Federación de cajas de Ahorros Vasco-Navarras

SUMMARY AND CONCLUSIONS

1. INTRODUCTION

The aim of this report is to examine retail trade in the Autonomous Community of the Basque Country (ACBC), and to analyse its current situation and recent development, and also its determining factors and trends in view of the future. These aspects are supplemented with an analysis of the situation of the sector both in the European Union and in Spain, in order to introduce variables which on one hand enable homogenous comparisons to be made, and on the other, to determine the importance of the Basque retail trade sector in the productive context and in relation to other markets.

As in previous sector-based reports, this report is divided into five chapters. The first chapter, by way of introduction, defines retail activity in accordance with the National Classification of Economic Activities for 1993 (CANAE-93), summarises the methodology used to produce the report and finally, synthetically defines the different typologies of retail agents. The second and third chapters examine the situation of retail trade in the European Union and in Spain, respectively, while the fourth chapter looks at the situation of the sector in the ACBC in greater detail. As a supplement to this quantitative analysis, the fifth chapter offers a qualitative overview of the retail sector, outlining the main competitive features of the sector and describing its strengths, weaknesses, opportunities and threats (SWOT analysis).

Definition of the Sector

Broadly speaking, the retail trade sector is divided into seven large branches of activity, according to the National Classification of Economic Activities (CNAE-93).

• Retail trade in non-specialised establishments
  Retail trade of mainly food products, beverages and tobacco in non-specialised establishments
  Retail trade of other products in non-specialised establishments
• Retail trade of food, beverages and tobacco in specialised establishments
  Retail trade of fruit and vegetables
  Retail trade of meat and meat products
  Retail trade of fish and shellfish
  Retail trade of bread and bakery, patisserie and confectionery products
  Retail trade of beverages
  Retail trade of tobacco products
  Other retail trade in specialised food establishments
• Retail trade of pharmaceutical, medical, beauty and hygiene products
  Retail trade of pharmaceutical products
  Retail trade of medical and orthopaedic products
  Retail trade of cosmetics and toiletries
• Other retail trade of new articles in specialised establishments
  Retail trade of textiles
  Retail trade of clothing
  Retail trade of footwear and leather goods
  Retail trade of furniture, lighting appliances and other household articles
  Retail trade of electrical appliances, radio, television and audio systems
  Retail trade of hardware articles, paints and glass
  Retail trade of books, newspapers and stationery
  Other retail trade in specialised establishments
• Retail trade of second-hand goods in establishments
  Retail trade of second-hand goods in antique shops
  Other retail trade of second-hand goods
• Retail trade not carried out in establishments
  Mail order retail trade
  Retail trade in stalls and street markets
  Other retail trade not carried out in establishments
• Repair of personal effects and household equipment
  Repair of footwear and other leather goods
  Repair of household electrical appliances
  Repair of clocks and jewellery
  Other repairs Typology of Retail Agents The retail agent acts as an intermediary, retailing products or services to consumers and end users, representing the point of contact of the distribution chain with the final purchaser. Retail distribution can be carried out in very different ways, and different typologies of retail distribution may be identified according to whether the retail agent has a headquarters or not, and if so, whether it is independent, integrated or associated.

2. THE SECTOR IN THE EUROPEAN UNION

The EU-15 retail trade sector is made up of a network of 4,097,200 companies, it employs 16,564,100 people and it generates 721,254.7 million euros. It therefore represents 20.4% of the European corporate fabric, 13.9% of its employment and 7.4% of wealth generation, measured in terms of the GVA.

Within the retail trade sector, retail trade in establishments covers 2,178,680 companies and employs 11,783,000 people. The participation of this sector in total commercial distribution stands at 39.1% of the total number of companies, 47.7% of employment, 28.9% of turnover and 19.5% of the generated value added. The contribution of the retail trade carried out in establishments to the whole of the European economy is 10.9% of the total number of companies, 10.0% of employment, 9.3% of turnover and 3.0% of the GVA generated.

The average size of retail establishments is greater than that of companies involved in trade in the EU-15. More specifically, its average size stands at 5.4 employees, while commercial companies as a whole have an average size of 5.1 employees. On the other hand, average sector turnover has reached 691,874.4 euros per company, and the average turnover per employee stands at 127,927.8 euros, figures which are lower than those for the whole of the trade sector: 1,212,560.7 and 236,504 euros, respectively.

In terms of the geographical distribution, Spain and Italy bring 21.2% and 27.5% of the total number of companies in the retail trade sector in establishments, which makes them the countries with the largest sector. However, in terms of employment, this position in the ranking is strongly reduced and it is the United Kingdom (24.2%) and Germany (20.2%) which are the countries which employ the greatest number of people in this activity. If the turnover and GVA variables are considered, the United Kingdom, Germany and France contribute around 60% of the turnover volume of the sector, with contributions of 22.1%, 19.0% and 18.7%, respectively. In terms of the GVA, the contribution of these three countries amounts to 24.0% for the United Kingdom, 22.4% in the case of Germany and 17.0% for France.

The participation of each of the EU-15 countries in the generation of business in the sector of retail establishments shows a clear correlation with the more densely populated countries. Therefore, the United Kingdom, Germany, France and Italy generate 72.6% of the amount of business for this. From the perspective of turnover per job, the greatest efficiency would correspond to the establishments in Belgium, Luxembourg and Finland, with values which are clearly higher than the EU-15 average (127.9 thousand euros per job). On the other hand, turnover generation per job is clearly lower in countries such as Portugal (76.9), Holland (81.1), or Spain (98.2).

3. THE SECTOR IN SPAIN

In 2002, there were 522,373 retail companies employing 1,621,438 people in Spain. The economic activity which these generated amounted to business (turnover) of 161,064 million euros, a figure which enables retail trade to generate a GVA of 31,745 million euros. In this way, the retail trade sector shows itself to be an activity with an important weight in trade activity as a whole: it concentrates 73.5% of companies and 61.5% of employment. On the other hand, its contribution is lower in terms of business generation (34.0%) and GVA (46.7%), the difference of which corresponds to wholesale trade.

For its part, the retail trade in establishments sector comprises 457,115 companies, a figure which represents 87.4% of the total number of Spanish retail companies and 24.6% of the service sector companies. This percentage supposes the greatest participation in terms of the number of companies between the different branches of activity which comprise the service sector. On the other hand, the number of those working in this sector reached 1,510,029 people. Similarly, the volume of sector employment represents 93.1% of retail activity and 19.7% of the whole of the service sector. In this way, the average corporate size of the retail trade in establishments sector stands at 3.3 employees per company, a figure higher than the average corresponding to the retail trade sector (3.1 employees/company), and lower than the whole of the trade sector (3.7 employees/company) and of the service sector (4.1 employees/company).

The economic ratios of retail establishments between 1999 and 2002 have evolved favourably. The amount of business per employee rose from 93,285 euros to 103,319 in 2002; and productivity per employee increased from 17,609 to 20,045 euros in this period. Personnel expenses per job rose from 9,277 euros to 11,000 euros which were recorded in 2002.

According to data from the 2002 Annual Trade Survey, the branches of activity which stand out for the importance of their economic magnitudes are: trade in non-specialised establishments, and specialised trade (textiles, footwear, electrical appliances, books, etc.). These two branches concentrate 77.7% of the amount of business, 79.7% of the production value, and 77.5% of the value added generated by the retail trade in establishments sector.

In terms of the corporate structure of the retail trade in establishments sector, the majority of companies in the sector are small or very small. In this respect, companies with freelance workers or without any wage earners (51.7%) and those with a maximum of two wage-earning workers (33.1%) represent 84.8% of the total. In terms of the geographical concentration, the most populated autonomous communities are those with the greatest concentration of companies. In 2004, Andalucía and Cataluña are therefore responsible for 18.7% and 16.2% of the total number of companies in the retail trade in establishments sector, respectively.

4. THE SECTOR IN ACBC

Importance and main magnitudes

Over the last decade, there has been an outsourcing of the Basque economy, with the weight of the service sector clearly growing in the generation of wealth in the ACBC. Within the service sector, the importance of the activity of trade stands out: it represents 11.4% of the GVA in the ACBC and 17.9% of the service sector. Trade activity covers the two large forms of retail: wholesale trade distribution and retail trade.

In 2001, the retail trade sector generated a value of production of 2,558 million euros, a value added of 1,836 million euros and employed a total of 64,425 people, figures representing 44.6%, 48% and 61.9% in the trade sector as a whole, respectively.

The activities included under the title of commercial establishments represent the pillar of retail trade activity in the ACBC, concentrating more than 95% of establishments, of the wealth generated and of the people employed in the whole of the retail sector in 2000.

The gross value added generated by the retail sector in establishments, according to Eustat's Survey on Trade and Repairs amounted to 1,613 million euros, a figure representing 4.4% of the wealth generated by Basque economic activity in this year. The relevance of this figure can be appreciated by comparing it with the contributions of other activities such as the paper industry (0.8%), agriculture (0.7%), or the machine tool sector (0.7%).

Characterization of the corporate fabric

According to the Directory of Economic Activities (DIRAE), the number of retail establishments in 2003 was 29,298, a figure which represents 95.8% of establishments in the retail trade sector and 76.1% of the whole of the trade sector. In accordance with these data, the average corporate size of the sector stood at 2.3 employees per establishment in 2003, showing a corporate fabric made up of micro-companies. More specifically, 95.7% of retail establishments in the ACBC have a maximum of two workers.

Considering the territorial distribution of the gross value added and the gross earned surplus, Bizkaia holds a predominant position in the sector since it concentrates 53.3% of the total gross value added and 52.4% of the gross earned surplus. This is followed by Gipuzkoa with participations of 32.9% and 33.5%, respectively. Álava holds the fewest participations, with respective values of 13.8% and 14.1%. Bizkaia also has a greater presence of activity: in 2003, it concentrated 52.7% of the total number of establishments and 52.3% of sector employment. Gipuzkoa, was responsible for 34.7% of establishments and 32.9% of employment, percentages which in the case of Álava amounted to 12.5% and 14.7%, respectively.

Finally, if we consider the different branches of activity which comprise the retail trade in establishments sector, the food branch is decisive in the number of establishments (33.6% of the total number of establishments), associated employment (40.8% of total employment), and retail space offered (36.4%). For their part, establishments specialising in textiles, clothing, footwear and leather goods are responsible for 22.0% of the network of retail establishments, employ 18.7% of the people who work in retail establishments, and offer 18.6% of the total retail area.

Recent evolution of sector sales

According to Eustat's Domestic Trade Index (ICI), sales in the commercial sector grew by 1.9% in real terms in the year 2003, which was below the rate of 4.6% recorded in 2002. Considering the evolution of sales in the retail sector in the ACBC from a wider temporary aspect, between the years 1993 and the first quarter of 2004, the indicator presented a positive annual variation rate, with an average annual growth of 2.2%.

Focusing attention on the last quarter, it could be said that although the three historic territories share the profile of slightly less growth in 2001, increasing growth in 2002 and limited growth in 2003, there are certain interesting points: Álava is the only territory which recorded a negative value in 2001 in the variation of the retail trade index in comparison with the previous year (-1.3%), Bizkaia recorded the greatest rate of interannual variation in 2002 (7.2%), and Gipuzkoa stood out for presenting the least range of variation in the financial years analysed.

5. COMPETITIVE POSITION OF THE SECTOR

Factors which affect sector competitiveness

The retail trade in establishments sector is characterised by a strong dynamism, stemming from the need to adapt to demand requirements. In this regard, the current situation and the prospects of the sector are determined by the factors which affect its competitiveness, among others:

• Location of the retail outlet
• Characteristics of the owner (age, professional career, etc.)
• Commercial operation of the establishment (supply chains, methods of payment, retail mode, etc.)
• Customer services offered
• Supply and prices of commercial premises
• Commercial Equipment
• Investments made to improve the establishment
• Level of associationism SWOT analysis The strengths of the sector can be summarized as:
• Location of establishments
• Corporate structure
• Urban developments
• Professional experience of the retailer and closeness to the customer
• Position of the consumer Among the weaknesses , we should mention:
• Commercial atomization
• Commercial density of the sector
• Specific training in retail
• Professionalization in a significant part of the retailers group
• Investments made to improve establishments
• Services offered to the customers
• Commercial equipment in the establishments Regarding the opportunities we should mention:
• New technologies and management systems to businesses
• Horizontal integration processes
• Personal treatment and provision of services
• Non-presential supply and retail systems
• Position of the authorities towards the potentiation of urban trade Finally, among the main threats, we should mention:
• Entry of more and more professional operators
• Consumer mobility
• Existence of better informed consumers
• Investment in commercial premises