunicipallegislaUon Commercial leases sugject to municipal by laws. on town planning. to regulations.

UK Sunday rest + 1 day No specific legislation. but No protection of goodwill. of early closing locaf municipal regulations Commercial leases not specifically (1.00 p.m.) permit control. subject to regulations.

EPOS, at least at the start, proving resis- with management and suppliers, as well fer at point of sale (EFT-POS) took place tant because of the prospect of a slow re- as with Direct Product Profitability (DPP), after the introduction of EPOS. The point turn on investment. Today, however, new which enables identification of real costs of this process is that it enables retailers prospects are opened up to them with the and profit connected with each product to benefit from faster payments, to do exchange of computerised data (EDI) present in the store. away with certain administrative tasks and which makes it possible for EPOS to liaise The introduction of electronic funds trans- to eliminate the risks of loss associated

p A M A 23-21 with troublesome cheques, thanks to the Table 8 Retail trade use of magnetic or microchip cards. AI- Use of electronic point of sale process in the United States though the technique used has been avail- (%} Wholesale Department SpeciaUst Foodstuffs Stores able for several years, the growth of stores Unit control EFT-POS throughout Europe is faced with 37 50 38 13 SWes tonow~up 61 73 59 87 considerable obstacles: absence of na- Daily deposit to bank 40 27 41 47 tional or international standards; fragmenta- lnternaf credit 24 69 25 7 External credit 21 57 28 0 tion of the structure of the banking sector Control of working hours 8 8 13 7 in a certain number of countries (especially Promotion follow-up 47 19 9 60 Fallow-up of the Netherlands); the controversy given non-promotional products 24 4 13 87 rise to by the distribution of the costs and Price changes 32- 23 25 80 Restocking 11 12 22 0 profits of the system amongst the different Control of incoming products 11 12 38 13 participants; finally, the lack of enthusiasm Management of coupons 29 19 16 40 Physical inventory 16 6 31 7 demonstrated by the consumer with regard Planning 8 15 0 20 to new methods of payment. SOurce: Institute for Retail Studi$$. Stirling University France and Belgium are at the head of the Twelve as regards installation of EFT- vice formats (take-away food, tele-shop- These trends of consumer consumption,

POS. ping, etc.). Moreover, all the European common to the whole of Europe, are ac-

The present development raises the pro- countries are witnessing an overwhelming companied by an increased segmentation blem of the use and management of infor- increase in the number of single house- of demand. Whilst the mass markets are mation procured by systems with holds (i.e. consisting of a single person). stagnating, even regressing, the micro-mar- increased performances, and consequently The latter constitute an up-and-coming mar- kets are experiencing a really rapid that of the management levels of the com- ket - for example, keen on food products growth. Distribution itself strengthens this pany. Which decisions at which level? The in individual portions, as also are mixed phenomenon by contributing to the acceler- new information technologies broaden the generation families with very individualised ation of the rate of renewal of products, to spectrum of possible choices. A European behaviour. Finally, the Europeans are de- the ever shorter life cycle. All these trends trend appears to favour the decentralisation voting more and more time to leisure acti- reveal the complexity of the challenge to of operational decisions at regional or divi- vities and constantly making choices in be met by the distributors - the challenge sional level, while the head office retains that sense. This is why couples who both of winning and retaining the loyalty of the the control of decisions on strategy and go out to work are particularly keen on in- customer. key functions. In this way, management creased flexibility of shop opening hours, Employment trend evolves from a traditionally hierarchical role especially on Sundays. The change in Distribution enterprises as a whole repre- to a function of assistance and advice to re- ways of living brings about a change in sent 15 to 20% of employment in the Euro- tail outlets. consumer consumption habits, which tend pean Community, including part-time

Consumer consumption to converge. From one country to another, workers, school leavers and immigrant trends the structure of spending is developing in workers.

The diversity of the distribution structures a comparable way and national or regional However, their needs are in the process in Europe reflects the diversity of con- peculiarities are becoming blurred. Food, of changing, connected with the increasing sumer consumption behaviour and cus- clothing and household equipment are fall- penetration of the new technologies and toms. The retail trade must adapt itself to ing in value in comparison with the profit the simultaneous improvement of informa- the increase in customers of the third and of accommodation, leisure activities, trans- tion systems on the one hand, and the in- fourth generations, responsive to new ser- port and telecommunications. creased competition accompanying the

p A M A 23-22 approach of the Single Market on the ity in the services sector. The do-it-your- thening their positions in local markets. On other hand. self market, for instance, has attracted all the other hand, internationalisation

The development of these new techno- the major food distribution groups in the measures, where they exist, show ambi- logies produces two main effects in terms Community, such as GB-Inno-BM in Bel- tions which largely exceed the European of employment. It enables automation of a gium, Vendex International in the Nether- framework. In the majority of cases, inter- certain number of basic tasks (stock man- lands, Asko, Tengelmann and nationalisation of the distributors of north- agement in particular), which has been re- Rewe-Leibbrand in Germany, Auchan and ern Europe has mainly taken place fleeted, over the course of the past ten Carrefour in France, La Rinascente in between countries of the same culture, years, in the degrading of different jobs in Italy. As has commercial catering: in whereas later expansion towards southern wholesale and retail distribution, which France, for example, Casino, Auchan, Ral- Europe was more in response to tactical from now on are given to workers with no lye and Euromarche have developed considerations in the face of less or- special training and to part-time staff. More- chains of cafeterias, fast food, theme res- ganised markets. France, the interface be- over, this process tends to favour the taurants, etc. tween the north and the south, is decentralisation of management and the Vertical integration may be the result of ac- receiving establishments of distributors emergence of innovative formats with re- tion by the distributors, extending their con- based in Great Britain, Germany and the gard to marketing, merchandising and trol of physical distribution upstream and Benelux countries, but is also expanding strategic planning. Hence a perceptible occasionally of production of merchandise, into the Mediterranean countries. evolution of distribution enterprises towards similar to the action of the producers, de- Very early on, the Benelux distributors decentralised management based on smal- veloping their own retail sales networks. spread out of their too-limited internal mar- ler but more qualified teams, and above This strategy has not always succeeded in kets: the Dutch C & A and Vendex and all better trained. the food distribution groups, but on the also the Belgian GB-Inno-BM have become

Distribution strategies other hand finds a good many followers in deployed throughout the whole of Europe.

for 1992 the non-food sectors: Benetton, Bally, German distribution devoted its original

The race for growth, the constraints repre- Singer are just some examples of pro- efforts to reorganisation at national level. It sented by concentration of the producers ducers who have diversified into distribution, is now gaining a footing in its neighbour and the reduction of the share of house- as also have many manufacturers of countries by targeting niches of which it hold spending in the retail trade, not forget­ microcomputers. The services have also has perfect mastery: discount food (Aidi), ting the opportunities offered by the Single tempted numerous distributors. First of all, computer stores (Microland), large elec-

Market, are causing the distributors to financial services: development of exclusive tronic or household electrical appliance out- operate a certain number of choices of cards giving access to a variety of service- lets (Hyper-Media). British distribution, the strategy. Three major possible options are s, acquisition of control of banking estab- most profitable in Europe, possesses large found: lishments, the sale of financial products. financial resources. Two-thirds of its invest-

- external growth; Secondly, non-financial services: the setting- ments have been made in the United

- diversification; up or takeover of travel agencies, introduc- States. In northern Europe, the English

- internationalisation. tion of divisions or subsidiaries responsible presence is ensured by some big names:

The aspects relative to external growth for after-sales service, running of specialist Habitat, Marks & Spencer, Laura Ashley, have largely been developed in the sec- professional services (maintenance, temper- Burberry's. In the south, only the take-over tion on "Structural Changes". Diversifica- ary staff agencies, etc.). of the Spanish Galerias Preciados is re- tion, prior to internationalisation (and With regard to internationalisation, it is ob- corded in 1987. Finally, with regard to the frequently preferred, even today) can take served that the European distributors, in Mediterranean countries, internationalisation several forms: entrance to new markets, their entirety, operate essentially regional concerns mainly textile specialists, these in vertical integration, and extension of activ- and national strategies, aimed at streng- the majority of cases being franchises:

P A M A 23-23 Benetton, Stefanel in Italy, Cortefiel in merchandise. Other measures, for example represented approximately 59% of the

Spain. liberalisation of exchange control, will trade of the EC in 1988, could attain a

Evaluation of the impact of the Single Mar- come into effect in 1992. Other regulations, share of 71 % in 1994. ket requires a few comments. Measures fa- for instance, relative to more controversial vouring finalisation of the big European areas, such as VAT, will no doubt be market are already in force, e.g. the "Dijon ready by that date. One thing is neverthe-

Cassis" [blackcurrant liqueur] legal prece­ less certain: completion of the Single Mar- dent set by the European Court, which es- ket will further strengthen the weight of Written by: DRT Europe Services - Deloitte and tablishes freedom of circulation of intra-Community trade. The latter, which Touche Ross

p A M A 23-24 In the metal production sector, secondary raw material supplies have a strategic advantage, in that they avoid

1 the need to import minerals, improve energy balances Cl and limit the amount of harmful emissions on production c: sites. In the industrialised countries, these materials ·--c ca form part of a highly structured collection and J... international dealing system. They play a crucial role in ..... a number of specific industrial activities such as electric -ca steelworks and the production of secondary non-ferrous ..... metal. (I) Scrap iron forms the basis of one third of total EC steel E production, with 48 million tonnes in 1988 out of a total (I) 137 million tonnes, approximately 40 million tonnes of ..... which was electric steel, produced solely from scrap en 1ron. ca Waste recovery from the four main non-ferrous metals 3: (aluminium, copper, zinc, lead) covered between 20 and -c 50°/o of the requirements of each of these metals. c: ca Description of the Non-ferrous waste metals include: Alumi- c. industry nium (AI), Copper (Cu), Zinc (Zn), Lead

Waste metals Waste metals include all (Pb), Nickel (Ni), Tin (Sn), ... and their al- ca J... forms of scrap iron: various types of steel, loys such as bronze (Cu + Sn) or brass (.) cast iron, tinplate, etc. which are magnetic, (Cu + Zn). A number of related activities i.e. sensitive to magnets (that is why certain sometimes play an important role in the en types of non-magnetic stainless steel are economic balance of the various sectors:

classed separately, with non-ferrous metals recovery of traces of precious metals such for collection and scrap iron for use). as Gold, Silver, Palladium, Platinum (elec-

23-25 tronics), sale of used parts (automobile de- •:• consumer scrap iron is derived from the case of scrap iron, this study does not molition). various items for which society has no fur- take into account manufacturing waste

At an EC level, scrap iron accounts for ap- ther use: car bodies, domestic appliances, from the metalworking industries (produc- proximately 50% of the value of recovered metal furniture, hardware, metal packa- ing raw metal or semi-finished goods) metal and over 90% in terms of tonnage. ging. It is a mixed, dispersed material which recycle their by-products directly

The main non-ferrous metals are aluminium made up of thin sheets which are often and do not therefore form part of the

(15% of the total value of recovered me- plasticised, galvanised, varnished, com- commercial salvage network; tals), copper (15%), lead (3%) and zinc bined with other components (plastic, rub- Stainless steel and special alloys

(5%). Other metals are recovered on a ber, glass, wood, synthetic foam, con- One of the most sophisticated areas of me- smaller scale, including precious metals crete); it can include traces of precious tal recycling is that of high-temperature, high-

(gold, silver, platinum) and other metals metals (e.g. in telephone exchanges, com- performance, corrosion-proof alloys. such as chrome, nickel, tin, antimony, tung- puters) and, more often, a small percent- Such alloys are often based on nickel, sten, titanium, etc. Each metal's share in age of other non-ferrous metals. chrome, tungsten, cobalt, titanium or a terms of value varies considerably from The scrap dealing sector only deals with large number of other materials which, year to year, according to fluctuations in the last three categories: together they when combined, meet clearly defined physi- world rates. make up the domestic market supply, part cal and chemical requirements.

Scrap iron There are four main sources of which is often exported. Sorting, classifi- Such metals are heavy and occur in of scrap iron and their respective importance cation and transport costs account for a limited quantities in only a few parts of varies according to the location, type and large portion of the total sale price. the world. There are therefore certain stage of economic development. Non-ferrous metals The recovery rate strategic advantages to be gained from re-

•:• internal scrap appears during the produc- of non-ferrous waste metals is relatively cycling them.

tion and initial processing stages of steel high. Secondary aluminium currently The salvager's skill lies in his ability to

and cast iron. It is normally recycled in- accounts for nearly 30% of total consump- separate, prepare and isolate each type of

side the plant itself (what steel-makers or tion of such metal within the EC, while sec­ alloy for smelting. This identification pro- ondary copper accounts for nearly 35%. Non- founders commonly refer to as "internal cess often involves the use of highly accur- ferrous waste is mainly used to produce sec- scrap"); ate scientific instruments such as X-ray ondary metals or used directly in the manu­ •:• new secondary scrap which appears in a spectroscopes. facture of semi-finished goods; it can also be large number of metal industries: carmak- Production and combined with primary metal. ing, mechanical engineering, metal working; consumption trends There are two main categories of non-fer- •:• demolition scrap iron is derived from the Ferrous metals Scrap iron (excluding in­ reus waste metals derived from pure me- discarding or destruction of equipment ternal scrap iron) today forms the basis of tals or alloys: (ships, fixed and rolling railway stock), in- 35% of EC steel production. The iron and •:• manufacturing waste "produced" by cus- dustrial plant and various constructions steel industry is the primary user, in the case tomers of the metalworking industry (such (assembly bays, refineries, oil platforms, of both electric furnaces, for which scrap iron waste can be salvaged directly by metal- thermal stations). By its very nature, such is the only raw material (1 050 to 11 00 kg of workers and used as a substitute for new iron tends to be of a high quality, thanks scrap iron per tonne of electric steel) and raw materials, otherwise it goes through to its known, stable composition, guaran- blast furnaces, where they provide a more or the collection and salvage network); teed high iron content and sound physi- less economical supplement depending on •:• consumer waste (wires and electric cal performance. Demolition scrap iron is the purchase price (150 to 300 kg of scrap cables, domestic appliances, cars). This iron per tonne of oxygen blown converter much sought-after and classed according type of waste metal invariably passes steel). Among the other users of scrap iron, to various categories: "naval", "railway", through the salvage network. As in the are iron foundries, steel foundries, re-rollers "industrial demolition";

*** p A N *0 1 R*A M A * ' * 23-26 * *** * Table 1 Scrap iron Main indicators, 1980-94 (1) (2) (4)

(million tonnea) 1980 1981 1982 1983 1984 1985 1986 ·1., . '1981 1989 '1990 1991190 19M/92 %' %

Apparent consumption 35.9 32.0 31.3 30.5 ~.5 32.5 41.6 '44.3· 47.0 48.5 50.0 4.0· .40 Net exports 0.4 3.2 2.6 4.5 4.4 4,7 O.G .. Q.6 ' 0.5 o.o· ' 0.0 · o:o. . · N/A -. 8 Resources used ( ) 36.3 35.2 33.9 35.0 37.9 $7.2 41,6 43..7 .47.5 48.5 oo.o· : '• 4;0 ' ,' 4:t)"

1 ( } 1i)8().85 EC9; 1986-87 EC12 (exclUding GfE!ece) (2} Ex<:luding Internal scrap ftom !ton and st&$1W0rk$ recyc!OO directly r> In lmn and steelwork$ and Clil$1 Iron follndries (~ Fore<:ots 199011994 :$¢tal) !ton or~ Scrap Iron colleoted by dealers, not including sorap prodUced by .steeJ· plants Sourc&:.fntemationallron and Steel Institute {IISI) 8nd E!.IJO$tat (Sldr)

and electrometallurgy. ducts still pass through the scrap yards sharply. It depends on the quantity of melt-

The collection of scrap iron in EC markets where they are stored, sorted, graded, pre­ ing equipment in operation or idle at any has always reflected the needs of the iron pared and transported before being sold one time, as well as the economic climate and steel industry, showing a marked de- to European or foreign iron and steel in the iron and steel industry. It is also a cline in 1982 and 1983, and, more re- plants. determining factor as regards pricing mech- cently, an increase of between 2 and 4%. In general, scrap iron resources vary rela- an isms.

Scrap iron derived from non-factory tively slowly and depend more on the past The main difficulties encountered by scrap sources accounts for an ever increasing than the present. dealers are fluctuations in demand and share of steel production. From 29% in The present, however, affects scrap iron variations in price. The iron and steel in-

1980, the figure rose to 33% in 1986 and prices according to market conditions. Low dustry plays a vital role in the fixing of approximately 35% in 1989. prices can lead to a reduction in re- prices, given that the suppliers are less

This situation can be attributed to the sources or speculative stockpiling. Such concentrated and less organised. Market quite different patterns observed in the was the case in 1986, when scrap iron re- prices are highly unstable, and this lack of two main sources of scrap iron. sources slumped by 15% following a sharp stability has direct repercussions on the

In steelworks, the improvement in the ma- cut in prices. Technological progress (in number of dealers and the tonnage of terials balance and the development of crushing machines, for example) can also scrap iron recovered. continuous casting has gradually brought increase the scrap iron recovery rate. For Prices tend to be fairly uniform throughout about a reduction in the amount of scrap cost-related reasons, scrap iron is pro- the EC, even though the levels may vary

iron produced. Scrap iron derived from cessed near collection points or along considerably. Spain is the sole exception:

new scrap now accounts for a smaller routes leading to major consumption prices here are sustained by buoyant de- share: in 1980 it accounted for 44% of the centres, where prices are fixed. mand and more strongly influenced by U.S.

EC's scrap iron resources compared with Furthermore, demand, which, by its very prices. just 30% in 1988. nature, is concentrated on the side of Non-ferrous metals The growth in the

Scrap iron derived from car demolition, heavy industry, can vary much more recovery of non-ferrous metals and their

naval demolition and miscellaneous pro-

Table 2 Activity in the scrap iron sector, 1989

(thousartd torines} (1) ~/l DK ·o· _E·. .F '• I . NL ··uk; Total ..

. ' .. ~M

Purchases of scrap iron by tnms 2769 543 10 078' '7921 :·6412- 13 750 ··487 a~· 4859~r Net exports -1079 *14 3478 4106 3 385. '~ 6.000 1, 630' 3t63, ,' ' .• 397 · Scrap collected on national. market 1600 469 13556 3815 9797 7750 . 2117 . ; 9798- '48992 .... .(' ~' ' ·- , '

P A M A 23-27 Table 3 Total scrap consumption C)

(thoU$and metric tonne$) 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

Belgique!Belgi~ 4052 3688 3749 4142 3157 3520 3112 2581 2502 3049 2 Dan mark 906 811 688 626 584 651 595 704 648 650 ( ) BR Deutschland 21 766 20322 19624 17544 17864 18606 18613 17051 16160 18547 Hallas (2) 900 900 900 900 900 956 1064 1107 1012 1 078 Espana 7222 9048 9011 9 111 9793 9398 10693 8737 8326 8749 France 10517 10254 9495 8549 8614 866() 8509 8550 8639 9312 Ireland NIA NIA 37 69 158 189 2.30 233 250 250 (2) Jtana 17177 18847 16929 15958 15153 16405 16400 15699 15721 16417 Luxembourg 1 785 '1577 1323 1315 1368 1685 1598 1491 1325 1200 Nederland 1965 1837 1779 1446 1458 1630 1504 1454 1308 1363 Portugal 492 512 435 466 553 565 550 375 393 400e> United Kingdom 15368 9296 10363 9557 9635 9619 8369 7826 8203 8859

EC total 82150 77092 74333 69683 69237 72384 71317 65808 64487 69874

United States 89722 75926 77202 51152 56048 59604 62978 59105 62643 70433 Japan 45624 43809 39592 38857 40160 43485 44170 40260 40622 42976

world total 351 823 332774 321955 287 550 299575 313 378 317 648 309 751 314557 331 528

1 ( ) Total S¢1'af)lXl0$1.lffiption, including sO!ap- non produced and tecyded inside ste$1 plant$ f) Estimates Totals are of available data only Soutce: list high recycling rate is justified by the high resented approximately 1.7 million tonnes in begun to take an interest and are well be- price of such metals, the relative scarcity of 1989, compared with 1.3 million tonnes in hind the USA. West Germany recycles the minerals and also the major energy sav- 1983. Production of secondary aluminium in­ over 700 000 tonnes of aluminum waste ings associated with secondary metal pro- creased by 8% in 1988, whereas over the per year, Italy - nearly 400 000 tonnes cesses. In the case of aluminium, whose en- same period, production of primary aluminium and France - 250 000 tonnes. In 1988, remained stable. ergy cost constitutes the main production fac- aluminium waste in West Germany was The EC has a recycling rate of around tor, it takes only 550 Kwhr to produce 1 used as follows: 570 000 tonnes for the 35% compared with 30% in the USA and tonne of secondary metal, compared with production of secondary metal, 150 32% in Japan. The highest recycling rates the 15 000 Kwhr required to produce 1 000 tonnes for direct use in the manufac- are found in West Germany (36.9%) and tonne of primary aluminium. ture of semi-finished goods and 75 Italy (35.6%). Overall, the recycling rates (proportion of 000 tonnes for primary metal production. Approximately 65% of aluminium waste waste in relation to producers' total raw Copper With nearly 1.5 million tonnes per from the carmaking, electrical appliances material supplies) and recovery rates (pro- year, secondary copper accounts for nearly and construction industries are collected. portion of waste collected compared with 40% of total consumption within the EC. As regards the collection of drinks cans, the total amount of waste produced) Since 1985, both demand and the quantity of however, EC countries have only just appear to be higher in the EC than in the waste metal recovered have tended to level rest of the Western world. Table 4 Non-ferrous waste metals are generally Recycling of non ferrous scrap metals used for secondary metal production which (%) Aluminium Zinc provides the main outlet, but they are also Rate of recycling 1 used in the manufacture of primary metal in the EC ( ) 35 51 3540 in western Europe M 24 47 36 and directly in the manufacture of semi- Energy savings enduced finished goods. by the· use of recycled metals {~) 96 87

Aluminium The use of aluminium waste (1) Estimation (2) Souroe: aiR (Bureau lntematiOnal de Ia ~ation), Serna Group. Eurostat within the EC (excluding internal waste) rep-

p A M A 23-28 Table 5 Scrap iron External trade

(million tonnes) 1980 1981 1982 1983 1984 1985 1986 1987 1988

Exports

1 EC( ) 3.1 4.4 4.2 5.7 6.3 6.7 3.3 3.4 4.0 Other Western Europe ().2 0.3 0.2 0.3 0.4 0.4 o.s 0.6 0.2 USA 10.1 5.8 6.2 6.8 8.6 8.9 10.6 9.6 9.2 Japan 02 0.2 0.2 0.1 0.2 0:.2 0.5 OA 0.4

Imports

1 EC( ) 2.7 1.2 1.6 1.3 1.9 2.0' 3.3 4.0 3.5 Other Western Europe 1.3 1.6 2.3 2..7 3.3 3.4 3.4 4.7 4.7 USA 0.5 0.6 0.4 0.6 0.5 0.6 0.7 0.8 0.9 Japan 3.0 1.8 2.0 3.9 4.0 3.3 3.2 2.4 1.8

· (t)19S0-85 EC9: 19$6.87 EC12 (excluding Gleece} Souroe; International Iron and Steel Institute {hSt} and Eurostat (Sidf) off. The main producers of secondary cop­ secondary zinc produced is now on the de- External trade per are West Germany (over 150 000 crease, as a result of technical advances The international scrap iron market is tonnes) and Belgium (1 00 000 tonnes). The in roofing materials. largely dominated by the United States, main users of waste copper for the pur- Lead Secondary lead, derived mainly from which is still the main exporter with poses of primary production or the manufac­ old batteries, accounts for approximately 11.1 million tonnes in 1989. ture of semi-finished goods are West 50% of EC requirements, although fluctuations In spite of this dominant US presence, EC Germany (250 000 tonnes) and Italy (nearly in international rates inevitably affect the profi- external trade plays an important role, al- 200 000 tonnes). tability threshold of lead recovery operations. though the trade position is balanced. Zinc Recovered zinc is derived from the Production of secondary lead is slightly on Since 1986, EC exports have stabilised be- waste produced by finishing workshops the increase whereas primary lead has en- tween 3.5 and 4 million tonnes, the main which perform electroplating operations, tered a decline. exporting countries being the Netherlands new processing scrap, used products The leading EC producers of secondary and the United Kingdom. based on zinc powder and roof demolitions. lead are West Germany and the United EC imports are at the same level but look The construction and carmaking industries Kingdom, which each produce approxi- set to rise, the main importing countries provide the main sources of scrap zinc, ac- mately 130,000 tonnes per year. being Italy and, to a lesser extent, Spain. counting for around 20% of the demand lntra-EC trade represents 11 million for this metal within the EC. The amount of

Table 6 Scrap iron External trade between main EC countries and non EC countries

(thousand tonnes) F Bll D E DK Nl UK TotaiEC.. 1987 Import 13 18 207 1596 1088' 17 26 54 3019 Export 254 138 478 0 0 32 1157 1 091 3150

1988 Import 26 2() 290 1429 890 10 41 2778 Export 325 242 752 () 0 25 1297 1130 3771

1989 Import 19 44 193 2100 999 0 45 31 3431 Export 375 357 364 0 0 0 1299 1 032 3427

Source: B1R •

*** p A N*O' R*A M A * ' * *** 23-29 Table 7 reduced the amount of internal process Quotations of old metals, nov. 1990 scrap, coupled with a steady increase in

(Ecu per tonne) ~ondon Pari$ Milan Dusseldorf BrusMis the proportion of steel produced by elec-

Copp$r (wire) 1605 1595 1 572 1700 1 725{1} tric arc furnaces based on scrap iron and

_ Brass (mixed) 1. 045 1130 970 N/A 1086 pre-reduced products. In years to come,

Aluminiom (old lamt.mated) 725 615 815 N/A 640 scrap iron is expected to account for be-

4 tween 70 and 75% of scrap supplies from Zinc .. 670(2) 615{$) 655( ) 600(5) 580(~) the iron and steel industry; 15 to 20% will 6 8 Lead 425( } 440(1) ' 390{ ) 440{5) 47oe> come from internal scrap from the iron and {'} fi!'St choice {t) old {~CO~(- steel industry (down 1 0%) and 10% from 4 { ) vastes material {II) scrap mr;tal$ internal foundry scrap (no change). {~)mixed , f)tube& <"} soft first category .. At the same time, the development of new {~old soft Soorce: lr;rtre d'informatiQn !TW~aux 11/90 iron and steel products such as coated

sheets and high-resistance national emer- tonnes, i.e. roughly one quarter of sup- meanwhile, perform salvage operations on gency steel have brought about a reduc­ plies derived from scrap dealers. an industrial scale and buy and sell their tion in the quality of the scrap iron

In conclusion, within the scrap iron trade, waste metal at an international level. Car purchased.

49 million tonnes go to EC plants with a demolition firms are playing a growing role New technologies such as thin slab cast­ further 4 million tonnes for export. thanks to the use of large crushers entail- ing will enable mini-plants to tackle higher-

On the basis of an average rate of ing large-scale investment. The exact num- value-added steel markets (flat products)

110 US$ per tonne in 1989, the value of ber of jobs provided by the sector is not and will consequently require a higher the products handled by the sector can be known, owing to the large number of trade- quality of scrap. Demand for high-grade estimated at 6 billion ECU. Prices are es- smen and occasional jobs. As a rough scrap iron and scrap iron substitutes is tablished on the basis of, among other guide, the number of jobs recorded for the therefore expected to increase greatly things, the USA price known as the "com­ entire waste recovery sector (NACE 62), over the next ten years. Production of pre­ posite price". They fluctuate widely, va­ of which waste metal forms the bulk, is in reduced products, which are the main sub- rying by between 18 and 20% from one the region of 120 000 jobs. The number stitute for scrap iron in electric month to the next. of people employed by the sector is now steel-making, should virtually double over

Structure of the industry on the decline, as sorting operations the same period.

and employment become more concentrated and more In the short-term, the amount of scrap iron

Scrap dealers and dealers in other forms highly industrialised. required by the EC's iron and steel indus­ of waste metal can be divided up into Outlook try is expected to reach 54 million tonnes three categories: collection firms, small Ferrous metals Technological develop- by 1992. wholesalers and dealers. Small-scale collec- ments in the iron and steel industry and the Steelworks' requirements: 64 million tones, tion firms represent the largest category growth of the steel markets will cause cer- which can be broken down as follows: and collect waste metal which is mainly tain tensions on the scrap iron market over •:• internal scrap: 15 million tonnes; derived from household refuse. Small-scale the next few years, not only in terms of •:• scrap iron: 49 million tonnes; wholesalers constitute the first stage in the quantity but also the quality of the waste col- •!• Foundries' requirements; recovery of industrial waste metal. Their lected. •:• scrap iron: 5 million tonnes. suppliers are primarily industries, collection Over the past ten years, technological de­ In terms of quantity, EC supplies should firms, demolition companies and sometimes velopments in the iron and steel industry easily suffice to cover scrap iron require- even public authorities. Large wholesalers, (improved yields, continuous casting) have ments in 1992, without having to resort to

p A M A 23-30 large quantities of substitute products. In - improvement of upgrading techniques for potential with the recycling of drinks cans. terms of quality however, efforts will have mixed and alloyed metals. The latter will have to be carried out on to be made in order to ensure that the Non-ferrous metals Apart from alumi- an industrial scale, as aluminium begins to scrap iron sector becomes an industrial nium, the outlook for common non-ferrous take over as a substitute for tin cans. structure, rather than remaining a predomi- metals is fairly bleak. In order to meet these various challenges, nantly commercial sector. Secondary metal production and the associ- scrap dealers and the associated indus-

Such a move should lead to more efficient ated dealing activities will fare better than tries are keen that the products in which use of new resources: average and major efforts will be made to they deal should be regarded not as

- organisation of the "vehicle crushing" sec- improve the percentage of available waste waste but rather as secondary raw ma-

tor with pre-dismantling of parts and up- collected: terial, fully integrated into the industrial net-

grading of non-metal parts which are cur- - larger-scale recovery of old batteries works and free from all constraints.

rently a major source of inconvenience (Pb),more effective upgrading of finishing

for crushing units, waste (Zn);

- development of tin can recycling, either improvement of separation techniques by

via incineration clinker from domestic magnetic sorting or hydrometallurgy (any

waste or directly via selective household rare metals); Written by: Serna Group Management collections, Aluminium, meanwhile, offers considerable Consultants

p A M A 23-31