Understanding Internal Trade and Commercial Location Factors
The Importance of Trade
Trade is the activity aimed at exchanging goods and capital services. Its importance is increasing, both for achieving high rates of employment and the highest possible welfare. Its contribution to GDP is proportional to the development and wealth of a country. In Spain, it represents a little more than 14% of GDP.
Commercial Location Factors
We can differentiate between exogenous and endogenous factors that determine business location:
- Exogenous factors: Transport, communications, and consumer concentration (CONSIM).
- Endogenous factors: Distribution organization.
Transport and Communications
For trade to exist, it’s necessary to bring the product to the retailer, who offers it to the consumer. The availability of transport, its speed, and the product’s preservation capacity enable or prevent its marketing. A good communications network allows merchants to contact manufacturers or producers efficiently.
Consumer Concentration (CONSIM)
The location of shopping centers is not random. Ease of transport is important, as is population density. Since every person is a potential consumer, areas with higher population density will have more market potential. The economic capacity of potential consumers is also a crucial factor.
Distribution
Distribution channels are of exceptional importance. Distribution depends on production. The Spanish production system is characterized by geographical dispersion and small business holdings. This dispersion prevents access to cheaper products and increases retail prices. Smallholdings prevent standardization and packaging, forcing producers to sell in bulk, thus requiring long commercial channels between producers and consumers. Large companies organize their own networks, eliminating intermediaries, shortening the circuit, and offering better prices.
In the main agricultural product markets, there are original markets (MERCADOS), such as Mercoguadiana and Mercoplasencia. They perform a similar function to fish markets. These original markets are often connected to auctions and slaughterhouses. Regions, towns, or city neighborhoods with efficient transport networks are better supplied than those that do not meet these conditions. Madrid, Catalonia, Navarra, Cantabria, and the Basque Country have higher levels of consumption and better trade networks. The opposite occurs in Extremadura, Castilla-La Mancha, Andalusia, and the Canary Islands. Within the same city, neighborhoods with good urban transport networks and residents with greater purchasing power are better supplied.
Internal Trade
Traditional Trade: The classic small shop, with limited dimensions and low-skilled staff, is tending to disappear.
Supermarkets, Self-Service Stores, and Hypermarkets: These have in common the lack of shop assistants, the prevalence of food products, product standardization, and centralized checkout. By making bulk purchases and reducing personnel, they can offer lower prices. They predominate in areas with higher population density, such as Madrid and Barcelona, the coastal periphery, and inner urban cores.
Hypermarkets: These are located on peri-urban land in large cities, near major communication routes. As it is essential to use a car to access them, they have large car parks. They offer three main product lines (food, household goods, and textiles) with rapid stock turnover.
Department Stores: These are divided into sections that sell all kinds of goods, with the largest ones having more than 50,000 items. Their implementation in Spain has been slow, with El Corte Inglés being one of the most prominent examples.