Human resource implications of globalization and restructuring in commerce

Report for discussion at the Tripartite Meeting on
Human Resource Implications of Globalization and
Restructuring in Commerce

Part 2

Copyright ® 1999 International Labour Organization (ILO)

4. Improving the efficiency of the supply chain through
information technology

4.1. Recent trends

4.1.1. From producer-driven to consumer-driven distribution

The distribution system has shifted 180 degrees from being producer-driven to consumer-driven. It is now the retailers who hold the power because they are the first to receive information about consumer preferences and can compete with other retailers, negotiate with vendors and respond to consumer needs. This information, which is reluctantly shared, is handed on directly to manufacturers and other vendors in an efficient consumer response system. This induces at least two other fundamental changes in the system. It builds stronger alliances between retailers and vendors who have traditionally been adversaries. It also changes the objective function for firms up and down the distribution chain from that of maximizing revenue to maximizing return on assets (profits).

4.1.2. Efficient consumer response

All producers, manufacturers, wholesalers and retailers try to develop programmes which improve production, distribution, and marketing efficiency. One major approach which has been adopted by some industries in a number of countries, Efficient Consumer Response (ECR), sets out to streamline and automate the distribution system from the production to the checkout line. The aim of ECR is that suppliers and retailers should work closely together to bring better value to the customer, maximizing consumer satisfaction and minimizing costs.

ECR usually concentrates on three core areas:

• merchandising and marketing. By restructuring promotional deals, ECR proponents hope to reduce the forward buying of stock and the diverting of products (i.e., buying in low-priced areas, and transporting and reselling in high-priced markets). Improved shelf- space and variety management could reduce warehouse and store costs. Better account management, customized promotions, account profitability analyses, and multi-functional selling teams may also improve system efficiency;
• replenishment, logistics, and product flow. By coordinating and integrating the approaches used by manufacturers and retailers to speed delivery, ECR attempts to reduce unnecessary handling, and thus lower costs. Recommended industry changes include joint management of stock to minimize warehouse costs, cross-docking operations (i.e., transporting goods directly from the manufacturer to trucks without first storing them in a warehouse) and improvements in packaging to reduce product damage;
• changes in administration and technology. Standardized bar coding of cartons and pallets would help improve efficiency. A new system of bar codes for variable-weight and date-coded products called UCC/EAN-128 has been developed. Use of electronic data interchange (EDI), electronic funds transfer (EFT), and computer-assisted ordering (CAO) may help reduce order errors and billing costs.

ECR has adopted four major strategies: efficient store assortment, making optimum use of shelf-space; efficient replenishment, by moving the "right product, to the right place, at the right time, in the right quantity, and in the most efficient manner possible"; efficient promotion, by simplifying trade promotion deals, offering alternative deals to meet distributor needs, managing consumer and store advertising, etc; and efficient product development, by obtaining better information on consumer preferences and on product attributes.

The cost savings from ECR would affect all distribution channels. A few firms have expressed some reservations because many of the programmes would initially reduce profit margins as initial costs are high and most of the benefits are long term. Others are concerned about inequities between those who bear the costs and those who reap the benefits.

4.1.3. Changes in IT drive the structural change in the supply chain

One of the main reasons why productivity has grown faster in the wholesale and retail trades than in the service sector at large in the United States since the early 1970s is that wholesalers and large retail chains have invested heavily in information technology (IT). Since 1960, IT investment per worker in the United States has increased more quickly in wholesaling and retailing than in other major sectors. IT investments also comprise a larger share of total equipment spending in wholesale/retail than in other major sectors, except communications.

During the 1970s and 1980s, changes in IT initiated a new round of structural changes in the supply chain. One important development was the introduction of scanning technology and the Uniform Product Code in the 1970s. At the store level, this brought noticeable changes for consumers at the checkout line.

Equally important, however, was the fact that these technologies transformed the ordering process, enabling electronic data interchange (EDI) of orders to wholesalers and manufacturers. At the same time, the emergence of industry-supported mechanisms for sharing scanner data began to give firms in all segments of the supply chain access to timely, accurate, highly detailed data on product movement. This made it possible to schedule production and manage inventories more efficiently, and provided the raw data resources for more sophisticated analyses of consumer preferences and buying patterns.

IT-based changes in manufacturing technology also helped bring about change by lowering set-up and changeover costs, making it less expensive to schedule shorter production runs of a larger number of products and product sizes. Advances in IT also led to improvements in warehousing and logistics that lowered supply costs and dramatically shortened the time between receipt of an order and delivery to a retail store.

Rapid horizontal communication helps decision-makers at all levels make good merchandising decisions faster. For retailers, "going horizontal" means relying heavily on technology to assist in the communication of important business information. In fact, certain technologies are so widely used that they have virtually become requirements for effective competition. For example, many high-performing retailers now use satellite systems to upload point-of-sale data captured via scanners at store registers. This allows real-time communication between the stores and the head office.

Finally, the era of network-centric computing will markedly improve the management of global business -- both within a single organization and among the extending community of major business partners. In the network-centric age, the information superhighway will lead to a vast system of information interstates, with powerful, large-scale networks devoted to transferring complex corporate data at fast speeds, and smaller paths for small businesses and consumers whose information needs are less demanding.

4.1.4. Three forms of distribution channels have emerged

An industry body, the ECR Performance Measures Operating Committee, has identified three primary product distribution channels: wholesaler supplied; self-distributing retailer; and manufacturer direct store delivery (DSD).

In the wholesaler supplied channel, the three fundamental processes in the system -- manufacturing, distribution and retailing -- are performed by separate firms. Products flow from manufacturers to distribution centres operated by a wholesaler, and then on to retail stores.

In the self-distributing channel, distribution and retailing -- and sometimes manufacturing -- are under the control of the same firm. Products flow from manufacturers, or the company's own factories, directly into distribution systems owned and operated by the retailer.

Finally, in the DSD channel, manufacturing and distribution are under the control of the same firm. Products flow to retailers through distribution systems owned and operated by manufacturers.

Information technology and new business practices can help make the products most in demand flow faster through the entire chain and reduce stocks at all levels of the system; however, the benefits derived from these advances may best be realized through a comprehensive, integrated redesign of information systems and business processes. Such a change is difficult to achieve in an industry with many participants and a complex structure.

4.1.5. Vertical integration puts pressure on the wholesalers

Vertical integration of the distribution chain puts pressure on the traditional role of wholesale companies while creating new opportunities for other operators, especially specialized logistics services companies.

Vertical integration implies that a number of retailers and manufacturers seek to take control of distribution activities formerly carried out by wholesalers and subsequently outsource the physical components of these activities to suppliers of logistics services.

The internationalization and expansion of the larger retailers and manufacturers substantially complicate wholesalers' distribution and sourcing methods. Manufacturers and retailers greatly value flexible, cheap and high-quality distribution and it is generally felt that wholesalers are incapable of meeting these stringent standards. Consequently, wholesalers are being dropped from the distribution chain or are taken over by manufacturers and retailers. This allows the latter to absorb the profits that wholesalers typically derive from centralized purchasing, inventory management and so on.

Wholesalers are strongly dependent upon small, independent retailers. The case of household appliance wholesalers in the Netherlands illustrates well the situation. The overall market share of household appliance wholesalers in this country has been declining systematically, because many independent appliance stores have either been taken over by chains or have associated themselves with buying groups or franchisers (see table 4.1).

Table 4.1. Market share of wholesalers per distribution channel, Netherlands, 1991
 

Distribution channel	Percentage of business within this distribution channel involving national wholesalers
Appliance store chains	0
Appliance stores organized in buying groups and franchised appliance stores	22
Independent appliance stores	48
Other outlets (department stores, hypermarkets, photo stores, etc.)	0
All distribution channels	17
Source: Coopers & Lybrand.

This erosion of the commercial, buying power function of wholesalers is also accompanied by a threat to their physical distribution function. The increasing capability of suppliers of logistics services to execute and manage complex physical distribution provides manufacturers and retailers with a simple and cost-effective way of dealing with the complex physical issues of modern distribution logistics. This removes a barrier to vertical integration.

The shift away from wholesalers is illustrated in the way in which total distribution costs are divided between the various distributors in France. The market shares for retailers and manufacturers have changed only slightly, but figures for the wholesalers and logistics companies have changed radically (see table 4.2).

Table 4.2. Consumer goods distribution in France: Distribution of market shares in 1985 and 1992 (in percentages)
 

	1985	1992
Manufacturers	25.5	24.1
Wholesalers	43.0	31.1
Retailers	25.5	27.2
Logistics services suppliers	6.0	17.6
Total	100	100
Source: Coopers and Lybrand.

In theory this shift could be caused by an increased tendency of wholesalers to outsource their logistics. However, this seems unlikely. Logistics is a core business for most wholesalers, and consequently these companies are often reluctant to outsource it.

4.1.6. Wholesalers are bought by manufacturers

Another indicator of the vertical integration of retailers and manufacturers may be obtained by observing the mergers and acquisitions in which wholesalers are involved. For this purpose Coopers & Lybrand developed a database combining information on 10,000 mergers and acquisitions involving wholesalers in the European Union for the 1981-95 period. From the information gathered, it is apparent that, in the majority of cases, wholesalers were bought by manufacturers and retailers who were far more active than wholesalers themselves or other (general) companies (see table 4.3). Logistics services companies played a marginal role in food and drink only. Furthermore, there was a marked variation across subsectors. While manufacturers acquired the highest share of wholesalers in all subsectors, food and drink retailers were the predominant players among retailer acquirers (table 4.3).

Table 4.3. Who bought the European wholesalers in 1981-95? (in percentages)
 

	Food and drink	Clothing	Furniture	Household appliances
Wholesalers	11	8	11	17
Manufacturers	38	62	60	57
Retailers	33	17	15	19
Suppliers of logistics services	3	-	-	-
Other	15	13	14	7
Total	100	100	100	100
Source: Coopers & Lybrand.

Finally, a detailed analysis of the acquiring companies shows that generally the larger companies are involved in acquiring wholesalers. They are often the ones that are operating on a European scale or have greatly expanded their European operations in the years following the adoption of the Single European Act. This confirms the close link between internationalization and consolidation.

4.1.7. IT enables personalized direct marketing

The low costs of direct marketing have created a huge and fast-growing industry -- made up of direct mail, telemarketing, database marketing, the Internet and free-phone, TV, radio and print advertisements. In its biggest market, the United States, the industry was worth $163 billion in 1998, when it grew by 7 per cent to almost three-fifths of the country's total spending on advertising. The industry expects 7 per cent annual growth to 2002, exceeding the 5.5 per cent forecast for advertising spending.

Direct marketing is growing even faster in places where junk mail is new enough still to be welcome. According to Robert Wientzen, president of America's Direct Marketing Association, in the Russian Federation and the Czech Republic most junk mail is opened and read -- indeed the average item is pored over by more than one person.

Yet, most direct marketing is still clumsy. Smart companies are trying to circumvent this by gathering information first-hand from customers. Tesco, a British supermarket, analyses electronic point-of-sale information as people shop, making it possible to change prices at different times of day or to tailor selections to suit local customers.

Direct marketing is now poised to take a new direction. It is aiming to change relations between customers and businesses so that each customer is treated differently. The key to this approach is to set up a "learning relationship" with the best customers. This improves with every transaction, defining the customer's needs and tastes in increasing detail. Computers and databases provide foolproof memory for this -- every preference can be registered.

Levi Strauss is introducing Web-linked kiosks in its stores, where customers can design their own pair of jeans, choosing from a number of styles, colours, shapes and sizes. The information is instantly relayed to its Tennessee factory, where the jeans are cut individually. To improve quality and reduce errors, each pair of jeans is made from start to finish by a single group of workers. Another example is Japan's National Bicycle Company, which turns out bikes in any size, colour or style without any increase in costs or delivery time.

Direct, personalized marketing also raises doubts about brands. As mass customization becomes feasible, each customer becomes, in effect, his or her own brand.

4.1.8. Electronic commerce aims at "frictionless market"

The Ernst & Young's "Second Annual Internet Shopping Study" revealed a dramatic rise in consumer shopping over the Internet in 1998, showing that online shoppers that year purchased more frequently and spent more than in the previous year. More than half (51 per cent) of online shoppers purchased something online on at least five occasions, up from only 17 per cent in 1997. In addition, more than a third (35 per cent) said they spent $300 or more, up from 26 per cent the year before.

The percentage of retailers participating in the Ernst & Young study who reported that their companies were either selling or planning to sell through the Web more than doubled: to 76 per cent from 36 per cent in 1997. The study recommended that retailers should concentrate on several key areas to help attract consumers and make them feel comfortable shopping online, which included credit card security, website navigation and branding. Of the consumers participating in the study who had not purchased anything online, 97 per cent expressed concern about sending their credit card information over the Web as a principal reason for not buying.

There have been many claims that the Internet represents a new "frictionless market" in which transaction costs are nearly zero, barriers to entry disappear, and markets clear instantly.

A number of recent studies shows that the cost reduction benefits of electronic commerce are revolutionary. For instance, an OECD study explores the key areas of cost reduction when a sale is carried out via electronic commerce rather than in a traditional "bricks and mortar" store (cost savings in physical establishment, order placement/execution, customer support and after-sales service), and when the structure of the value added chain is changed (disintermediation of wholesaler and retailers located between the producer of tangible goods and the consumer, and displacement of intermediary products).

There are also a number of studies on the impact of electronic commerce on prices. A number of them have come to the conclusion that prices are somewhat higher -- and others that prices are lower. Obviously, one reason for this is the substantial price dispersion, as pointed out by Michael Smith and Erik Brynjolfsson in a study comparing Internet and conventional retailers. The study revealed that prices for books and CDs could differ by as much as 47 per cent across Internet retailers at any one time and the dispersion of posted prices on the Internet was equal to or greater than comparable measures of dispersion across conventional retailers. It analysed empirically the characteristics of the Internet as a channel for two categories of homogeneous products -- books and CDs -- using a data set of over 4,500 price observations collected over a period of nine months. The study also compared pricing behaviour at 37 Internet and conventional retail outlets. Smith and Brynjolfsson found support for the hypothesis of increased efficiency in Internet channels in several areas. Prices on the Internet were 8-15 per cent lower than prices in conventional outlets, depending on whether taxes, shipping and shopping costs were included. In addition they found that Internet retailers' price adjustments over time were up to 100 times less than conventional retailers' price adjustments -- presumably reflecting lower menu costs in Internet channels.

4.2. Impact on employment and working conditions

4.2.1. IT personnel grows and its benefits increase

Within the commerce sector, IT personnel form a privileged group enjoying better pay and working conditions. Pay premiums, hiring bonuses, retention incentives, casual dress and flexitime are among the perks now routinely dangled in front of potential IT employees in an effort to reel them in.

The United States Bureau of Labor Statistics (BLS) data reveal vast differences in wages within commerce sector occupations. In 1997, the average hourly wage of a cashier was $6.96; retail sales staff earned somewhat more -- $8.64. Wholesale and retail buyers earned already twice as much as retail salespersons. Database administrators, computer programmers, systems analysts and electronic data processors all earned more than $23 (see table 4.4).

Table 4.4. Employment and average hourly and annual wages of some occupations, United States, 1997
 

	Employment	Average hourly wages	Average annual wages
Cashiers	3 122 490	6.96	14 480
Salespersons, retail	3 842 730	8.64	17 970
Order fillers, wholesale and retail sales	235 720	9.40	19 560
Stock clerks -- stockroom, warehouse or storage yard	803 560	9.66	20 090
Order clerks, materials, merchandise and service	357 040	10.60	22 040
Salespersons, parts	293 940	11.51	23 930
Computer programmer aides	63 240	14.83	30 840
Wholesale and retail buyers, except farm products	99 820	16.72	34 780
Computer support specialists	406 230	18.71	38 920
Database administrators	82 600	23.06	47 960
Computer programmers	501 390	24.27	50 490
Systems analysts, electronic data processing	530 420	24.69	51 360
Source: BLS: Occupational employment and wages 1997. This publication includes data over 770 detailed occupations.

4.2.2. Biggest job increases at the top and at the bottom of income distribution

According to a case study published in Fortune Magazine in 1995, the biggest job increases were at the top and at the bottom of income distribution at that time, while in the middle-income category, only a few jobs were created. The BLS 1998-99 Occupational Outlook Handbook projected that this trend would continue in the United States in the period up to 2006. Service and retail trade industries will account for 14.8 million out of a total projected growth of 17.5 million wage and salary jobs.

Almost two-thirds of the projected growth will be in occupations that require less than a college degree. However, these positions generally offer the lowest pay and benefits. Jobs requiring the least education and training -- those that can be learned on the job -- will provide two out of every three openings due to growth and replacement needs; three out of every four openings will be in occupations that generally require less than a bachelor's degree. Cashiers and retail salespersons belong to these occupations.

The 25 occupations with the largest and fastest growth in employment, as well as higher than average pay and lower than average unemployment, will account for 5 million new jobs, or 27 per cent of all job growth.

The fastest growing occupations reflect, among others, growth in computer technology. Computer engineers' and systems analysts' jobs are expected to increase rapidly in order to satisfy expanding needs of scientific research and applications of computer technology. The three fastest growing occupations are in computer-related fields.

Compared to Canada, Japan and European countries, the United States wholesale and retail sector is exceptional in that it also creates many jobs in the low-income, low-skill categories. In other countries, the proportion of high-skill occupational categories is higher and has increased since the 1980s (see table 4.5).

Table 4.5. Share of high-skill occupational categories in wholesale and retail trade in selected countries
 

	Share (%) of high-skill occupational categories (1+2+3 of the ISCO-88) in total employment
	1980s	1990s
United States	12.6	11.8
Canada	11.4	12.3
Finland	24.4	31.9
France	38.4	40.8
Japan	15.8	18.9
Source: OECD.

4.2.3. E-commerce and employment

While electronic commerce may lead to expanded employment in traditional retailing in the near term, as retailers maintain a presence in both physical and cyber channels, disintermediation and the changes in the value added chain are expected to have a negative impact on employment in this sector.

According to a study commissioned jointly by Euro-FIET, EuroCommerce and co-financed by the European Commission, and published in September 1998, there is no certainty at this time as to what impact electronic commerce will have on employment. It is generally agreed that electronic commerce will have a negative effect on jobs, mostly because of the inadequacy of existing skills in enterprises. However, as the electronic market expands, new jobs will be generated in start-up companies, in multimedia, Intranet networking and new communication products, and new professions will be in demand (hotliner, webmaster, security manager, information net manager, project and operations manager, lawyer specialized in electronic commerce, etc.).

In view of the fact that electronic commerce still has to make an impact on mass markets, only tentative estimates can be made at this point as to its overall impact on jobs:

• It has been estimated that the design and development of Europe's 150,000 commercial websites (not including the work of maintenance) has created around 3,000 new jobs. Jobs are also being created in small companies specializing in web-related services. In the United States, where the Internet has made a much wider impact, it is estimated that 760,000 jobs have been created by the Internet.
• In Germany recent estimates show that 200,000 new jobs will have been created in communication services between 1995 and 2005 -- of which over half in new electronic commerce services.
• In Belgium it is estimated that only one in ten vacancies for specialists who can implement electronic commerce solutions can be filled at present.
• In the United Kingdom it is estimated that the web design market alone is currently worth over £100 million and it is expected to grow by 40 per cent per year, with a similar growth in the number of jobs for web designers.

Furthermore, according to a study also commissioned by the European Commission and carried out by Gemini Consulting, e-commerce could generate the creation of 500,000 jobs in the European Union (EU) by 2005. It should be recalled that some 22 million people in the EU work in the commerce sector -- almost 16 per cent of total EU employment -- and that between 1982 and 1992 commerce created about 2.3 million jobs in the 15 Member States of the EU, a growth of 12 per cent.

By and large, e-commerce shops require far fewer, but high-skilled, employees. In the United States, Amazon.com, the e-commerce books merchant, has only 614 employees (for sales of $148 million), while Barnes & Noble, the largest physical United States bookstore, has 27,200 (for sales of $2.8 billion). While these numbers are not strictly comparable, they give a rough idea of the difference in employment levels and sales per employee ($267,000 per Amazon.com employee versus $103,000 for Barnes & Noble).

A comparison of NECX, a catalogue turned e-commerce seller of PCs, and CompUSA, the largest retailer of PCs in the United States, provides some idea of the impact on skill requirements. In 1996, CompUSA had 106 stores, each of which generated on average $38.4 million in revenues and employed 103 persons, the majority of whom were cashiers, salespersons, and stockers/warehouse workers. NECX generated $50 million from its website in 1997, but employed only 38 people, half of whom provided skilled, technical support (webmaster, Unix administrator, junior-level support person, four EDI support persons, and 12 programmers) to the site.

Federal Express reports that their online customer service system has represented a savings of 20,000 new recruitments (about 14 per cent of their total labour force). Cisco reports that, thanks to its e-commerce website, they did not have to hire 1,000 new staff for their sales/support group (out of a total of 4,500 sales and marketing employees and 11,000 total staff).
 

Box 4.1 UPS courier service turns to e-commerce The present trend of mergers and acquisitions in the postal services and among express mail and parcel delivery firms may be attributed in part to the potential for expansion provided by electronic commerce. In the United States, for instance, UPS is so influential that the traditional role of logistics and transport is being reversed. UPS no longer goes to its clients; its clients go to UPS. IBM, Compaq and other major computer companies have opened warehouses in Kentucky (resulting in the creation of thousands of jobs) to be near the airport of Louisville -- one of UPS's major hubs -- which transits 500,000 parcels a night brought in and out by hundreds of aeroplanes. For major carriers such as UPS, the market linked to e-commerce is potentially enormous, despite the fact that the development of Internet actually reduces the number of documents transported. Indeed, the carrying of documents accounts for 38 per cent of UPS's activities throughout the world (and 57 per cent in the United States). This prompted UPS to launch an on-line delivery service in 1998, guaranteeing the transfer of documents by checking the identity of the sender and recipient, and ensuring the confidentiality of the transaction. However, at an average of $5 a mailing, as opposed to more than double that for a dispatch of actual documents, electronic delivery represents a potential to be reckoned with -- and neither the postal services nor parcel delivery companies know the likely repercussions. Source: Le Monde (Paris), 6 Oct. 1998.

According to a WTO study on electronic commerce, published in 1998: "developing countries have a lot to gain from electronic commerce and the Internet but fundamental challenges relating to access and education must be addressed ... A number of countries already benefit from new export opportunities including data entry, software development, claims and forms processing and accounting ... The Internet will make it easier for producers in poor countries to become part of an international bidding and supply process from which they were largely excluded in the past".

However, new commercial circuits do not develop at the same pace throughout the world. According to the Bangladesh Employers' Federation, little or no modern distribution circuits have evolved in Bangladesh and the traditional commercial structures continue to prevail. Despite government policy to encourage electronic commerce, there is limited or no access to communication facilities. There is also popular pressure on the Government to adopt appropriate policies to avert the unwelcome social effects of electronic commerce.

4.2.4. E-commerce and skill requirements

The Euro-FIET/EuroCommerce study on electronic commerce points out that employees involved in e-commerce gradually acquire higher skill levels as they are spared routine and repetitive tasks and have a far richer information basis upon which to work. Electronic promotion of goods, particularly through the Internet, will lead to a new type of position -- that of the web promoter. The opportunities provided by electronic sales will encourage some of the existing personnel to turn to electronic selling. The job of the accounting officer in commerce will change significantly as electronic commerce will transform the exchange of information and the management of payments made and received. In general, new task arrangements for employees in an electronic commerce environment are expected to place emphasis on three types of activities: managing production, promotion, marketing and monitoring of competitors; managing the communication between the enterprise and its customers and suppliers; and managing the information and communication technology infrastructure.

As with other forms of IT-enabled business change, flexible enskilling and responsible autonomy are necessary ingredients to realize the potential of electronic commerce. Enskilling through electronic commerce seems to have more leverage where jobs are integrated and less segregated as is the case with employees of small firms.

There is a high percentage of young prospective employees with the minimum IT literacy requirements; hence these developments create employment opportunities for these groups of individuals. Another prospective employee is the IT professional with a vertical specialization in a particular commerce sector. For instance, food retailing is a sector, among others, in which the traditional merchandising process is being transformed through the automation offered by ECR techniques -- thus creating employment for such individuals.

Furthermore, the set-up and management of electronic commerce applications will require the transfer of knowledge on product features, effective selling and promotion strategies, efficient logistics functions and existing financial management procedures. Employees conversant with these aspects of work, particularly through experience gained in the target work environment, will find themselves better poised to ensure employment within the transformed business context. Moreover, the maintenance of the electronic commerce infrastructure requires a continuous re-evaluation of the content and processes embedded in the electronic transaction media. Therefore, the ability of the employees to translate enterprise, competition and market-related developments into requirements for updating and expansion of the firm's electronic commerce infrastructure will also be important.

4.2.5. Working conditions: The potential of e-commerce

According to the same Euro-FIET/EuroCommerce study, technology in general -- and electronic commerce in particular -- require a redefinition of regulations to ensure sustainability and stability of employment. The concept of flexisecurity of work might help define working conditions when employee flexibility would not be counterproductive for firms -- acting as a brake on investment in human capital -- while ensuring that the required flexibility in work did not become a destabilizing source of insecurity.

Working time

Electronic commerce will require flexible work arrangements for a number of reasons. Customer services will operate on a 24-hour basis, necessitating a redistribution of jobs. There may also be cases in which the time frame of the work will be increased as the new requirements of electronic commerce weigh on existing personnel, thus creating an additional workload.

Commerce will probably witness work migration trends similar to those observed in large centralized enterprises, first for workers in manufacturing during the Industrial Revolution, and later for white-collar staff in mass office complexes. As electronic commerce is among those technology phenomena that challenge the idea of the normal working week, it may allow workers to have more control over their working lives; they may, for instance, choose to work in the early mornings, during evenings or at weekends, in order to tailor their work preferences more closely to their personal lives and family commitments. Flexibility in working space and time, if carefully organized, can create jobs -- not only through job-sharing but also through new forms of demand for services generated by greater freedom to manage personal lives.

The main challenge for changes to working space introduced by electronic commerce is the possibilities the technology offers for teleworking. From an employee's perspective, teleworking is expected to have negative as well as positive aspects. The negative ones concern the lack of social interaction, the mixing of "professional" and "family" activities, the tendency to work longer hours, the interruption of work for domestic chores, the difficulty to perform teamwork, and to maintain a company culture. On the other hand, the positive aspects of teleworking include flexibility in selecting the time and place to work, time saved from commuting, and reduced operating costs for enterprises.

Wages

The earnings landscape in the commerce sector will be reshaped through the impact of electronic commerce as this will demand a new type of worker, who will be higher skilled and thus better paid. It is expected that employers will need to reward high knowledge of the technological infrastructure of electronic commerce, as well as logistics, sales and promotion techniques focused on particular product and market characteristics. An example of this is the situation in the grocery market where employees with experience in efficient consumer response methods (electronic commerce through EDI) are highly paid due to the market's current shortage of such skilled personnel.

4.2.6. The distribution of jobs is going to change

Much recent research has focused on data at the enterprise level to investigate the relationship between technology and employment in a number of OECD countries. As a general rule, these studies find a positive relationship between technology adoption and employment at the enterprise level. The impact of technology on employment at the industry level, however, is dependent on the nature of the jobs created, the extent to which they replace other jobs, and the effect on rival firms in that industry as well as in other industries or countries.

At the present stage, it is impossible to quantify the overall employment effects of information and communication technologies on wholesale and retail trade. Obviously the wholesalers and retailers of hardware, various electronic devices and communications equipment have grown and profited from the developments. But job creation in this segment is not necessarily at the expense of some other segments, although these technology products have radically reduced labour costs and/or improved customer service and productivity.

The "Internet industry" itself is going to create jobs. Basically, in 2005, the Internet is expected to contribute 50 per cent of jobs created in the United States telecommunications sector. Additional jobs created in the Internet/Intranet scenarios do not emerge from Web usage per se, but come almost exclusively from the production of Web-related hardware-software content (see box 4.2). Also, it is evident that vertical integration, direct marketing through Internet and e-commerce are going to increase jobs in transport and logistics in general. However, it is unclear to what extent these services are going to be externalized from wholesale and/or retail trade. As discussed earlier in the report, there is some evidence that a number of retailers and manufacturers seek to take control of distribution activities formerly carried out by wholesalers, and subsequently outsource the physical components of these activities to suppliers of logistics services.
 

Box 4.2 Job opportunities in e-commerce-related industries The convergence of media, telecommunication and computing technologies is creating a new integrated supply chain for the production and delivery of multimedia and information content. Most of the employment related to electronic commerce evolves around the content industries and communications infrastructure such as the Internet. Both in political circles and in mass media, these industries often raise great hopes for job creation. The computer software, motion picture, audiovisual and publishing industries have been defined as the "copyright industry" (Economist Incorporated, 1996). In the United States, the industry's employment share grew from 1.60 per cent in 1977 to 3.08 per cent in 1996 and is forecast to generate 1.4 million new jobs in the period 1996-2006. The industry is quite diversified, with software services a fast-growing component; employment in the advertising and publishing industries is forecast to lose its relative share in employment. In Europe, there seem to be no consistent source of data to estimate employment for this industry. Adding estimates of the publishing, audiovisual and software industry, Databank Consulting (1997) obtained an estimate of around 5 million people (i.e. 3 per cent of overall employment). The main difficulty is estimating software programming and computing services in Europe. The Community Labour Force Survey reports an estimate of about I million employed in software companies in 1995 (excluding software personnel in hardware manufacturers and user companies). Another survey reports 2 million employees for the same year and for a wider definition. A third survey reports an estimate of 1.5 million employees only for Germany, France and Italy (Databank Consulting, 1997). Japan carries out a special survey on information services; for 1996, it gave a total of 417,087 employees. In addition, employment in the publishing industry and the audiovisual sector is estimated at 2 million for the year 1996 (i.e 3 per cent of total employment). Employment growth in the content industry is driven by information services, and particularly by professional computer services (which represent 58 per cent of information services in the United States), data processing and network services (28 per cent in the United States), and electronic information services (14 per cent in the United States). While the number of jobs differs greatly among countries, employment in this fast-growing industry represents only about I per cent of overall employment across countries. Quantifying the impact of electronic commerce on job creation in the software sector is very difficult. According to the estimates presented above, United States Internet-related companies to the computer services sector employ more than 42,000 full-time employees. According to the European Commission's Panorama of EU Industry (1997), Western Europe has more than 16,000 software and services companies with over 300,000 employees. In terms of employment evolving from software and services in the context of Internet and multimedia applications, however, most of these companies have less than 20 employees, and several not more than five. Databank Consulting estimates, on the basis of case studies, that Internet activities such as the implementation of websites only created about 6,000 work-years of additional work in Europe (Databank Consulting, 1997). Source: OECD: The economic and social impact of electronic commerce, Ch. 4: Electronic commerce, jobs and skills, pp. 131-132.

Another factor which makes it hard to estimate the likely impact of technology on wholesale and retail trade -- and therefore its employment effects -- is that consumers rarely behave as expected. Printed books have sold extremely well, partly thanks to the Internet and the availability of books in electronic format. The best-known retailer on the Web, Amazon.com, has sold old-fashioned bound pages to over 4.5 million people. Others have pioneered the paradoxical art of selling books by giving them away. Rough Guides, a British travel-book company, has seen sales soar since it started putting some guides free on the Web. The Starr report, available free on dozens of websites, went straight to number one on the bestseller lists of both Amazon.com and its main rival, Barnes & Noble. Everyone who paid for the report from these bookshops already had access to its entire contents for nothing.

5. The changing consumer and retail formats

5.1. Recent trends

Changes in demographic trends, labour force participation rates and income distribution have all an impact on the retail trade. In recent years, the retail trade has had to contend with: slower economic growth rates; an ageing population; greater ethnic diversity; an increased participation of women in the labour force; and a slower growth in income and widening disparity in income distribution.

As a result of these trends, two specific consumer groups have emerged, in particular in the industrialized countries: the first may be termed as a "convenience-oriented group", and the second, a "price-conscious group".

5.1.1. Time-saving formats for the convenience-oriented group

The rise of the convenience-oriented economy may be mainly attributed to the increased labour force participation of women -- and this trend is nowhere more apparent than in the food business. Many consumers do not have the time to prepare traditional meals and increasingly even lack the knowledge of how to cook. The substitute -- "take-away food" -- combines value added services (cooking) with the freshness and variety of products and the comfort of eating at home. However, per capita spending on "food away from home" is constantly on the increase and, consequently, new kinds of competitors that combine the services of a food store and a restaurant have started to enter the market. Indeed, traditional stores and restaurants are facing serious new competition from "home meal replacement" providers.

Cutting the time required for food preparation is another form of convenience. It is not therefore surprising that the sale of semi-finished products -- pre-washed and pre-prepared vegetables, packages of various assortments of salad ingredients, spiced portions of meat, fish etc. -- has grown rapidly. This has had a major impact on store design. Remodelled stores look like a group of stores under the same roof. The prepared foods/deli counters are expanding into a "food court" where the customer is able to walk directly to departments such as dairy and deli. In the middle of the court there is usually an area where customers can sit down and relax -- maybe even have something to eat or drink.

Another form of convenience for the shopper is to be able to carry out a number of tasks on a single shopping trip or in a single store. To improve their "one-stop shopping" appeal, stores have been adding new services, such as banks, florists, video rental, and pharmacies, even though the proportion of shoppers who use these specialty department stores remains limited.

The ultimate convenience is home shopping when consumers give their order by phone or fax or even use their home computer after looking at a catalogue or visiting a website. This consumer need has created a new retail format: the provider of interactive shopping services. Instead of selling their own goods, these service providers take orders from customers and then send their employees to the designated stores to fill the orders and transport the purchased goods to the customer.

5.1.2. Money-saving formats for the price-conscious group

Over the past five to ten years, the earnings of the lowest paid (first decile) and the highest paid (ninth decile) have developed in a very different way. According to an OECD study, the earnings at the top have risen much faster than those at the bottom. The only exceptions are Finland, Germany and Japan among the OECD countries. In a number of countries real wages for low-paid workers have fallen substantially (Italy, Sweden, United States and New Zealand). These income trends also mirror a division in the workforce. The proportion of those working over 50 hours a week and the proportion of those working part time, part of a year, or rarely, have increased. This overall trend has resulted in the emergence of money-saving formats:

(a) Hypermarkets cut the operating expenses

As discount merchandisers learned how to cut distribution costs, they built larger stores. Such major retailers as Carrefour, Wal-Mart, Meijer, K-Mart, Fred Meyer and Target developed supercentres/hypermarkets, combining full-size discount stores with full-size supermarkets. The supercentre/hypermarket format is the most rapidly growing large-scale retailing concept in the world, and one that is hurtling toward global consolidation.

Traditional stores and even supermarkets are very concerned about the level of efficiency and, hence, price competition that the so-called supercentres/hypermarkets bring to the business. The major idea behind the "efficient consumer response" (ECR) initiative is to prepare retailers to compete with these new competitors. For instance, the average grocery retailer has operating expenses equal to 21.8 per cent of sales, whereas Wal-Mart's operating costs are only 17.5 per cent. Even after full implementation of ECR, operating costs for the average grocery retailer are estimated to be 19.3 per cent.

In Europe, the hypermarket was founded by Carrefour, still the international leader in this format. In the United States, Wal-Mart was the leader in converting purchasing and distribution cost advantages into lower prices.

(b) Low prices highlighted

Supercentres/hypermarkets have selected a number of formats to highlight their low prices. The EDLP (Every Day Low Price) format is one of the most popular. Private labels, house brands and generic products are not new inventions but, in the past, their popularity increased during economic downturns and declined during recoveries. Private labels or "own brands" are flourishing in many industrialized countries. They account for over half of all sales in some categories, are often cheaper than national brands and tend to provide greater margins for retailers. Most worryingly for national brand managers, many private labels are now competing on quality. Own brands also tend to be between 10 and 30 per cent cheaper than comparable national brands. Private labels seem to have performed better in some European countries and Canada than in the United States. Table 5.1 provides a breakdown of store-brand penetration by country (17 OECD member States).

Whereas customers may once have sought quality with little regard for price, or low prices at the expense of quality -- thus enabling national brands to focus on quality and private labels on price -- they now seem to want high quality at an affordable price. This poses a challenge for manufacturers and retailers alike.

(c) Global homogenization of hypermarkets

A major derivative effect of the growing global hypermarket war, or "race for space", is that it is forcing rapid changes among local operators in each market, in some cases encouraging them to sell to a large-scale international partner or open their own hypermarkets. The acceleration of hypermarket activity has led to local hypermarkets and supermarkets working rapidly to improve their merchandising and logistical competitiveness. This, in turn, has led to a phenomenon that could be called the global homogenization of hypermarket retailing.

All Carrefour hypermarkets, for instance, are built around three key components -- one-stop shopping, ample free parking and a discount pricing strategy. And the concept, values, systems and synergies are largely the same across Carrefour's extensive global network.

Table 5.1. Private label penetration by country
 

Country	Private label share (% units)	Population/km2	% large stores (>or=3,000 m2)	Top retailers' market share (%)
Switzerland	41.2	155	36	80
United Kingdom	37.1	228	70	45
Germany	21.8	225	40	47
Canada	21.0	3	50	25
Belgium	19.8	325	56	58
United States	17.6	25	70	17
France	16.4	103	76	38
Netherlands	16.3	363	31	47
Denmark	15.1	118	37	77
Sweden	10.7	19	38	95
Finland	8.0	148	27	75
Spain	7.7	77	35	20
Italy	6.8	190	26	11
Austria	6.3	91	26	56
Norway	5.0	13	19	86
Ireland	3.6	50	53	43
Portugal	2.3	113	43	41
Source: Financial Times (London), 26 Oct. 1998.

(d) Membership club stores challenge hypermarkets

In addition to supercentres/hypermarkets, other retail formats are growing to meet the demands of the price-conscious group of consumers. Membership club stores are considered a major competitive threat to supermarkets as they sell items in large unit sizes. Some manufacturers consider these stores to be a different class of trade because many of their sales are to other businesses. Sam's Club and PriceCostco are the two largest chains in this retail segment. In the United States, the number of club stores is expected to rise from 856 in 1997 to 975 in 2001, but their sales are expected to grow at a slower rate than those of the supercentres.

(e) Small shopkeepers defend themselves by associating together

In the face of competition from large distribution undertakings, many small and medium- sized undertakings have defended their market shares by associating together in a network which grants them access to efficient logistics structures and enables them to acquire the necessary critical mass and economies of scale. These network associations of independent businesses are primarily structured in the form of consumer or retailer cooperatives, purchasing groups, voluntary chains between a wholesaler and many retailers, or even franchises.

Franchising, which appeared on the scene more recently than the other networks, is developing rapidly, particularly in non-food sectors as manufacturers endeavour to influence their distribution networks. It is most developed in France, accounting for approximately 6 per cent of total retailing turnover in 1997. The primary advantage of franchising over the other network formats is its greater emphasis on transfer of business know-how and the marketing of a more unified image. In grouping together under a common trade name independent undertakings of different sizes, these network formats offer small and medium-sized undertakings the possibility of competing more efficiently with large distribution undertakings.

(f) And the losers of the race are ...

Identifying those who will lose most sales to supercentres/hypermarkets and club stores is difficult. But a number of estimates agree that the losers are going to be traditional (independent) supermarkets, convenience stores, warehouse stores and limited assortment stores (small stores).

According to Euromonitor, in Western Europe supermarket numbers will grow by 5 per cent to over 40,000 by 2002, with the greatest growth in France, Ireland and the United Kingdom. In all three countries, planning restraints will prevent the over-expansion of hypermarkets and benefit supermarkets. In the United Kingdom, many of the new supermarkets will be in town centres, as major grocery multiples take up supermarket formats for city centres once again.

However, hypermarkets, which have shaped the whole market for food shopping over the last decade, increased their market share very rapidly in Western Europe and Scandinavia between 1993 and 1997 and are now expanding in Southern Europe as well. The format is likely to become very important in Eastern Europe, with major Western European businesses investing in the region.

Yet, the market share of large-scale outlets varies considerably among European countries. In 1995, hypermarkets accounted for 49 per cent of the grocery market in France, but for only 5 per cent in Greece (see table 5.2). In the Czech Republic, the number of retail stores per 10,000 inhabitants is twice as high as the European average (see box 5.1).

Table 5.2. Grocery market shares of the principal retail formats in Europe, 1995
 

	Hypermarkets1	Supermarkets2	Hard discount stores3	Small self-service outlets
France	49	39	5	7
Germany	22	26	22	30
Great Britain	39	36	5	20
Italy	5	48	2	45
Spain	24	36	6	34
Portugal	25	16	5	54
Netherlands	4	55	6	35
Belgium	16	53	13	18
Greece	5	28	0	68
1 Hypermarkets and supercentres: retail self-service establishment offering a broad range of food and non-food products with car parking facilities and a floor space of 2,500 m2 or more in Belgium, Denmark, France, Luxembourg, the Netherlands, Portugal and Spain; 1,500 m2 or more in Germany; 2,323 m2 or more in Great Britain and Ireland. 2 Supermarkets: retail self-service shop selling predominantly food but also increasingly non-food products, with a floor space of 400-2,500 m2 in Belgium, Denmark, France, Italy, Luxembourg and Spain; 400-1,000 m2 in Germany; up to 2,323 m2 in Great Britain and Ireland; average of 300 m2 in the Netherlands; 200 m2 or more in Greece and Portugal. 3 Discount store: retailing establishment selling a range of rapid turnover, cut-price goods and with virtually no floor service at all. Source: European Commission.

 

Box 5.1 Emerging formats in the Czech Republic The Czech Republic provides a good example of changing consumer trends and their effect on store formats. Although small, specialized stores and markets still dominate, the trend during the past few years has been toward bigger stores with a wider range of products. Czech shoppers have responded positively to the opportunity for one-stop shopping, and traditional habits, such as buying daily in small quantities, are changing. Currently in the Czech Republic, there are about 220 retail stores for every 10,000 inhabitants. The number has doubled in the last nine years and is now more than twice the European average of 90 stores/10,000. In the past, women traditionally did the grocery shopping daily and only bought as much as they could carry. Now, 20 per cent of families use a car and this percentage is increasing. Food is still commonly purchased in small shops or groceries near customers' homes (1991: 59 per cent of families; 1997: 51 per cent). However, a segment of customers that has grown in recent years includes those who buy food only once a week in large stores (over 400 m2). These customers have a higher income and education than average. In 1991, these weekly shoppers accounted for only 19 per cent, but by 1997 they had grown to 26 per cent. Although statistics show that in the last four years Czech shoppers have begun to buy recognized brands, price still plays a decisive role. Many chains have already started to sell common products with their own brand name (e.g. Delvita, Julius Meinl, Mana), which are usually cheaper than similar well-known brands. Current consumer product retail stores provide a wide choice of foreign and domestic products. Do-it-yourself products (such as building materials, home repairs) are increasingly being offered in specialized superstores in big cities, such as Baumax (Austrian), Obi and Gotzen (German) and large department stores, such as Tesco (United Kingdom). The transformation from a state economy to a market economy witnessed an increase in larger stores with more staff. The proportion of all sales in large retail stores (with more than 100 employees) increased from 22.6 to 25.8 per cent between 1996 and 1997, suggesting a successful expansion of supermarkets and hypermarkets in the Czech Republic. Supermarkets (stores of 400-2,500 m2) only appeared in the Czech Republic after 1990, but they already account for 32 per cent of sales. Companies include: the Interkontakt group (120 supermarkets Sama); Euronova (62 supermarkets Mana); Delvita (30 supermarkets Delvita); and Julius Meinl (61 supermarkets Julius Meinl). Discount stores such as Penny Market (Rewe) and Rema 1000 (Interkontakt and Reithan) started in 1997, but have already opened dozens of supermarkets. An additional 70 to 80 supermarkets were built in 1998. The first two hypermarkets opened in 1996, five opened in 1997 (Makro, Interspar, Globus), and others (Tesco, Kaufland, Carrefour) are being built. The first hypermarkets easily attracted customers by offering a wide range of food and consumer products in a friendly environment. These large stores are located in the largest Czech cities such as Prague and Brno. The number of hypermarkets doubled in 1998. Recent surveys by Incoma Praha (market research company) show that shoppers are generally satisfied with opening hours, the variety and freshness of products, services, cleanliness, and even prices, although this category had the lowest rate of satisfaction (66 per cent). Source: Helena Vagnerova: Changes in the Czech retail network, The Central and Eastern Europe Business Information Centre, May 1998.

5.2. Impact of globalization and restructuring on training

There is a marked tendency in some areas of commerce to replace low-skilled jobs by jobs requiring a higher level of education. If the sector is to continue offering career prospects to its current workers, it must provide for additional education and training. At the same time, new areas of work are bound to emerge which will be attractive to persons with a higher education. In this instance, existing employees, through additional education and training schemes, should also be given a chance to acquire the requisite skills for these new jobs.

There is a universal consensus that education and training are an important long-term response to the challenges of globalization. Globalization makes national policies related to the development of human resources more important than ever. In a context of ever-changing economic conditions, an open economy requires a high degree of professional mobility. Education and training have a strong bearing on the ability to innovate, develop new technologies and improve product marketing. Furthermore, technological change has simplified a number of tasks and raised the demand for skilled labour. Finally, the issue of equality of opportunity, notably in access to high-quality education, is a crucial one from the point of view of social equity and also contains a political economy dimension: when social inequalities widen and feelings of insecurity grow, there is a possibility that a large segment of the population might oppose economic reforms in general and trade liberalization in particular, even though these may not be the main factors at work. In the presence of unequal education opportunities, this danger is understandably highly significant.

5.2.1. The self-employed require more training to modernize their business

Although their relative share is constantly decreasing, self-employed workers still account for some 20 per cent of employment in retail trade in the European Union. In the southern Member States, their share is much above this average.

In the past, these small shopkeepers had little access to training activities. But this is beginning to change. Small shopkeepers need many new skills in order to survive. First, they need to develop a "differentiation strategy" to compete with the new business formats. This implies that they must try to distinguish their products and services from those of their competitors. Second, once they have distinguished these products, this needs to be visible to the targeted groups of customers -- and this requires marketing skills. Third, small shopkeepers need networking, for instance by belonging to voluntary chains. Training may thus be an important factor of group cohesion in this respect. It may act as a means to achieve more homogeneity and efficiency, through joint definition and application of homogenous procedures, organization principles, selling concepts and management methods.

Nevertheless, many of the owners of small shops feel that they cannot spare any time for training -- or do not see the need for it. To make matters more complicated, there are few studies on the qualification and training needs of small shopkeepers.

In 1997, the European Centre for the Development of Vocational Training (CEDEFOP) carried out a study on the qualifications required by 20 micro-enterprises in the retail sector in Greece, Ireland, the Netherlands and Portugal to deal with the modernization process against a background of changing work organization. Fifteen of these enterprises had a maximum of ten persons.

Concerning work organization, these case studies revealed among other things that:

• there were important differences in the previous experience of persons starting their first business. All of them had substantial work experience as employees and most of them also had experience at management level in the same kind of firm they were starting. Failures in decision-making, concerning for example the assortment to be displayed, could often be attributed to inadequate preparation;
• in many cases, the entrepreneur was very motivated in serving his customers, but less attracted to the managerial aspects of running a business. Some explicitly stated that they could not or would not delegate tasks;
• the entrepreneur held a very central position that seemed to protect his exclusive domain against external influences. This attitude restrained even the growth of the business;
• there was no clear division of work in a horizontal sense;
• most of the modernization in these micro-enterprises took the form of specific projects, involving an overhaul of or change in existing premises. These were initiated and carried out by the entrepreneur with the support of external help. In a few shops, the staff played a more important role and external help was nearly totally absent. The personnel played a crucial role in collecting client information and in communicating this information within the enterprise, but even in these cases, the process seldom had a structural basis (keeping diaries on customers' wishes for example).

Concerning qualifications, the main finding of the study was that successful modernization was linked to enhanced qualifications requirements. It concluded that, in the area of management of the modernization process, entrepreneurs and the staff of micro-enterprises needed education and training in order to be able to:

• envisage the objectives, results and chances of a modernization process;
• budget time to devote to this strategic approach;
• subdivide the modernization process into various partial projects and to take stock of their success or failure;
• provide funds or to acquire and invest them adequately;
• motivate all parties involved in the modernization process, implying that all people should work as partners and agents;
• integrate additional personnel in the case of an expansion, taking into consideration their different initial situations and interests;
• convey the message of modernization positively to former and potential customers; and
• find partners outside the business capable of providing adequate back-up to the modernization process through consultation and services (associations, cooperatives, trade chains, individual providers of services, networking).

As regards the organization of labour, the study felt that education and training were required to enable entrepreneurs and their staff to:

• redefine the role and tasks of the owner;
• reassign tasks to the various parties involved;
• organize work under aspects of time economy;
• assume their new roles and the new division of work, and to accept responsibilities;
• create a climate of mutual trust and acknowledgement of performance without ignoring the various existing interests;
• pursue the development of labour organization towards "teamwork";
• understand that the support of changes in the organization of labour requires vocational qualification and/or training;
• describe existing qualifications as well as qualifications required in the near and far future;
• define qualification requirements and translate them into a realistic concept of training;
• find training facilities with adequate offers and come to an agreement with them;
• utilize everyday working routines and the communication requirements involved therein for continuing vocational training and combine work and training;
• pursue effective and comprehensive quality maintenance and improvement; and
• carry out increasingly cost-efficient work.

Given that customer orientation and market positioning are a constant concern, the study also concluded that entrepreneurs and staff should be able to:

• develop personal relations with customers;
• communicate with the customer about the assortment of merchandise and, if necessary, modify the offer of merchandise to meet customer demands (as an element of market research);
• offer customers adequate services at the right time, e.g. provide home delivery, meet customers' wishes which cannot be satisfied by existing stock as quickly as possible, accept telephone orders, be ready to compromise as to terms of payment, etc.;
• make visiting the shop a pleasant experience for the customer;
• establish an adequate and attractive relation between quality, service and price for the customers and achieve a high quality standard of service and products -- above all, in the sensitive field of perishable goods in foodstuff retail trade;
• supply customers with expert information about the goods, their special features, range of use and possible alternatives;
• understand the necessity of a permanent market survey and analysis and draw conclusions from it (methodological ability);
• recognize and interpret changes in the competition landscape and legal provisions;
• observe, interpret and, if necessary, react to the changing market strategies of the most important competitors;
• recognize, interpret and react to changing demographic structures, especially in view of possible changes in the structure of buyers;
• pursue a self-critical verification of their own market positioning, the location of the shop and the assortment in view of a possible loss of acceptance; and
• interpret index figures concerning potential risk constellations.

In addition to all these qualification requirements, the study felt that entrepreneurs and their staff should be equipped to deal with the modernization process by receiving instruction in the following areas: design of façades; interior decoration; advertising; cost accounting; introduction and maintenance of information technology; and legal problems.

In view of all these needs, the study found that the prerequisites for adequate education and training were largely missing in many countries. The fact that regulated vocational training in the retail trade differed from country to country already placed micro-enterprises in a different position. But even in countries with regulated vocational training, the majority of persons working in micro-enterprises had not completed this training.

5.2.2. Improved training of the sales staff becomes crucial

Another CEDEFOP survey of 55 national and multinational retail companies operating in the EU Member States revealed that the segmentation of customers and improvements in the quality of customer service created fresh needs and new in-company training policies. In a strategy of competitiveness and quality, people who are in direct contact with the customers become a strategically important group because they convey the image of the enterprise and its concepts to customers through their own behaviour and knowledge.

This implies a radical change in the target groups of the training policy. Training is no longer exclusively devoted to internal promotion. On the contrary, the goal is to train those employees who are in direct contact with customers. In this way, the sales staff and cashiers become the main target groups of training in retailing. Furthermore, part-time workers become an important target group for in-house training, because they are nearly always in direct contact with customers, usually at critical moments or under great pressure.

The CEDEFOP survey showed that in 80 per cent of the companies, continuing training existed for shop assistants. Training of shop assistants was more common in non-food outlets (88 per cent) than in food outlets (68 per cent). It was less prevalent in super/hypermarkets where the number of shop assistants was not so high. Surprisingly, the smallest companies -- up to 100 employees -- involved all their shop assistants in training, while the largest only involved half. Continuous training of cashiers was much less common. Only 26.6 per cent of the companies provided continuous training for cashiers. Stock employees received even less continuous training. Indeed, this category of employee was most frequently left out of any type of training.

Concerning the continuous training of part-time workers, results varied considerably. In some companies, their training was considered to be as important as that of the full-timers, whereas in other companies, they were treated as a marginal group. Part-time workers were catered more for in department stores and very large firms. However, when it came to training to promote careers within the firm, part-time workers did not fare so well. All in all, 31.1 per cent of the companies provided continuing training for part-time workers.

The convenience-oriented customer group has also had an impact on the content of training. The survey showed that it was becoming current practice to devote training to the improvement of product knowledge and language skills, and to place special emphasis on the attitudes and behaviour of staff in order to enhance the envisaged company image.

According to the survey, some of the most advanced companies had taken steps to integrate training into their overall strategies and to take a more global view of their human resources. An increase in training with regard to the company's culture and organization was observed. Furthermore some companies were extending their training to more general subjects such as costs, margins and benefits. In many cases, a major training objective has been the adjustment to new commercial policies and the promotion of the new company image.

The survey also showed that pedagogical methods were following the general trend in training. There was little classroom and face-to-face training and much on-the-job training. The survey identified five types of pedagogical methods:

• self-learning through correspondence courses, textbooks or audiovisual materials;
• simulation of situations at the workplace;
• sandwich courses with longer periods of practical experience with the help of tutors;
• short meetings to discuss common interest matters in the work environment;
• delaying the opening of the store for half an hour every week to provide a training and information session for all the staff.

5.2.3. More resources are needed for in-house training

The role of in-house training provided by the employer is vital in retailing, because -- and this trend is common throughout the world -- the level of education and initial training in the retail sector is on average much lower than in other sectors. Shop assistants and cashiers usually start work without direct job-related qualifications. This situation makes the modernization process especially hard for small retailers. In small shops, in-house training usually means on-the-job training conducted by the owner without any systematic concept (see box 5.2).
 

Box 5.2 In-house training in European micro-enterprises Stationer, Greece Most workers in the retail sector in Greece are secondary-school graduates who are basically trained in-house during their work. This was the case in the enterprise in question. According to management data, it was estimated that six to eight months were required for the total training of any new employee. The management concluded that there was no training centre for retail sales employees where horizontal knowledge of the sector could be acquired. The ideal profile of new employees would be: knowledge of English to be able to read product literature; computer literacy; and good communications skills for better personal contact with clients. Together with technical knowledge, these are the basic requirements for an employee's training. Continuing vocational training is not organized in the enterprise. Every fortnight the owner devotes time to training the employees himself. Supermarket, Ireland None of the staff had any prior formal training in retailing and the majority of staff in the shop had been trained by the owner himself. He has now trained a number of his staff to be able to train new staff in a variety of new jobs. Several of the staff have participated in training courses run by Spar and they have also participated in training sessions led by the owner himself using Spar training videos. When he last organized an in-house training session and asked participating staff members to fill out an assessment of the course, one staff member indicated that she "needed no more training". Supermarket, Portugal Any new member of staff had to undergo vocational training. In addition to the training carried out by the owners at the workplace, he or she had to attend a vocational training course entitled "How to sell more and better" run by the Business Association to which the owner had belonged for more than 30 years. With the automatization of the cashier's duties (PLU) and the introduction of the point of payment (POP) all the staff had to be trained in order to learn how to operate this new equipment. Some training has already been given in this area by the appropriate company. A new training plan is currently being drawn up. Mini market, Greece The staff had mainly completed compulsory schooling or finished their secondary education without any further training. They had to have had previous experience in a supermarket or a grocery store, even a small one, as well as be young -- a fact that serves various needs (a pleasant appearance, ability to carry and place products, etc.). There was no systematic training apart from that provided by suppliers of mechanical equipment (e.g. calculators, computers in the storeroom). The owners were willing to send their staff for training for a few hours in the context of systematic sectoral vocational training if the occasion arose. The employees had a disadvantage vis-à-vis their other colleagues working in larger supermarkets and department stores where in-business vocational training was organized on various issues. Source: CEDEFOP.

A number of studies show that employers in the retail sector provide more training than those in many other sectors. A survey conducted by the Centre for Training Policy Studies at the University of Sheffield revealed marked differences among the various sectors of the economy. Sectors in which the highest proportion of enterprises offered training were found among financial and related services (banking and insurance was the highest at 87 per cent), the public utilities (whether in public or private ownership) and in sectors providing retailing and repair services to the public. The survey was based on elaborate questionnaires and interviews with the managers of 50,000 European enterprises in the then 12 EU Member States in 1994. The initial results were first presented at European level in 1997 (see table 5.3).

Table 5.3. Enterprises of different industries offering training in 12 Member States of the EU, 1993
 

Sector	Number of enterprises ('000s)	Proportion offering training (%)
Banking and insurance	15.1	87
Electricity, gas and water	3.0	81
Other financial services	4.1	79
Sale and repair of vehicles	42.5	78
Real estate, renting and services for enterprises	118.9	72
Post and telecommunications	1.6	66
Retail trade and repairs (excl. vehicles)	75.4	64
Manufacture of machinery	48.1	62
Manufacture of metals and metal products	58.4	59
Paper, publishing and printing	28.9	59
Hotels and restaurants	65.7	58
Manufacture of non-metallic products	42.1	57
Wholesale trade (excl. vehicles)	89.2	57
Manufacture of transport equipment	8.7	56
Construction	127.2	51
Food, beverages and tobacco	35.9	49
Transport and storage	38.0	46
Mining and quarrying	6.2	43
Other manufacturing (incl. furniture)	33.3	41
Textiles, clothing and leather	56.4	26
Total	898.7	57
Source: Centre for Training Policy Studies in the University of Sheffield.

The study revealed a great disparity between the distribution of employment by gender and distribution in the participation rates in the courses by gender. Female proportion of the employment was 64 per cent, but female participation rate in the courses was only 25.8 per cent, almost the same as the participation rate of male employees (see table 5.4).

Table 5.4. Distribution of employment and participation rates in courses by gender,
in 12 Member States of the EU, 1993
 

Sector	Distribution of employment (%)		Participation rates in courses (%)
	Males	Females	Males	Females
Mining and quarrying	87	13	33.0	31.7
Manufacture of:
Food, beverages, tobacco Textiles, clothing, leather Paper, publishing, printing Non-metallic products Metals, metallic products Machinery, electrical equipment Transport equipment Other types of manufacture	63 37 69 74 82 75 85 73	37 63 31 26 18 25 15 27	24.5 10.7 21.0 37.7 19.2 30.7 34.3 10.3	21.9 6.0 20.1 28.8 20.1 28.4 24.1 9.0
Electricity, gas and water	79	21	47.5	52.2
Construction	89	11	14.7	18.2
Wholesale, retail, repair:
Sale and repair of vehicles Wholesale trade Retail trade and repairs	80 67 36	20 33 64	29.9 22.1 29.5	24.9 18.1 25.8
Hotels and restaurants	45	55	23.5	24.0
Transport and communication:
Transport and storage Post and telecommunications	80 67	20 33	29.5 57.2	31.9 47.5
Financial intermediation:
Banking and insurance Auxiliary activities	52 54	48 46	59.6 37.9	51.9 39.0
Services for enterprises, renting and real estate	56	44	34.0	31.5
Total	66	34	29.0	27.2
Source: Centre for Training Policy Studies in the University of Sheffield.

6. Labour-management relations in the context
of globalization of distribution circuits

In the commerce sector, concerns over wages, working conditions and the autonomy of industrial relations actors have mostly increased in buyer-driven production chains -- i.e. controlled by the buyer, in other words the retail trade. These chains are often found in labour-intensive, low-skilled industries, such as garments, toys and footwear, where labour costs can play a predominant -- albeit fleeting -- role in comparative advantage. Barriers to entry are also low in these labour-intensive industries, as the capital investment and equipment requirements to enter the market are minimal and the relocation of production in buyer-driven chains, such as garments, has been far greater than in capital-intensive industries which have demonstrated considerable locational stability. In their approach to buyer-driven chains, both governments and unions may be left with less room to manoeuvre, given that labour costs are such a vital factor, than when dealing with activities which comply with a more balanced array of considerations. Furthermore, the contracting firm's dependence on the buyer may make matters more sensitive and pose obstacles to trade union organization.

6.1. Unionization in the commerce sector

Trade union membership levels are traditionally lower in sectors in which small enterprises prevail; there is a large proportion of female employees; there are high labour turnover rates and a high proportion of employees in employment relationships that are neither full time nor permanent. The commerce sector has all these features. In addition, there are country-specific characteristics in industrial relations systems that contribute to low unionization rates -- especially in the commerce sector.

Retail and wholesale trade are among the least unionized industries in many countries. However, trade union membership rates vary considerably from country to country. In Scandinavian countries, which are the most unionized, trade union membership rates are high in the retail and wholesale trade. Indeed around 70 per cent of commerce sector employees are unionized. If the unemployed are included, the membership level is even higher. In Finland, for instance, the unionization level in the commerce sector was 81.9 per cent when the unemployed were included, but only 70.6 per cent when they were excluded.

Among OECD countries, the other extreme is the United States. In 1998, a mere 13.9 per cent of wage and salary workers were union members. In the wholesale trade they accounted for 5.8 per cent and in the retail trade for 5.2 per cent. In Japan, France and the United Kingdom, unionization rates are not much higher. As a general rule, unions have been steadily losing members for a number of years in these countries.

Offshore contracting has clearly contributed towards the decline of unionization rates in the garments industry (see also box 6.1 on unionization in clothing retail) in both the United States and other countries. International subcontracting has thus affected union membership in labour-intensive, low-skilled production jobs in high-wage countries.
 

Box 6.1 Unions in the clothing retail sector in the United States Clothing retailing in the United States has always ranked among the least unionized sectors of the economy and rates of unionization have been falling since at least the 1970s. In 1983 only 4.4 per cent of apparel sales workers were covered by collective bargaining agreements while rates of union membership were even lower (3.5 per cent). By 1996 these rates had fallen further to 2.4 per cent and 1.7 per cent, respectively. Collective bargaining coverage is highest in department stores (4.6 per cent), compared to 3.2 per cent in specialty stores and 1.2 per cent in variety stores. In 1972, the Retail Clerks International Association (RCIA), with an overall membership of 633,000, was the largest union in clothing retailing and the seventh largest union in the country. A second union, the Retail, Wholesale, and Department Store Union (RWDSU), had 198,000 members, and two food retailing unions (the Amalgamated Meat Cutters and Butcher Workmen and the United Food and Confectionery Workers Union) had some members in clothing retailing, as did the Teamsters and the Amalgamated Clothing Workers Union. As union membership declined in clothing retailing, a number of these unions merged and the RCIA joined with the Butcher Workmen of North America in 1979 to become the United Food and Commercial Workers Union (UFCWU). The United Retail Workers joined the UFCWU in 1994, bringing the combined UFCWU membership to 983,000 (1995). The Retail, Wholesale, and Department Store Union has another 76,000 members, but these figures include workers in food retailing and other services, as well as clothing retailing. Union organizing Changes in the economic structure, technology, demography and geography of retailing have presented obstacles to unionization. Mergers and downsizing have cut potential membership; unionization has been resisted by the rapidly growing mass merchandisers; the prevalence of young and part-time workers with weak attachment to the industry has made organizing drives and winning elections more difficult; the dispersal of retail activity from central cities to suburban malls has weakened traditional organizing tactics; and electronic sales technologies have made it easier to replace sales clerks and lessened the threat of strikes. Public policy has not helped union organizing in the face of these changes. The time-lags in conducting elections and responding to unfair labour practices by employers always disadvantage unions in industries with high labour turnover. In addition, unions have recently been banned from organizing activities in public areas. Unions have, however, made some gains in organizing retail distribution centres. The Union of Needle Trades, Industrial, and Textile Employees (UNITE), for example, organized a 700-employee Marshall's distribution centre in Georgia in 1997, following up on a similar organizing drive at T.J. Maxx's distribution centres the preceding year. Organizing by UNITE has been further extended to distribution centres in Massachusetts, North Carolina, Indiana, Virginia, and Nevada in 1998. Data on union wage effects are not available for clothing retailing. However, unionized workers in the overall wholesale and retail sector earn on average 11 per cent more than non-union workers. The absence of controls for worker and employer characteristics makes this an imprecise estimate of the pure union wage effect. Source: Peter P. Doeringer: Ringing it up: Labor and human resources in the clothing distribution channel (Boston University, 1999).

6.2. Collective bargaining developments and international
agreements between the social partners

The accelerating pace of structural changes in the commerce sector has also had an impact on the rules and practices which regulate relations between employers and workers, including collective bargaining and, more generally, on social dialogue.

A number of global, social and economic trends are also affecting the bargaining process in the commerce sector. These include: the rapid expansion of information and communication technologies, the progress made in regional and global integration and the development of tertiary and part-time employment.

The changing structures in the United States retail sector and their impact on labour issues and labour relations provide an example of these developments.

As lean retailing allows large retailers to reduce their inventories, they become more dependent on supply chain logistics -- the smooth movement of