Retailing Location: Spatial ‘Cherry-Picking’

As illustrated above retailing have important implications for the capitalist political economy both as a functional necessity for present utilisation and as an investment potential for the future. Its material implications are not limited with its place in economics and politics. In this

27 The importance of reproduction for the labour class will be discussed with reference to Castells work establishing the link between urbanisation and means of collective consumption in detail in the following chapter on Marxist responses.

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sections retailing’s spatial importance will be investigated in detail. Through this investigation the author intends to find out some clues about the relationship between the dictates of the capitalist political economy (based on competition and maximisation of profit rates), retailing’s locational preferences and spatial injustices that will be discussed in the final section of this chapter.

Retailing, being a complex system, is shaped by both internal and external dynamics and these dynamics by no means affect retail activities’ locational decisions.

Externally the global shrinkage in the world markets and intensified competition for surplus values both between retailers and between retailing and other sectors cause to several changes. Internally, retail firms passed a period of financial disciplinisation to decrease their costs of functioning. New management techniques and personnel acquisition policies led to an increase in unqualified, part time majorly female labour force in retailing. Decreasing consumer power on one side, and diversification of consumption patterns on the other forced retailers to focus more on product development, advertisement and consumer relations.

Additionally, as the retail capital got stronger within the economy retailers started gained immense advantages over producers and distributors, and are able to reduce their costs to a considerable degree. Outsourcing the production, own-branding and development of distribution channels are some of the recent developments that retailers took advantage of.

Retailing is always considered as a very dynamic sector which is in constant change and adaptation. This is by no means a creative destruction process. Those firms who can internalise necessary changes, become able to survive within changing forms of capitalism including the present stage. Others, mostly small scale, labour intensive, capital weak, traditional retailers got disappeared either through mergers and acquisitions or faced bankruptcy.

In this period of intensified competition the locational advantages becomes crucial between retailers. As Clarke (1997) points out firms’ existence within the economy equated to their presence in advantaged locations. Retailers, deciding on a location, have to consider both the commodity prices they are utilising for selling the products and ground rents they have to pay and as the major input-output resources.

In value terms retailers do not add any value to the commodities and their legitimate claim needs to cover the transportation and servicing costs (if exists any).The profits they obtain cannot be called as surplus value in Marxist terms as this is totally out of the system of value

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creation and retail activity is not a value creating activity, neither in terms of machinery and labour usage or exploitations. But it is still linked to the production processes as the absolute rent that retailing creates is a fictitious one which is legitimised by the social relations of production that is due to the diversification and specialisation within the production sector.

Considering inter-sectoral differences, they are only effective at the level of absolute rents when they influence profits. On the side of landowners, they consider the rents they will obtain, either be the product of productive activities as a part of surplus value or be the return from commercial functions as a part of ‘parasitic’ gains that are also called profit.

As a ‘parasitic’ sector not productive in its nature and despite their domination over producers, the sector is still highly dependent on price of commodities. When retailer’s power over producers cannot exceed certain limits (limits enough to enable producers to keep functioning with a suitable rate of return) or when all retailers receive products at same prices (disappearance of product price advantages) retailers become dependent on locational advantages as the only source of monopoly rent (MR1). In addition and apart from the commercial activity, those places that retailers occupy can also be subject to exchange and thus be considered as advantageous. As a result of this relative locational advantage that is reflected on property values a second form of monopoly rent formed (MR2). It is a well-known fact that many large scale retail companies have land banks that not only seek for best locations for retail activities but also selling of unused spaces and acquiring others having potential to develop.

Location factor becomes more significant regarding the differential rents. To obtain differential rents some retailers benefit from locational advantages which means advantageous urban locations that enable retailers to reach advantageous consumers.

These advantages can be classified into two as done for the classification of differential rents. In the first case, some retailers, in return to their equal amount of investment to places sharing similar qualities (in terms of infrastructure and superstructure) may obtain relatively higher returns. In other words retailers occupying better locations obtain higher revenues.

The difference is the result of differential rent type one (DR1) which appear as the result of a locational difference. In the second case, retailers may obtain differential revenues from qualitatively and locationally similar places in return to their differential investment. This time retailers’ differential gains comes from an external and controllable factor, which is the amount of investment. Investments in architecture, parking areas, green areas surrounding the retail facility or provision of a children’s playground can be seen as investment factors that enable retailers to enjoy from second type of differential rents (DR2).

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The dynamism of retailing affects both the formation of differential rent type one and two. For the case of DRI, as a result of changing urban dynamics (like development or decline), advantageous locations within a city may change. In addition to urban dynamics, the accumulation of retail firms at one location may lead to the supply saturation and without any external intervention, the retail development negatively affect itself and causes to the decreases in the extraction of differential rents. On the same vein, as a result of intensified competition between retail firms, those having low capital concentration may leave some important places while strong ones start to dominate advantageous environments and produce differential rents based on their ‘small monopolies’. For the case of DR2, retail firms that are able to perform investments to increase their adaptability to chancing competitive retail environment obtain advantages over others lacking these investments.

Considering the complexity of the retail development process and retail practices, it becomes very difficult to separate which part of the gain comes from DR1 and which part comes from DR2. In practice, in the very competitive retail environment retailers do not have the luxury to benefit from one of these options. Thus, retailers do their best to maximise their gains from both location and investment vice.

If retailing would be a productive sector in its essence, the competition of retailing with other sectors in the economy brings the discussion to the issue of absolute rents. But this is not the case. To be able to utilise the concept of absolute rent to analyse differential advantages between different sectors, one need to investigate the organic composition of the sectors which means the ratio between means of production and labour power contributing to the production process. Retailing is not a productive sector and retailers do not obtain their profit out of labour exploitation. The source of profit for retiling comes from the share that producers are willingly to give away and retailers are maximising this share by realising internal adjustments which includes factors mentioned before and significantly the locational decisions. So the analysis of the organic composition of the sector will not enable us to compare the sector with others and as agued by Harvey, one need to replace the concept of absolute rent with (class) monopoly rents that better reflects sectorial differences in obtaining rents. Finally, considering the retailers’ dispersion over urban areas and their economic power, the lands they occupy can be seen as source of class monopoly rent although retailers do not act with class consciousness.

There is evidence that the concentration of capital (and thus of power) in retailing tends to be particularly marked and this in turn can weaken the relative power of upstream capital

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(agricultural and other food producers) and of (downstream) workers who are the consumers of the retail product.

As a result of this concentration, retail sector becomes one of the most powerful economic sectors not only at the national level but also at the global scale (Deloitte, 2013). According to Forbes annual company reviews, there exist 10 retail firms (mostly food retailers, being Wal-Mart the 3rd) in the top 100 of the annual ranking of the world’s largest corporations.

This increase in economic power illustrates the competitive power of the retail sector over others and also the relatively higher rates of returns when compared with other sectors in the economies. These concentrations of power within retailing have an evident spatial dimension and it is spatial monopolies and oligopolies which affect consumers and perhaps spatial monopolies which affect upstream capital. At the local scale, this competitive advantage concretise over the domination of land uses. Planning great amounts of commercial land uses, even if they are thought to be used in the far future, together with increasing number of commercial facilities (i.e. shopping malls) all around the world illustrate the case at concrete terms. As will be expanded later, in addition to all such (internal and intra) sectorial considerations, the presence of central and local governments, their influence on planning institution all play an important role in all spatial decisions at all scales from regional to street level.

In a system where the space occupies a major role in the continuation of the firms, retail representatives have to cooperate with urban policy makers (both at the national and local level) to obtain advantageous locations. At the first step, retail representatives with their monetary and political power, try to establish pressures over ruling representatives for the production of enabling laws and regulations. Through these kind of deregulatory policies retailers aim to diminish spatial barriers, enable their free entry and exit from the land (use) market, and thus aim to guarantee maximum returns for their spatial investments. At some moments when free market conditions do not prevail in favour of retailers (regulations for retail competition, limits on monopolisation, efforts for the reduction of unequal retail accessibility, etc.) through political and legal interventions retailers passes to second step strategies where retailers accept to play within the rules of the game rather than changing them. This time, to maximise their profit, retailers produce legislative, organisational or technical “shortcuts”. Among these shortcuts, there are some related with internal organisation of retail firms, like employment of uninsured employees, increases in their working hours, cuts from aids are common strategies. In addition to this, as Guy (2002, 2006), Wood et al. (2006) and others demonstrate, retailers create spatial shortcuts as well.

Increasing the retail floor area by adding extra floors within the existing facility, vertical

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growth towards ground level and utilisation of parking spaces or play grounds for retail purposes are common strategies retailers produce to overcome legislative and spatial barriers. In fact, such strategies illustrate how the dynamism of the retail sector overcomes the clumsy legislative and regulatory structures. In such cases, where retailers (or capital interests in general) defines the rules of the game or bypasses established rules through shortcuts, the last crisis of capitalism, the production of social and economic injustices becomes unavoidable.

Space then becomes the place where necessities of market mechanism, spatial selectivity of retail investments, inadequacy of regulatory mechanisms and bodies, and the needs and desires of the ordinary citizens concretise. With these words, the section continues with urban injustices and their relationship with retailing.