AN ANALYSIS OF THE DEVELOPMENT or comm "
mums SYSTEM—S m THE GREATER 3i PAULO : 1
METROPOLITAN AREA * - “

Thesis for the Degree of Ph D.
MICHIGAN STATE UNEVERSHY
ALBERTO DE GUVEIPA LEMAFEIMB
1972

 

 

 

 

 

 

 

 

 

v—nv

 

 

ABSTRACT

AN ANALYSIS OF THE DEVELOPMENT OF CONTROLLED
RETAILING SYSTEMS IN THE GREATER S. PAULO
METROPOLITAN AREA
BY

Alberto de Oliveira Lima Filho

The development of controlled retailing institutions,
particularly shopping centers, in the Greater S. Paulo
Metropolitan Area (GSPMA) was examined in this dissertation
from three perspectives: (1) from a theoretical point of
View, using a systemic conceptual framework; (2) from an
explanatory and interdisciplinary perspective, drawing upon
contributions from other disciplines and comparative analysis;
and (3) a normative perspective utilizing modelling tech-
niques.

The work began with a theoretical discussion of the
retailing system, its objectives and activities, its loca-
tional patterns and evolutive characteristics. These
analyses indicated a definite trend toward decentralization
and the emergence of specialized building facilities.

The study then was focused on the retailing system's
spatial dimensions, with an emphasis on their relationship

to urban systems theory and trade area measurement techniques.

 

 

Alberto de Oliveira Lima Filho

The Brazilian retailing system and the evolution of
‘ its institutions were examined on the basis of the theore-
l tical framework which was developed. The complex inter-
actions among retailing institutions and the GSPMA were

explained. This analysis indicated that if the quality of

3—"..- _. A

urban life is to be improved there is a need for the reloca-

tion of retailing facilities at decentralized points, using

modern design features such as the shopping center. A
market opportunity analysis was made to evaluate the rela—
tive demand potential in the city's forty—eight districts.

This procedure gave a clear indication of demand density

over space.

The decision-making process concerning investment
and location then was examined using modelling techniques.
The outcome was the construction of a normative model for

shopping center location. This model used cost concepts,

' .vr..-qw-- ,-_ -<mm«

capital budgeting techniques, and probabilistic constructs.
The model can be applied in practical situations using the
preliminary results of the market opportunity analysis made
; for the GSPMA. In order to provide guidelines for the

= model's application, a logical flow diagram was prepared.
Such a model can be useful to those concerned with the

problems of retailing location in larger metropolitan areas.

 

 

AN ANALYSIS OF THE DEVELOPMENT OF CONTROLLED
RETAILING SYSTEMS IN THE GREATER S. PAULO

METROPOLITAN AREA

BY

Alberto de Oliveira Lima Filho

A DISSERTATION

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Marketing and Transportation Administration

1972

 

ALBERTO DE OLIVEIRA LIMA FILHO

 

@Copyr ight by

 

 

DEDICATION

To my father

Justice Alberto de Oliveira Lima

in Memorian

ii

 

 

ACKNOWLEDGMENTS

This dissertation was accomplished with the cooper-
ation of several persons and through a generous grant from
the Ford Foundation, which has supported most of my graduate
studies.

I am grateful to three scholars whose academic
association and friendship have made a substantial contri-
bution to my career. Professor Leo Gilbert Erickson has
guided my academic life since its beginning ten years ago,
when he enthusiastically supported my decision to become a
professor. As chairman of this dissertation committee, Dr.
Erickson worked with great dedication and personal interest.
As a direct result of his scholarship, many improvements
were introduced into this work. Professor Donald Arthur
Taylor, my academic adviser in the doctoral program and a
committee member, has given me solid and secure guidance
during my course work. He contributed fundamental sugges-
tions concerning marketing and retailing in Brazil. Profes-
sor Stanley Charles Hollander stirred my curiosity about
retailing theory. Dr. Hollander, also a committee member,
provided help concerning the bibliography and the analytical
framework, his careful reading of the manuscript was an

important factor in its improved quality.

 

"g...“ H

 

7'

 

 

My wife Ada Maria and my son Alberto III, both
played a very meaningful role in all phases of the project.
They provided understanding, help, and encouragement when—
ever necessary. My mother, Lygia, was also a strong and
constant support, not only during the dissertation, but
also during the early stages of my life.

Mrs. Elizabeth Marcus did an excellent job in
editing this thesis. Her contribution transcended her
professional competence, and became a truly personal envolve-
ment with my objectives. Miss Lusia Mitchell, a young
assistant, contributed a careful and enthusiastic proof-
reading of the last draft. Mrs. Elianna De LaRosa typed
the originals, sometimes under severe time constraints.

Mrs. Louise Sacha and Mrs. Margaret Cushion also are
deserving of my appreciation for their assistance in admin-
istrative matters during the doctoral courses.

To all of these, I extend my everlasting gratitude.

iv

~>.— rap *5

TABLE OF CONTENTS

   

DEDICATION O l I o I o o o O o o o o I

ACMOWIIEDGMENTS . O O O O C I O C O O O

'1 LIST OF TABLES. - I . C C C . . . C . C
3' LIST OF FIGURES . . . . . . . . . . . .
3H7. Chapter

       

I. INTRODUCTION AND OBJECTIVES. . . . . .

Forward: The City as the Context for
Retailing Adjustments . .

Background of the Problem.

Problem Formulation. . .

Research Requirements .
Analytical Framework .

ANALYSIS OF THE RETAILING SYSTEMS. . . .

Retailing Systems as Component of the
Marketing System . . .

Theories of Structural Changes in
Retailing Systems. . . .
Theory of Change in the Spatial Location
of Retailing Institutions . .
The Shopping Center as a Component .of the
Retailing System . .
Spatial Dimensions of the Retailing System
The Urban System. . . . . . . . .
The Hinge Factor. . . . . .
City Structure . . . . . . . . .
The City Fabric . . . .
The Retailing System and the Quality of
Urban Life . . . .
Retailing Systems Within the Urban Space.
Trade Area Analysis. . . . . . . .
A Summary of Theories and Concepts. . .
The Relevance for Analytical Purposes. .
Conclusions . . . . . . . . . .

Functional Analysis of the Retailing System.

Page

ii

138

 

Page

      
  
 
   
   
  
  
   
  
  
  
 
 
 
  
 
 
 
  
 
 
  
  
 
 
 
  
  
 
  

III. RETAILING SYSTEMS IN BRAZIL--PATTERNS OF

CONTRAST AND EVOLUTIONARY CHARACTERISTICS . . 157

 

Contrast Types . . . . . . . . . 158 «‘
- The System's Evolution. . . . . 166 ‘1 f
;r_ The Chronology Gap and the Contrast .
1 Patterns. . . . . . 182 .}
Greater S. Paulo Metropolitan Area: Urban 1 .
Structural Evolution. . . . . . . 187 ‘ ‘ 4
Retailing in the Greater S. Paulo '2 \%
Metropolitan Area: Problems and Trends . 199 ‘

IV. THE SHOPPING CENTER INDUSTRY IN THE GREATER
S. PAULO METROPOLITAN AREA . . . . . . . 213

Introduction . . . . . . . . . 213
Iguatemi Shopping Center: Overall
‘ Characteristics . . . . . . . . 216
' Iguatemi Shopping Center: Operational
Descriptors. . . . . . . . 220

Lapa Shopping Center: Overall
Characteristics . . . . . . . . . 227
Lapa Shopping Center: Operational

Descriptors. . . . . . . 231
Center 3: Operational Descriptors. . . . 241
Final Remarks. . . . . . . . . . . 245

V. CITY OF S. PAULO MARKET OPPORTUNITY . . . . 252

Introductory Concepts . . . . . . . . 252
City of S. Paulo: Urban Area . . . . . 254
Districts Demographics.‘ . . . . . . 256
Population Index. . . . . . . . . . 259
Income Index . . . . . . . . . . 262
Car Ownership Index. . . . . . . . . 265
Composite Index . . . . . . . . 268
Modified Composite Index . . . . . . . 275

:VI. A NORMATIVE MODEL FOR SHOPPING CENTER LOCATION 283

283
284
286
293
299
300
303
303
308

Introduction . . . .
Basic Criteria . . .

Investor's Objectives . . .
Retailer's Objectives .
Investor and Retailer: Joint Objectives
Shopping Center Sales Potential. .
Competitive Uncertainty . . . .
Decision Tree Analysis. . . . .
Probabilistic Decision Criterion .

O I I O I O I I O
I O l O O O I O 0

vi

 

   
   
   
 
  
   
  
 
  

 

Introduction . .
The Analytical Approach
The Greater S. Paulo Metropolitan
Market Opportunity Analysis .
Normative Model
Need for Future Research
Expansion of the Normative Model
Conclusions

Land Site Costs
Site Decision Criterion
Model Evaluation. .
Application GUideline .

vii

I I O I

 

 

r?

_‘.\ -" Y
IO
‘. 7-.A -
' . ;.E’M.n - 1

-W.

LIST OF TABLES

  

  
  
  
   
  
   
  
  
  
  
   
   
  
    
  

K Page 7.

Shopping Centers in the USA . . . . . . . 65 1““

f‘ 2. Shopping Center Descriptors Basic .Q"!
Classification Criteria. . . . . . . . 78 ‘4

3. Shopping Center Taxonomy . . . . . . . . 88 1}; A

4. Shopping Sub-Trade Areas . . . . . . . . 124 : til

5. Taxonomy of Brazilian Retailing System--1960 . 162

=. 6. Comparative Chronology--American and Brazilian
7-71 Retailing Systems. . . . . . . . . . 184 5??

. 7. Time Lag in the Development of the U.S. and
-‘, 7 Brazilian Retailing Systems . . . . . . 186

8. 1970 GSPMA--Population, Area and Densities . . 190

9. City of S. Paulo--Demographic Growth . . . .

10. City of S. Paulo--Popu1ation 1900-1990 . . .

* 11. Shopping Center Iguatemi Physical Facilities .
:f3' 12. Shopping Center Iguatemi Trade Area Descriptors

‘ 13. Shopping Center Iguatemi Customer Shopping
" Behavior and Demographics . . . . . . .

Shipping Center Lapa. Operational Descriptors .
Shopping Center Lapa Trade Area Descriptors. .

Shopping Center Lapa: Shopping Behavior and
Demographics . . . . . . . . . . .

SC-3, Physical Facilities Descriptors. . . .
SC-3, Trade Area Descriptors. . . . . . .

‘*Ql,sc-3, Shopping Behavior and Demographics' ‘ '

viii

 

 

City of Sao Paulo--District Demographics 1970
Census . . . . . . . . . . . . .

Population Index S. Paulo-~48 Districts 1970
Population--Distribution--%--Index . . . .

1970--Income Index, S. Paulo 48 Districts,
District Total Household Index-—% Distribu- .
tion—-Income Index . . . . . . . . .

Car Ownership per District-—1970 % Distribution
and Index . . . . . . . . . . . .

S. Paulo--48 Districts—-Market Opportunity 1970
Composite Index . . . . . . . . . .

Composite Indexes Quartile Distribution and Map
Coding . . . . . . . . . . . . .

S. Paulo--48 Districts—-Market Opportunity
Modified Composite Index . . . . . . .

Modified Composite Indexes Quartile Distribu-'
tion and Map Coding . . . . . . . . .

ix

Page

257

260

264

267

270

271

276

277

._-.-~_- " ._- I-

1... -v e

we“ W‘x.‘_.—“

”-5-

 

 

LIST OF FIGURES

  
   
  
  
  
  
  
  
  
  
  
  
 
  
  

Page

Analytical Framework--Flow Chart . . . . . 14

2. Evolution of Retailing Stores . . . . . . 31

3. Diagram of the Dialect Process . . . . . . 41

4. Basic Shopping Center Designs . . . . . . 83

5. Basic Shopping Center Designs . . . . . . 84

if; 6. Basic Shopping Center Designs . . . . . . 85
_:j . 7. The Greater S. Paulo Metropolitan Area (GSPMA). 188 ,

8. Location of the State of Sao Paulo. . . . . 194
79. Evolution of the S. Paulo Urban Area . . . . 196
10. City of S. Paulo. . . . . . . . . . . 200 1
{‘j;.->i 11. Location of Shopping Centers in S. Paulo. . . 214
i ' 12. Iguatemi Shopping Center . . . . . . . . 217

i13. Lapa Shopping Center . . . . . . . . . 228
14. Center 3 . . . . . . . . . . . . . 240
51J15. City of Sao Paulo Districts . . . . . . . 255
efflfi. ‘ Composite Indexes: Non-Modified . . . . . 272
"%17. ’ Composite Index: Modified . . . . . . . 278
Decision Tree Diagram (Partial Representation). 307

Decision Tree Diagram Showing Probabilities
(Partial Representation) . . . . . . . 309

Normative Model--Flow Diagram . . . . . .

 

 

CHAPTER I

 

INTRODUCTION AND OBJECTIVES

Foreword. The City as the Context
for Retailing Adjustments

w—

The focus in this dissertation is on the controlled
, shopping center as an urban insitutional structure. As

are most things, the shopping center is a creature of its

i environment and must be understood within the context
within which it exists and functions, namely, the city.
: The city can be conceived of as a system which performs

several specialized functions within the boundaries of its
i geographic area.

From a generic point of View, the city's functional
process may be described in terms of the activities per-

formed by its population, by the locational patterns of

  
  
  
  
  
  

 

;.. its inhabitants and institutions, and by the continuous

: - movement of people and goods over a limited and sometimes
well-defined geographic space. People living within the
limits of an urban area perform a series of activities
which can be divided into three main categories: living,

working, and trading. a

.1... 'HfL

 

L 2

The Problem of Urbanization
As a process of urbanization takes place, the city
grows in size and population the economic development and the

I industrialization create separation between the point of

 

t production and the points of consumption. The three
basic activities which were performed in the same place,
1 or at very near distances, tend to become located in

1 separate areas within the city limits because of space
requirements.

Such a phenomenon, on the one hand, is conducive
to better living conditions; the specialization in loca-
tional patterns for different activities makes the urban
system more efficient, assuming that operations will be
L on a large scale. On the other hand, the separation of
different activities among diverse locations creates a
, tremendous increase in the traffic necessary to move

people and goods over the space. Due to societal norms

  
  
  
  
  
  
  

and patterns, the movement of people and goods is likely

 

to occur during the same hours of the day and toward the
same marketplaces. If the retailing system of a city is
not properly planned and located within the city, the
accumulation of a homogeneous supply to fulfill a hetero-
geneous demand generates congestion and reduces the

efficiency of the system.

 

W U W' yvvvwvw

 

 

4:. v 1

,rr'

 

These processes and interactions become more and

more complex when a city, due to this growth, abandons
its initial single center or concentric pattern and
adopts an arrangement composed of several nuclei in which
specialized activities are performed. This is the case
in large metropolitan areas where the distances and the
specific characteristics of each sub-area create an
extensive need for movement among the several nuclei. If
the locational patterns of retailing institutions do not
show a rapid degree of ecological adjustment, the entire
system will be jeopardized. An uneven flow toward
retailing areas, for example, will effect the traffic
necessary to perform other activities, such as moving

from living to working areas.

Retailing System Adjustments

The adjustments made by the retailing system to
the expansion of a city into a complex metropolitan area
generally begin with the specialization of similar types
of retailing institutions and their location in clusters
near the central business district (CBD). The second
adjustment is decentralization along the radial axes of
the city and an unplanned locational trend to move to
the core of the various nuclei of the metropolitan area.
A final and most recent development is the change to

noncentral locations with an extensive use of planned
I

 

  
 

facilities; these are likely to provide one-stop shopping
and off-street parking. All these adaptations are forms
of ecological adjustment that the retailing system must

perform in order to survive and grow within a metropolitan

 

' environment. The most recent development, new institu-
.f}l tions known in modern retailing as shopping centers, are
‘1': the central focus of interest in this dissertation, in
ggfi particular, their emergence, locational patterns, and
1:, normative planning aspects in a developing economy.
i.‘ Background of the Problem
'figii The concepts already mentioned indicate that the
;&f* retailing study proposed here must start with the analysis
7:311 of spatial and locational aspects and procede to mana-
:‘_,: gerial and marketing dimensions. Such an approach also
a; f. suggests that exogeneous and noncontrollable, rather than
‘Eiéi endogeneous and controllable, variables should be dealt
“:5:‘ with first. Before discussing shopping centers, it is
..-

necessary to determine and to analyze the environmental

   
    
   

characteristics of the region in which the center will
operate.
The Greater S. Paulo Metropolitan Area (GSPMA)
Lhas become the largest human conglomeration in Brazil
_ and in South America. The factors which produced this
Vleencentration will be analyzed in detail in chapter 4,

't a brief description of the city's origin and present

 

 

  

structure is mentioned at this point to provide a basis

for the formulation of the problem.

S. Paulo

S. Paulo was founded in 1554 by Jesuit priests.
Its initial growth was slow, evidenced by its 25,000
inhabitants and 4,200 households in the first decade of
the nineteenth century.1 Today S. Paulo has 5.2 million
inhabitants concentrated in an area of 857 km2, and a
diametral axis of approximately 40 km. This megalopolis,
which has grown at an annual rate of 5.2 percent during
the last decade, is located in the southern part of
Brazil near the Atlantic Ocean. It lies in a region of
medium elevation where the average altitude is 2,400
feet. Since S. Paulo is surrounded by mountains, it
initially grew from its central nucleus along the valleys
where the main hinterland roads and railroads were con-
structed. More recently it has concentrated along the
major radial avenues which spread from the central
district of the city.

By virtue of several factors that will be dis—
cussed later, GSPMA represents an extreme example of
inadequate use of urban land. This phenomenon has two
side effects which are relevant in the present context;
the first is the high value of land, which is associated
with the second, a high population density factor of 1032

inhabitants per kmz.2

 

 

 

.5_,..r ‘.

 

    
     
  
  
 
 

w————-

6

Retailing in S. Paulo

Following and sometimes contributing to the
urbanization process of the metropolitan area, the retail-
ing system has changed its characteristics in two ways.
First, there has been a tendency toward institutional
change, or the appearance of new types of retailing
stores;3 second, there has been a tendency toward decen-
tralization. Such behavior has some positive aspects if
regarded from the viewpoint that every firm must adjust
ecologically in order to survive.4

The decentralization trend has followed the routes
of the major radial avenues; since the early 1950's these
have been the dominant areas of retail concentration.5
This locational pattern was adequate until recently;
other factors, such as a constant rise in population and
increased use of the automobile, have changed the scene
and more traffic space and restricted zoning regulations
along these streets have become necessary. At this
stage, the centralized locations began to lose their
differential advantage since few of them provided off-
street parking.

Retail location studies are a relatively new
phenomenon in Brazil. Techniques such as trade area
determination, traffic volume counting, drawing power
determination, and design of retailing outlets in accord-
ance with the spatial dimensions of the market are just

emerging as common retailing practices. The studies

 

  
  
  
  
  
  
  
    
  
  
  
  
  
  
 
  
  

ggkéét are being performed seem oriented primarily toward
:tbe evaluation of a site already chosen rather than to
"' site selection as such.

Despite the fact that new forms of retailing, such
as supermarkets and chain stores, have been organized in
the GSPMA, they have been planned mainly in terms of
modification of their internal structure and consequently
with insufficient attention to the changing urban environ-
ment. Shopping centers, which also represent a new form

of retailing, seem to be following the same process. The

 

limited number of institutions within this category have

failed to use precise techniques for planning and design

“'
I' .
v~-
' I

-~. 7"?“ "st-‘1. .
"film
.

;iof their development.

7‘51?

The importance of these institutions will be

. described later in relation to the Brazilian environment,
L but at this point it is only necessary to mention the
ireffective advantage that they can provide in reducing
‘traffic congestion, better land use, and enlargement of

egimplementation of the marketing concept in the metro-

 

 

8

 
  
    
     
  
  
   
 
 
  
  

 

H. usable and smaller quantities.6 Of necessity, there must ‘5‘
Dela high degree of adjustment and compatibility among :‘M
the institutions which constitute the retailing system 7'2.}
and the characteristics of the market in which it operates. W
Seymour Baranoff defines this function as the
central task of the retailing system, that is, aggregating fig?
‘_ , assortments in anticipation of consumer demand and making ; g
A available this "concentrated variety" for the convenience i: 5
'1§=9. of the ultimate consumer.7 Shopping centers may be I -f{
A viewed as physically concentrated retailing systems.8 As
such, they must provide both aspects of the above-mentioned
function: (1) a qualitative, anticipated assortment
achieved by means of their store mix; and (2) the con— . "
venienCe generated by their locational patterns, layout
- design, and the possibility of offering one-stop shopping. 1 .1.
Following the same reasoning it can be maintained .1 if;
that shopping centers are an advanced expression of the‘
I: retailing system's organizational and locational patterns;
‘ according to the same rationale, the main objective of
: these systems is to serve as the locus for transactions

7yith-the ultimate consumer within a certain trade area.

 

 

9

which will be examined in detail in chapter 2,9 shows

that shopping centers began in the 19205 and had its major
expansion after World War II. In Brazil, development is
much more recent, being less than ten years old.10
Despite these constraints and the natural limitations of
a comparative analysis between two broad systems, it is
possible to perform a descriptive and comparative study
of the controlled retailing systems in Brazil and the
United States.11 Such an analysis may provide the basis
for the formulation of policies and recommendations con-
cerning the planning and location of shopping centers in

f a developing economic environment.

E Main Objective

L The central objective of this dissertation can be
expressed as the determination of criteria and the formu-
lation of norms concerning the planning, and location of
5 controlled retailing systems in large metropolitan areas
such as the greater S. Paulo. The central problem can be
t formulated as follows:

‘ To conceive and to develop a model capable of
generating recommendations for planning and

locating shopping centers in accordance with

the norms and criteria which constitute the
dissertation's objective.

 

The norms and criteria that will represent the
major guidelines begin with a rather simple but compre-

hensive statement of the marketing concept. The shopping

   

10

 
   
       

center as a marketing institution must serve needs and

wants within profitability constraints. In other words,

EPA "'J .'

 

se

these institutions must fulfill and improve upon a wide

L'm
1“

V.-_

I
h‘

set of distributive functions and activities within urban

ran
1
-

€91 ; space boundaries; at the same time they must represent
‘59 a profitable and efficient alternative for economic Vi>3J
A: , Aw
fl . resource allocation. ‘ ,g
1‘

In accordance with this concept, the norms and
criteria for the development of shopping centers can be
expressed within the following scheme.

A.

 

Relative to its customers, investors, and i;‘7

retailers, the shopping center must: 5-

(1) provide a return on investment which is . '
satisfactory relative to competing A
alternatives with comparable risk; ‘

(2)' permit long-run survival and growth to
the firm;

(3) enhance aggregate consumer convenience,
which implies a reduction in the shopping
effort in terms of time and travel; and

(4) achieve economies of scale greater than
those of alternative locational and
organizational patterns.

Relative to its environment, the shopping

center must:

(1) increase the efficiency of urban activities;

 

11

(2) allow better utilization of urban space;
(3) avoid intraurban congestion; and
(4) facilitate the service level of those
firms supplying goods to the center
retailing institutions.
These norms and criteria must take into considera-
tion the evolution aspects of the retailing system and
its relationships to the changing structure of the cities.
Over time, cities tend to become more complex due to
increasing specialization, which causes a decrease in

i local self-sufficiency.12

i Research Requirements

The development of controlled retailing system in

 

the greater S. Paulo metropolitan area has considerably

  
  
  
  
  
   
 
  
  
  
  

lagged behind similar events in the United States. In
S. Paulo, the first system emerged after the beginning of
a period of cultural and economic growth, which occurred
simultaneously with urbanization, industrialization, a
; complex distribution system, heavy traffic congestion,
7%: and all the problems inherent in the specialized activities
of large metropolises.
Studies of these problems have been undertaken by
public institutions, the local government, and the State
of S. Paulo. Such efforts have been oriented toward .
urban analyses, traffic planning, and housing ordinances.l3 7 ;“~X

Other studies, oriented toward the distributive aspects of €3\ji

 

12

the problem, have been conducted by educational institu-
tions such as the School of Business Administration of
S. Paulo and by individual professors at that school.

These contributions limited in number and scope

 

were directed toward the description of the retailing

system and its related managerial problems.l4 Consequently,
the need for additional research seems evident. It could

provide an essential service to marketing and retailing

V—Vm-w

in Brazil, particularly if it could, by means of an
interdisciplinary approach, offer syntheses and reduce the
gap between the two orientations.

Such studies may prove helpful in guiding city
planning and in advising private institutions about site
selection and location problems. Research of this scope
is quite feasible because of the better analytical tools
i which are available today. From a social point of view,

it is clear that the normative dimensions of the model

   
    
  
 

 

will be able to generate solutions which may avoid con-
tinued misallocation of resources and poor selection of

shopping center sites.

Analytical Framework
The objectives of this dissertation and the charac-
teristics of its central problem require a careful and
detailed analysis of an extensive number of concepts,
theories, and empirical variables. This task must be

accomplished through an interdisciplinary approach, which

 

 
   
   
       
 

¢hWH 13
J "T
If .91 . .

g 1111 draw upon contr1butions from several areas such as

‘learketing, urban economics, and statistics.
A The analytical framework will begin with a discus-
sion of theoretical and conceptual constructs from the

'irretailing system as a subset of the total marketing system.

      
   
    

we shall be concerned primarily with functional, institu—
tional, and locational aspects of the retailing system.
IWithin this context, we then shall move into a similar
_ .1 treatment of the shopping center, which is a subsystem of

L i‘the retailing system. This framework, which will be

     
    

‘ t

. examined in detail in chapter 2, follows a logical pattern:

     
   
   

‘wr'it moves from generic concepts of marketing as applied to

  
  

-retailing, to the explanation of the retailing system's

-gifhnctional aspects, to a detailed analysis of retailing

 
 

’fpurposes, which will be utilized in the last

V‘.df this dissertation.15

 
 

4'0- . fine-“ “n.

WW

 

 

ANALYTICAL SECTION

E!

 

Marketing Concepts

 

.Brazil's Retailing

 

 

 

Retailing System
Functions and
Activities

 

J,

 

Retailing Evolu-
tion

Changes: Insti—
tutional (1)
Locational (2)

 

1

 

‘Shopping Centers
as Retailing
Institutions

Operational
Features

 

Taxonomy

 

 

 
   

MODEL SECTOR

14

BRAZILIAN ENVIRONMENT

 

System

Evolution and
Contrasts

 

URBAN SYSTEM

 

Urban System

City Functions
and Structures

Theories of
Urban Structure

 

 

 

 

 

S. Paulo's Retail-
ing System

Evolution and
Institutions

 

”Location

 

 

1

Retailing with-
in the Urban
Area

Theories of
Retailing

 

 

 

S. Paulo's New
Forms of Retailing
Institutions

 

v

 

 

T

GSPMA - Urban
Structure

Evolution

Patterns

 

 

Centers in
Paulo Urban Area

 

 

Emergence of Shopping
the .

 

 

 

Analytical F

 

Micro Variables]__€>{h

GSPMA

Urban Retailing
Location

 

 

 

acro Inputs Model Simu-
lation C,R=P

Figure 1.--Analytical Framework--Flow Chart.

Output
0T Evaluatio

 

15

 

The environment, ecology, and various theories of - A”
retailing location are examined in chapter 2. The urban "?

; system, its components, and its structural features are
reviewed, using as analytical tools the landmark contribu—
tions of Burgess, Hurd, Hoyt, and Ullman and Harris. The
analysis then moves from theory toward an inductive explana- . :'
tion of S. Paulo's urban structure. Based on the concepts
already developed, and using secondary data, a comprehensive

inquiry into the city's developmental patterns, its

3 ' structural changes, the evolution of its retailing institu-
3; tions, its locational patterns, and an analysis of its ‘
it}; macroeconomic descriptors will be made.
I 4&7: A major feature of chapter 3 is the analysis of
égé?;_ the city's most recent urban plan and the close relation-

ship between this plan's public policies and programs and

   
  
  
  
  
   
  
   

the primary objectives of this dissertation.16

As can be observed in Figure l, the material ' 1?
derived from the analytical framework developed in chapters " 3
'¥ :3 2, 3 and 4 will be used in the normative part of the work; ‘.¢‘
7‘ a closer look at the same figure clearly indicates a
logical and integrated flow of analysis from the macro-
rtheoretical level to the microanalytical level.

In the next chapter the development of this
Ffanalytical framework begins with an analysis of the

Eétailing system and its components.

 

FOOTNOTES: CHAPTER I

 

l 1

, Plano Urbanistico Basico, vol. 2, Desenvolvimento
' Urbano (S. Paulo: Prefeitura Municipal de S. Paulo, 1968),
p. 23. Hereafter the Plano will be cited as PUB.

2

 

Ibid., p. 45.

3Newness as a relative term will be discussed
later, in particular the meaning of new in the Brazilian
i market at a specific time and place.

4Ronald E. Gist, Marketing and Society (New York:
Holt, Rinehart and Winston, 1971), p. 364.

._ _..—.—4 .

5Metro de Sao Paulo, Sistema Integrado de
Transporte Rapido Coletivo em Sao Paulo, vol. 1 (S. Paulo:
Compafihia do MetropOIitano de S. Paulo, 1968), p. 39.
This is a technical report prepared by Hochtief, Montreal,
De Consult, consortium of consultants.

6Rom J. Markin, Jr., Retailing Management: A
| S stems A roach (New York: Macmillan Company, 1971),
p. 17.

7Seymour Baranoff, "Retailing as an Operating
System," in Reavis Cox, Wroe Alderson, and Stanley J.
Shapiro, eds., Theory in Marketing (Homewood, I11.:
Richard D. Irwin, 1964), p. 19.

   

8According to the definition used by the Community
Builders Council, shopping centers may be defined as "a
group of commercial establishments, planned, developed,
owned and managed as a unit related in location, size and
types of shops to the trade area that the unit serves;
it provides on-site parking in definite relationship to
the types and sizes of stores." Community Builders
Handbook (Washington, D.C.: Urban Land Institute, 1968),
p. 264.
For conceptual definitions see also Paul E. Smith,
"Prescription for a Successful Shopping Center," MSU
Business To ics (Autumn, 1966)rl7; and Frank Meissner, \
»P anne S opping Centers," in Ronald R. Gist, ed., ‘
Mane ement Pers ectives in Retailing (New York: John
fiiIey and SonsTP1967), pp. 86-93.

 

16 \

 

 

17

9For an extended treatment of the evolution of

shopping centers in the United States see Community
Builders Handbook, pp. 271—272.

loAlberto de 0. Lima Filho, Shopping Centers--
U.S.A. vs. Brazil (Rio de Janeiro: Fundacao Getulio
Vargas, 1971), p. 91.

 

 

11In the present work the terms controlled

retailing system and shopping center will be used
interchangeable.

 

 

12Brian J. Berry, Geography of Market Centers and
Retail Distribution (Englewood Cliffs, N.J.: Prentice-
Hall, 1967): P. 106.

13

PUB and Grupo Executivo do Grande S. Paulo,
Gegram (S. Paulo: Governo do Estado, de S. Paulo, 1967).

l4Polia Lerner Hamburger, "A Estrutura de Distribui-
cao (II)," mimeographed; William Knoke, "Supermercados no
Brazil," Revista de Administracao de Empresas, 3, no. 9
(October-December 1963),91; and Lima, Shopping Centers,
p. 91.

 

15For similar reasoning see Eugene J. Meehan,

Explanation in Social Sciegce--A System Paradigm (Homewood,
111.: Dorsey Press, 1968), chap. 3; and Paul E. Rigby,
Conceptual Foundations of Business Research (New York:

John Wiley and Sons, Inc., 1965), pp. 18-21, 92.

16PUB, see footnote 1 above.

 

 

 

 

CHAPTER II

ANALYSIS OF THE RETAILING SYSTEMS j

 

In this chapter we shall examine a number of theories 4
and concepts which are instrumental to this dissertation.
This is done to establish conceptual foundations for explain-

ing retailing in general, and shopping centers in particular;

‘ thV.r"fr’7‘T’V

 

to provide a basis for analyzing and evaluating changes in

,lgfl.: the retailing system; to associate retailing development :
‘Igiv- with urban dynamics; and to provide basic constructs for a

{hfgl‘ normative model for shopping center location.

ES E? , This dissertation conceives of the shopping center

'YIIIEJ as a specialized form of retailing institution whose central

  
  
  
  
  
  
 
  
  

objective is offering aggregate convenience and which oper-
ates under a condition of controlled competition. The idea Ki
of aggregate convenience stems from the classic definition
elaborated by Reavis Cox in his analysis of the retailing :1
system's structure. Cox has pointed out that "the consumer

seeks aggregate convenience and for this, he is best served

effort he spends in collecting and using his whole
‘"ard of living."1 Extending his reasoning, Cox stresses
‘the consumer tries to maximize the returns he receives

18

 

'7IlI'IF5F"""""""""""""""""""""""""""""""""""""""IIII
19

from devoting a given budget of time and money to shopping.2
The concept of operation under controlled competition is
analyzed by Frank Meissner, who mentions that this aspect
permits the existence of a certain degree of competition
which will, from the supply side, ensure profitable opera-
tion and, from the demand side, freedom of choice.3

This discussion of the shopping center's objective
leads to the assumption that centers must be identified as
components of the marketing system, must operate within the

urban environment, and therefore require a high degree of

_. .‘ ._...-

adjustment to the spatial dimensions of their trade area.
A suitable way to examine this point is to conduct a func-
tionalist investigation of the shopping center as a specific

structural arrangement of the retailing system. We also

,_.—..._.W. .

assume it operates as a component of a higher order system--

5 the marketing system--within the limits and the operational
constraints of urban space.
: Retailing Systems as Component
E of the Marketing System

Retailing is a part of the marketing system. It acts
as a gigantic screen, filter, and facilitating mechanism in
aggregating the vast quantities of goods, anticipating con-
sumer needs, and dispersing these goods throughout the con-

sumer population.4 This definition is strongly influenced

 

by Wroe Alderson's concepts of assortment and dispersion

and matching homogeneous supply with heterogeneous demand.

 

.
i

 

 

20

It also emphasizes the relevant aspect of serving needs

and wants over dispersed locations.

Monostasy and Systasy

 

Taking into consideration the ecological aspects
which are inherent in the social system, it also is possible
to view retailing systems as organized behavior systems with
a definite tendency toward monostasy and systasy in choosing
locations. Alderson defines monostasy as the condition of
occupying a unique position in the market place,5 whereas
systasy refers to the tendency to stand together or to
seek support from other components of the system.6

These concepts are relevant to the latter explana-
tion of retailing institutions which initially try to stand
alone by seeking separate locations; in other words, they
seek monostasic conditions. As the city structure becomes
complex, and as new firms and patterns of population
density emerge, one is likely to observe the tendency
toward systasy. As Alderson mentions, these two factors
create forces of attraction and repulsion among the insti—
tutions which compose the retailing system.

According to the preceding analysis, the following
generalization can be made:

(a) In their initial stages, the institutions which

compose a retailing system show a tendency
toward monostasic locational patterns (for

example, the general store).

I 21

(b) As cities grow, stores tend to cluster,
taking advantage of a location which may
provide joint opportunity (for example,

clusters of motels and restaurants at many

 

g city limits).

(c) In a more advanced stage,the two phenomena may
exist simultaneously. In a first phase,
retailing institutions leave the central
business district because of urban congestion;
this is a monostasic trend which also shows
a high degree of repulsion,that is, a preference
for an isolated location in the commercial axis.
In a second phase, due to the same con-

gestion, the stores move into functional,

"’W‘—'I’""W .— . . .

decentralized locations; this is a clear trend

F...

toward systasy and attraction (for example,

, the regional shopping center).

Transformation and Adaptation

P The dynamic features of retailing locations and

E the new forms of physical organization described and

E _ commented on in the marketing literature seem to indicate

that the transformation and adaptations manifested by the

 

retailing system are highly consistent with the general-
izations mentioned above.7 These generalizations also
have a common trait: they indicate the ecological character-

istics of the retailing system's functions and processes.

   

x ”at".

: Hvtfy'rw -

W‘WII

    
  

 

 

22

Retailing's constant adjustment to environmental
conditions can be better conceived if the role of retailing
institutions is evaluated from the marketing conceptviewpoint.
That is, because retailing is the last node in the distri-
bution process system, it is responsible for total imple—
mentation of the actions taken by other institutions in
the channel, namely, manufacturers and.wholesalers. This
aspect requires a deeper analysis of the functional dimensions

of retailing and its processes.
Functional Analysis of the Retailing System

The central function of the retailing system is
to provide time and place utility within the boundaries
of its area of influence. A functionalist approach in
evaluating the role and objectives of the retailing system
is compatible with this statement and provides the
necessary background for studying the retailing process
in relation to the characteristics of its operational
environment.

For the purposes of this dissertation, retailing
systems also are conceived of as "organized behavior
systems which interact in conjunction with their relevant
'environment."8 By this definition, they also can be termed
ecosystems, which infers that all the components of a

system are functionally linked to their environment.9

 

 

  
  
  
  

23

In the case of the retailing system, the most
relevant variables in describing its operational process
are the physical dimensions of the system, the locational
patterns, and the spatial descriptors of the relevant
environment.10 An analysis of the interaction among these
variables may provide generalizations or hypotheses such
as the following:

Increased geographic dispersion of the cities is
associated with decreased centralization of
retailing institutions.
The conceptual introduction has shown that an analysis of
the functional dimensions of the retailing system may be
conducted within a theoretical framework, which enhances
the perception of its characteristics.

A good approach is the scheme proposed by Richard
Lewis and Leo Erickson in their study of the functions of
the marketing system.11 If one focuses attention on the
retailing subsystem of the marketing system, it is logical
that its primary function is to service local demand
(demand within the relevant environment). In so doing,
the system is creating aggregate convenience, which, by
analogy with the reasoning of Lewis and Erickson, may
be conceived of as the unique and inherent purpose of

the retailing system.12

 

fi—

ve“- w

 

1,. _.- -.,.._4_ .

 

 

.v

24

Retailing Activities

 

The next step is to identify and discuss the
activities performed by the retailing system in order
to execute its functions. The discussion hereafter will
be divided into two major categories: the generic activities
and the specific activities performed by retailing. The
first set of activities is related to the obtaining
demand functions; the second refers to the locational
behavior of retailing institutions and how they adjust to
changes in the environment. The label generic means that
these activities are performed by all marketing institutions
in a more or less standard pattern; the label specific means
that these institutions perform the activities with a high
degree of specialization.

The activities of advertising, personal selling,
sales promotion, product planning, and pricing are performed
in various combinations and various degrees by marketing

system institutions.13

In the retailing system, for
example, product planning may be conceived of as strategy
relative to product mix or merchandising. Pricing in
retailing is also a less flexible and controllable factor;
the retailer is truly a middleman, His margins are
largely fixed by two important price determiners—-his

supplier, whose price becomes the retailer's cost, and

the consumer, whose demand is,to a considerable extent,a

7——

{ 25

given for the retailer. These activities, however, are
subject to some control by the retailer. If they are
properly managed, the retailer may be able to alter the
market penetration; he may be able to increase the
market share relative to the potential existing in the
trade area.

In relation to the so-called demand servicing
n activities, retailing institutions should plan and manage
them according to the existing characteristics of the
trade area.14 In this case,the institutions are assumed
to perform a very specialized set of activities which
must be adjusted to the specific position of retailing
within the channel and which, by the same token, are
oriented toward the servicing, locational,and logistic
descriptors of the trade area. These activities are

complementary to the obtaining demand activities mentioned

 

earlier, but it is conceivable that they do not change the

market potential. In addition, it is correct to assume

that they are complementary and functionally related to

E the obtaining demand activities.15
.Although the preceding analysis discusses how

these activities are performed,for the purposes of this

dissertation it is necessary to pinpoint the real meaning

} of demand servicing activities and their unique features

E in the retailing system.

 

 

v.1

....—-....

yr

{

 

r—_———

26

Demand Servicing Activities

 

The demand servicing activities mentioned by
Lewis and Erickson are comparable to the following

specialized activities in retailing:

Demand Servicing Activities as Performed.

 

Marketing System-—Generic Retailing System--Specific*

 

Warehousing Location
Store and Warehousing Design

Inventory Management Merchandising

Transportation Receiving and Delivery
Parking Decisions

Order Processing and Retail Services
Handling

 

*Source: Adapted from a conceptual framework given in
William Lazer and Eugene Kelley, "Retailing Mix:
Planning and Management," Journal of Retailing
(Spring, 1961): PP. 35-36.

 

The analogous relationships depicted indicate that
in order to perform the servicing demand function retailing
institutions go through a multistage set of activities.

(1) They appraise the market potential and its location;
(2) a plan of selling and warehousing physical facilities
is conducted; (3) an evaluation of the merchandise to be
carried is made, bearing in mind the characteristics of
the market and the dimension of the physical facilities;
(4) an integrated plan is developed to program the in-flow

and out-flow of products to and from the store site; (5)

 

27

adequate parking facilities are designed and built which

will enhance transactional convenience;16 and (6) retail-
ing institutions plan and program the activities

internal to their organizations. These are the services

which are to be offered to provide an adequate flow of

output by the system,and these must be planned in relation

to the characteristics of the relevant environment.

Matched Parallelism

 

The foregoing analysis sets the stage for some
final remarks regarding the nature of retailing system.
According to Seymour Baranoff, the output of retailing is
to produce what he calls "matched parallelism," or to
correlate needs and wants with the resources, goods, and
services available to satisfy those needs and wants.17
Baranoff emphasizes that it is doubtful that a complete
matched parallelism can be achieved, since the outputs
of the retailing system will act upon the environment
with a steady process of change. Consequently,

the system is a dynamic, continuous process--
ever changing ever expanding; the reasons why
the system works the way it does are many. They
have to do with a high level of production, an
inability to get things directly, specialization
of labor, levels of aspiration, 'convenience,‘
adaptation to environment, urbanization and
technology.18

The evolutive characteristics of retailing systems

and the search for a constant adjustment to environmental

28

conditions have been discussed up to this point in terms

of functional structure and the managerial activities

of the component institutions. In the next section,
attention will be focused on the description and analysis
of the change theories relative to the structure of retail-
ing institutions and their locational patterns.

Theories of Structural Changes
in Retailing Systems

 

 

The continuous adjustment of retailing system
institutions is caused mainly by the drive toward differ-
ential advantage; the dynamic process of change also has
"circularity" characteristics,19 since every change
presented by retailing institutions is almost immediately
incorporated into the relevant environment. Consequently,
the environmental conditions change again and new adjust-

ments become mandatory if continued efficiency is desired.

Characteristics of Change

The characteristics of structural changes in the
retailing system are perceived in relation to decisions
regarding the locational pattern of its institutions, in
the assortment of goods offered for sale, in the size of
stores, in the ownership and control of retailing outlets,
and in the package of retail services offered in a

particular period of time or in a specific market.

29

There are many theoretical explanations for these
changes. David Revzan, for example, pointed out the
following factors: (1) a continuous expansion of product
assortment; (2) an ever—changing geographical environ-
ment; (3) a changing spatial pattern for the location of
stores and centers; and (4) a need for highly formalized
systems of retail markets,in which increasingly specialized
trading practices take place.20

Malcolm McNair believes the changing pattern of
retailing is eXpressed by its power to stimulate and
encourage higher rates of consumption. In 1953, McNair
mentioned several areas in which the retailing system
could take decisions and perform changes. Among his
recommendations, the following seem to be most relevant:
(1) the decentralization of retailing activities must
keep pace with the decentralization of cities; (2) store
locations must continue to adapt themselves to new
trends in suburban living, with emphasis on the private
automobile; (3) unplanned central city shOpping areas
strangeled by traffic congestion must be replaced by
planned suburban shopping centers, and (4) a continued
effort to increase convenience must be pursued by means
of adequate parking, full assortment of merchandise,

extended store hours, and better layout designs.21

30

McNair's normative program gains greater eXpression
if one looks at how the retailing system in the United
States has evolved over the last twenty years; the patterns

do not differ from McNair's main lines of reasoning.

Effects of Change

 

Up to this point,the discussion was centered around
the causes of changes in the retailing system. Now it is
necessary to study the effects of these changes and their
impact upon the major characteristics of the system. A
brief analysis of these effects will be developed, and
they will be related to the conventional theories of
retailing system change.

Operational Effects.--Due to the increased number

 

of products, proliferation of brands, and sophistication
of wants and needs, the retailing system has gone through
an extensive specialization of its operational patterns;
the sequential trend of these adjustments is presented in
Figure 2.

Figure 2 shows a certain degree of consistency
between the increased number of products and the specializa-
tion patterns exhibited by retailing institutions. The
numbers in parentheses indicate a sequence which started
with the general store. A word of caution must be added:
the figure is intended only to illustrate the changes in
operational structure which can be observed in the field

of retailing. It also is clear that the emergence of one

31

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32

specific type of institution does not deprive previous

ones of market opportunity.23

Ownership Effects.——The expansion in operations, the

 

requirements of more complex logistical support, the
increase in capital needSIand inclusion of higher-level
technology in the retailing process have had two generic
effects upon ownership of retailing institutions. There
has been (1) a general trend toward group or public owner-
ship, with a decline in individual or private ownership;

and (2) the creation of new forms of ownership such as
leased departments, franchising, and consumer-owned outlets.

Effects on Location and Store Design.--In order

 

to avoid the decline of the central business district,
which was caused by such factors as lack of parking, old-
fashioned store design, and traffic congestion, a trend
toward decentralization emerged in the use of suburban
clusters.24 Location patterns were affected by the
development of large centers near residential areas and
with easy access to major intraurban and interurban
freeways. The availability of large land tracts, enabled
planners and merchants to innovate in terms of store
design, location of the buildings within the site, and
advanced architectural technology, all of which create

a more pleasant shopping environment.25

33

The analysis of the fundamental concepts related
to the causes and effects of change in the retailing
system and the contributions from Revzan and McNair lead
to a discussion of the formal theories of retailing

change found in the present marketing literature.

Formal Theories of Change

 

According to Ronald Gist, explanation of the
changing nature of the retailing system evolved into four

26 (1) natural selection;

theories or working hypotheses:
(2) the wheel of retailing; (3) the general-Specific-
general cycle; and (4) the dialectic process. Examination
of these theories will be oriented toward an explanation
of the emergence and locational patterns of shopping
centers.

Gist points out that the concern with the changing
role of marketing institutions is an attempt to identify
the causes of change and to describe its nature.27 In
the specific case of shopping centers, it is conceivable
to say that the causes of the change were: (1) increase
in the size of urban areas; (2) traffic congestion in
the core of the cities; (3) emergence of the dormitory
suburbs, and (4) rise of consumer mobility. The nature
of the change can be eXplained in terms of: (l) the
decentralization of retail trade; (2) the develOpment of
sites for shOpping centers; (3) the increased number of

shopping centers; and (4) the construction of special

retailing structures.

34

The causes and the nature of the change are multiple
and can be observed in the organizational behavior of
modern retailing institutions and in the overall character-
istics of the system. Its analysis also provides an
adequate theoretical framework for discussing the normative
and comparative issues of this dissertation.

Theory 1: Natural Selection in Retailing Systems.--
The natural theory selection argues that the retailing
institutions operating within an environment change in
order to survive. This concept may be extended to all
organized behavior systems and is a major conceptual
framework of the prOponents of Aldersonian thought on
marketing.

The variables which constitute the environment
change; within the capabilities of its resources and techno-
logical skills, the retailing system changes and adjusts
to the new demands of the environment. Those institutions
which, by one means or another, begin to demonstrate a
large innovative and adaptative behavior are likely to
receive positive feedback from the environment; as a conse-
quence, they show a differentiated "market power." The
result of the process is that those institutions which do
not innovate begin a cycle of self-destruction and enter

into what may be called a fading trend.

35

This trend starts with the decrease of
institutional adequacy in relation to the consumers,
particularly when the more adaptive competitors are able
to offer better retail services. The next stage is a
decline of sales volume caused by the reduction in trade
area dimension,which also is related to lesser drawing
power and weaker market penetration. The consequent smaller
Operational scale creates several phenomena, among them
the following: services must be reduced since they are
by far the most controllable costs; the amount of inventory
must be reduced with a conceivable impact upon the assort-
ment; and the ability to use mass promotion is reduced
since the smaller volume and narrowing trends in product
mix do not permit these expenses. The overall profit-
ability of such institutions is likely to show a decline,
which will accelerate the deteriorating process already
described.

As a result, noninnovative institutions will be
unable to inject new capital and they will be below the
competitive level in the job market. Thus, the
financial capacity to relocate in prime spots. will be
lost,and the maintenance of a sound level of selling
services will be impossible. The most common example of
institutions showing this pattern are grocery stores
located in the central business district or on corners

of radial commercial strips.28

36

On the other hand, adaptive institutions possess
a high degree of sensitivity to changes in the relevant
environment. They change in the short run, and
capitalize upon market Opportunity. The effect can be
described as a strong improvement in the "power to act"--
the Aldersonian concept of differential advantage. By and
large, these institutions are able to accommodate to changes
in the city structure. Using larger amounts of fixed
capital, they seek better layouts and locations and use
modern patterns of retailing management.

Following such technological changes as widespread
use of the automobile and the construction of intraurban
rapid transit networks, these stores move into the
planned and controlled sites of the shopping centers,
which are the latest eXpression of compatibility to provide
easy access to the mobile buyer. The trend toward shopping
centers further shifts the central places within the urban
area; stores which do not follow the trend are automatically
outside the trade area and the range of spatial competition.
Theoretically, stores which move into the shOpping centers
are components of a highly energetic subsystem of retailing;
stores which remain in decaying areas belong to a blight-
ing subsystem, namely, the CBD, or the so-called inner

city.

37

The theory previously discussed indicates that
changes in the urban environment caused by applied tech-
nology create a climate conducive to centrifugal locations
and new forms of store design. The processes change the
density of demand over space, positively affecting those
institutions which follow these trends and negatively
affecting those slow to adapt. The effects have definite
influences on individual stores,as well as on sets of
institutions located in decaying areas.

These modifications and adjustments must be con-
ceived of as a continuous process, since they are incorpo-
rated almost immediately into the relevant environment and
become an integral part of the urban system.29 This
natural selection theory is mentioned by other authors
and given various names,30 but basically it is concerned
with the phenomena related to changes from an ecological
perspective and enphasizes the relevant aspects of
survival and growth.

Theory 2: The Wheel of Retailing.--The conceptual
framework of the wheel pattern was derived originally

from McNair31 and was expanded and extensively discussed

by Stanley Hollander.32 The theory is basically

related to innovative behavior and changes in the opera-
tional patterns of retailing stores as they move toward
maturity. More specifically, these scholars focused on

operational margins, product mix, and on the managerial

capacity of the storekeepers along the wheel cycle.

38

It is possible, however, to explore changes in
location and store design within the wheel theory frame-
work using the examples of "conformity and non-conformity"

33 The decentralization and con-

mentioned by Hollander.
struction of specialized buildings may be viewed as a
particular form of nonprice competition which gives the
firm an opportunity to increase volume and maintain gross
margin standards. An example of conformity is Supermarkets
and discount stores, which, in the initial stages, operated
in low-cost buildings with lower rent value. The first
discount stores were located in fringe locations with
modest facilities and limited services, but later they

were admitted into shopping centers. Within certain
limitations, they improved their service level. A simple
observation of the architectural features of modern shop-
ping centers indicates a considerable degree of conformity
with the wheel pattern; the modern closed mall is a clear
expression of this trend.

The case for nonconformity might be argued on the
basis that decentralization and suburban shopping centers
are not a time innovation; rather, they represent the same
way of doing business in other locations within a geographic
area. This argument is rather difficult to defend if one
looks at very sophisticated centers such as the Ball
Harbor in Miami or the Somerset in Detroit, which are
typical examples of evolution in design and luxury.34 These

centers were planned and constructed with a highly sophisti-

cated target market in mind.

39

Theory 3: The General-Specific-General Cycle.--
There are certain limitations in using the hypotheses of
the general-specific-general approach to study the decen-
tralization of retailing and the emergence of shopping
centers since its focus is on the depth of lines carried by
the institutions. However, two points may be mentioned.
First. modern shopping centers are flexible in accommo-
dating specialty stores and larger department stores.
Consequently, the center environment is permissiveInot
only to large-scale retailing, but also to the specialty
store, which exemplifies the return to specialization
in retailing. Second. shOpping centers offer one-stop
shopping. According to Victor Gruen, the centers are
able to create an outstanding and ideal environment for
shopping which cannot be matched by any commercial street
or unplanned shOpping district. The center, Gruen
believes, is the expression of a rare occurrence in our
free enterprise economy-—the binding together of individual
businesses in c00perative fashion with the aim of creating
greater commercial effectiveness through unified
endeavor.35

Theory 4: The Dialectic Process.--The dialectic
process is based on an application of dialectical reason—
ing to eXplain the change process of retailing
institutions. Research seems to indicate that the
inception of this theory must be credited to

Ronald Gist.36

40

The evolutionary aspects of the dialectic process
are certainly the most relevant to a discussion of the
changes in retailing. The scheme“s initial stage is labeled
thesis and refers to an existing set of ideas, forms, or
philosophical attitudes in relation to the performance of

some processes. In the second stage, antithesis, the

 

evolution creates new and alternative forms for performing
the process. The antithesis must be conceived of as
the negation of the previous stage. The third and final

stage of a change cycle is called synthesis and may

 

be defined as the mixture or blending of attitudes and
concepts used in the first and second stages. The
dialectic argument is depicted by Figure 3.

The entire change and evolutionary patterns
through which the retailing system has passed may be
explained with the dialectic framework, but for purposes
of the present work only the decentralization and
emergence of shOpping centers will be examined in
detail. In the first stage, thesis, stores were located
mainly in the central business district, and had no or
limited parking facilities (street parking). They occupied
buildings which were undifferentiated from the basic
designs of the neighborhood and which generally had
limited facilities for receiving and delivery. Most of

them Operated only within normal working hours.

41

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42

During the antithesis phase there was a generalized
tendency to noncentralized locations and use of land for
parking purposes. There also develOped architecturally
complex structures, specially planned and designed for
retailing and to accommodate clusters of stores within an
environment Of controlled competition which had very
specialized loading docks (including underground tunnels)
and pick-up stations. Very flexible operating schedules
catered to the weekend buyer and family visits during
evening hours.

The synthesis stage in this evolutionary process
may be conceived of as the tentative movement toward CBD
renewal, including the transformation Of central streets
into pedestrial malls, the modernization of downtown
department stores, and the construction of multideck public
parking in the core of the cities. The success and
final evolution of the synthesis phase cannot be ascertained
definitely because of the countervailling power of the
suburbs and their increasing population. In addition,
there is the unavoidable impact of the automobile;
its positive effects create higher mobility, but its
negative effects generate heavy traffic congestion in
central city areas. Although the dialectic process has
passed through only two stages, it is possible to say
that it represents a neat framework for evaluation and

explanation of the decentralization phenomena and the

43

emergence of shOpping centers. This theory differs from
the wheel pattern in that the latter does not integrate
conceptual and Operational aspects common in the previous
stages.

These theoretical analyses of retailing systems,
their functions, and the evolutionary process of their
components make possible a detailed study of spatial
theories, their fundamental concepts, and their relationship
to shopping centers. Therefore, these institutions will
be examined in terms of their Operational characteristics,
their locational patterns, and their role within the
urban area. Such an approach takes a multi-dimensional
perspective which perceives of shopping centers as highly
Specialized marketing institutions performing functions
within their relevant environment, namely, the city.

Theory of Change in the Spatial
Location of Retailing Institutions

 

 

Up to this point the analytical framework has
been developed around the theoretical explanation of
the changes in the retailing system which are eXpressed
by the evolutionary characteristics of the institutions,
their functions, their activities, and their organiza-
tional behavior. We now will discuss theories which
center on the changes in the spatial location of

retailing institutions from a strategic point of View.

44

In other words, we will evaluate the logistics of
retailing location as a response of the system to changes
in the environment. At this point no mention will be
made of theories concerning the structure of cities,

the techniques of defining trade areas, and the decision
process which is necessary to evaluate and to select a
trade site. These tOpics will be discussed in detail at
the end of this chapter in conjunction with an analysis
of marketing geography and the Spatial dimensions of the
retailing system.

The treatment given to the subject here stresses
the point that changes in retailing location are strategic
moves made by the institutions in order to face changes
in urban space. Such an approach begins with the
basic assumption that retailing is Space oriented; further—
more, one Of its unique characteristics is that it must
follow shifts in the urban structure and must seek
competitive advantage by means of adjustment in locational
patterns.

Many marketing theorists have been concerned with
the problem of changing locational patterns and much has

been written on the subject.

Lalonde's Construct
Bernard Lalonde has said that "in recent years
much attention has been focused on the changing structure

of metropolitan areas, mainly due to modifications in

45

pOpulation concentration" which requires adjustments in
the locational features of retailing. According to
Lalonde,"the retail structure exists to serve the popula-
tion of the area; and since it serves a definite need,

37 Thus,

it shifts in response to a change in that need."
it is axiomatic that "the decentralization of the urban
population within a metropolitan area has caused a similar
decentralization in the retailing structure of the
country."38 Finally,Lalonde mentions that an outstand—
ing symptom of decentralization has been the emergence

of shOpping centers.

In order to face these dynamic trends, the
retailer must take into consideration at least the
following points: the first is related to the need of
changing the site of his business; the second is related
to the need of a constant evaluation of the performance
of the existing or of the new Site; the third deals with
the design Of the physical facilities in the new loca-
tion; and the fourth is concerned with the need for a
constant monitoring of changes in the location in terms

of population movements, modifications in the economic

descriptors in the area, and so forth.

46

These multistep studies are likely to produce
information that will enable the retailer to make deci-
sions related to location strategy, which centers around
the evaluation Of the actual adequacy of the store facility
as well as possible alternative locations.39 These studies
consider basic data on costs and revenues as related
to the actual market potential, that is, actual performance
in the existing location as compared with costs, revenues,
and the related potential in alternative locations. Since
location changes are linked with additional investments,
it is essential to prepare projected Operating budgets for

all the alternatives under consideration.

Applebaum's and Mertes's Constructs
William Applebaum also stresses the desirability
Of Obtaining pertinent information about population
descriptors, environmental conditions, and the level of
competition within areas under consideration.40
The changing conditions in urban areas and the
need for strategic adjustments also have been studied by
John E. Mertes, who points out that location of a given
retailer is unique, and that a Site once suitable gradually
may become an unprofitable one.41 Mertes's studies,
which focused on the spatial environment of Oklahoma City
and its surrounding regions,reveal some interesting

concepts of strategy in retail location. According to

Mertes there is an interplay between convenience and

47

choice when the consumer decides where to shOp. Convenience
is increased by the reduction in time and effort necessary
for shOpping trips, whereas choice is enhanced by means
of broad assortments or by the degree of accessibility
to places where comparisons can be made. Thus,there is
a conflict between convenience and choice, and this conflict
may be reduced through increased accessibility.42

Retailing institutions must seek Optimization
of convenience and choice by using the accessibility
factor in a positive sense and within the limitations Of
the controllable and noncontrollable variables. Convenience
may be achieved by means of nearby locations, but a limiting
factor is that space restrictions Of such locations do
not allow for maximization of choice. To provide a wider
range of choice, more floor Space is necessary; as a
consequence, locational decisions become centrifugally
oriented. Mertes assumes that consumers "will make an
extra effort in time and distance costs to visit shOpping
areas that provide a maximum selection of comparison
goods";43 the drawback is that control of accessibility
is limited or sometimes impossible. In order to
reduce friction over space and to improve choice, the
retailer makes strategic moves within the marketplace,
choosing prime sites along road networks and building

specialized retailing complexes such as shopping centers.

48

AS a result of increased automobile ownership and

the outstanding progress of U.S. highway development, the

following strategic location alternatives are presently

available, according to Mertes's classification.

1.

44

Internal Site--in the city's core or limits,

 

generally near freeways which allow rapid,
movement of in-bound and out—bound traffic.

Axial Site--in the radial traffic arteries

 

which serve as links between the core of the
city and the outlying areas.

Pivotal Site—-at the interchange of two

 

principal roads in areas of high population
density. These are adequate for community
shOpping places.

Peripheral Sites--on the outskirts and in fringe

 

areas of large cities. Here large complex
developments, such as regional shOpping centers,
can be accommodated.

External Sites—-in the vicinity of high density

 

traffic highways. This location alternative
doeslflay an important role in megapolises or
interurban areas such as Detroit—Chicago, San

Francisco—L05 Angeles, and so forth.

49

Markin's Business Area Classification

In seeking locational adjustments the retailing
institution follows customer movements not only in terms
of their increased mobility over the urban space, but
also in accordance with their changing densities within
that Space. The generic characteristic of these trends
is a continued decentralization of retailing sites as
they leave the core of the city and move toward its
boundaries. This trend created the following possible
45

types Of business areas, which Rom Markin has classified.

1. Central ShOpping Area—-generally in the

 

core 0f the CitY. It includes large multi-
floor department stores, financial institutions,
and civic centers.

2. Secondary Shopping Area—-composed of several
smaller clusters and operating as satellite
nuclei around the CBD.

3. Stringed Developments--unplanned clusters

 

located along the radial transportation routes.

4. Neighborhood Area-—an unplanned cluster of

 

convenience stores drawing traffic from the
adjacent area.

5. Free-Standing Locations--monostasic retailing

 

institutions which provide convenience parking

and ShOpping and business facilities.

50

6. Shopping Center Area-—planned and develOped

 

center drawing business from the surrounding

area according to the attracting power of

the store mix.
In the process of choosing a suitable location, retailing
institutions analyze the characteristics of each of the
areas mentioned above and their compatibility with the

Operational planning which duaparticular store has in mind.

Nelson's Location Principles

Another theory which eXplains the change in
retailing locations was develOped by Richard Nelson with
very empirical, but pragmatic, formulations.46 Nelson sug-
gests a site selection procedure composed of eight princi-
ples which retailers should follow, totally or partially,
when appraising a new location. The first principle
refers to the analysis of trading area potential, which
is determined by the evaluation of the population, their
income, and willingness to buy. The second principle iS
concerned with the accessibility of the trade area in which
the retailing institution will be locating; this factor
is measured not in a static manner, but takes into con-
sideration past, present, and future trends. The E2159

principle involves knowledge of the growth potential in

 

the area, or even of the possible future decline of sales

volume. The fourth principle relates to the concept of

 

5l

interceptors,47 that is, selection of locations on the
routes between downtown (the traditional marketplace)

and residential areas. The basic function of interceptors
is to draw traffic from conventional business districts
because of their increased convenience. Nelson's inter-
ceptors are located in main radial axes and near pivotal
sites on the interchange between a radial and a loop.

The concept discussed here represents the initial
eXpression of trends toward strategic decentralization
which was observed by Nelson in cities such as Detroit,
Chicago, Mexico City, and Vancouver.48 The occurrence
of these location strategies also may be the cause of
some urban features, such as the sectorial and multinuclei
patterns discussed by Homer Hoyt and C. D. Harris and
E. L. Ullman.49

The fifth principle considers the role of

 

cumulative attraction, which may be achieved by institutions
selling similar and complementary goods. According to
Nelson, these institutions will enjoy a synergetic advantage
because Of their attraction power when located together.

It is interesting to note that this principle is consistent
with the Aldersonian concept of systasy in locational
decision making.

The Sixth principle is eXpressed by the rule of

 

retail compatibility and was defined by Nelson as follows:

52

two compatible businesses located in close

proximity will show an increase in business

volume directly proportionate to the incidence

of the total customer interchange between them,

inversely prOportionate to ratio of business volume

of the larger store to that of the smaller store,

and directly proportionate to the sum of the ratios

of the purposeful purchasing to the total purchas-

ing in each of the two stores.50
The empirical evidence of the strategic application of
this principle may be observed in unplanned retailing
clusters as well as in the development of tenant mixes
in planned shopping centers. In the first case, when
stores are located along major commercial strips, one
observes the close proximity of car dealers, automotive
and parts stores, and gas stations, all of which are com-
plementary in their trade. In the second case, in planned
shOpping centers of large dimensions, there is more
than one outlet for goods such as shoes, men's apparel,
and so forth. In order to provide sufficient space for
the latter, large sites are necessary, and they are
likely to be found only in decentralized locations. The
sixth principle is related to the importance of customer
interchange among stores, whereas the fifth emphasizes

the total drawing power of a specific location.

The seventh principle, unlike the sixth, takes

 

competition into consideration. It uses an inverse
rationale, emphasizing the importance of avoiding inter-

cepting positions and location in clusters.

53

The eighth principle is oriented toward the economic

 

analysis of the site. Nelson mentions that the evaluation
must be performed in terms of the site's cost and its
relationship to sales productivity. This reasoning is
connected to the objective assessment of costs and

revenues relative to potential.

Simmon's Model

 

A more complex and multivariable theory to explain
the changes in location is provided by James Simmons, who
bases his model on the assumption that changes in income,
pOpulation, mobility, technology, and urban patterns are
the controlling forces (exogenous and independent
variables) which affect the retailing system's structure
and locational patterns.51 Simmons develOps an interesting
breakdown of the factors affecting retailing location; on
the demand side he places customers' preferences and their
degree of mobility; on the supply side he analyzes the
cost of locating at one specific site. This model takes
into account technology, urban ecology, and the respective
adjustments made by retailing institutions. According to
Simmons, shOpping centers reveal the effects of economies
of scale and a higher level of systemic adjustment to

urban area trends.

54

Summary of the Preceding_Theories

 

The preceding theories are an excellent set of con-
ceptual tools to explain the decentralization of retailing.
Furthermore, analysis of them demonstrates that they empha-
size the strategic perSpective, the operational dimensions,
and the systemic characteristics involved in the evolution
of spatial locations. Mertes, Applebaum, and Markin
contribute classificational concepts; Nelson deals with
the Operational programs of site selection; and La Londe
and Simmons offer a systemic approach. This set of tools
ranges from simple reasoning, such as that suggested by
Nelson, to complex models, such as the Simmons' concepts.
For the purposes at hand, the major contribution of this body
of knowledge is that it furnishes constructs to study prob-
lems related to prescription of store location and invest-
ment in retailing. Beyond this, it indicates the trend in
locational patterns as well as the evolution toward the most
highly specialized form of retailing, the shopping center.

The ShOpping Center as a Component
of the Retailipg System

 

 

This general discussion of the retailing system
and its evolutionary patterns now permits a closer
examination of shOpping centers, which are highly
specialized forms within this system. These institutions

will be analyzed as components of the retailing system

55

with an emphasis on their functional and operational charact-
eristics. The basic purpose is to understand the evolution
of these institutions and to explain how they adjust to

the particular dimensions of a trade area. The follow-

ing analysis will be centered on the U.S. environment and
its shopping centers.

Paul E. Smith, in a seminal article, conceptualizes
the shopping center from a systemic approach. He believes
it must be examined from a realistic appraisal of facts
and observed trends in the economic life of the community.52
A shOpping center, says Smith, is, in its entirety, a
retail institution. Accordingly, a center which is composed
of several independently owned stores must be conceived
of as an entity in relation to its linkages with the
market and its adequacy within its demographic trade area.
Because of the long~term commitments and extensive capital
investment involved, center location and planning must take
into consideration environmental trends such as modifica-
tions in road networks, traffic patterns, and zoning
policies. i

Smith's total system concept emphasizes that the
center‘s main objective is to function as an Open system.

It must take into account the possibility of influencing
its external environment, and it also must have a great deal

of control of its internal environment. The complexity

56

of these tasks requires both marketing expertise and the
cooperation of developers and financial agencies. The
shOpping center also is conceived of as a dynamic insti-
tution since it is built to meet the immediate requirements
of the market as well as to allow for the center's future
expansion.53

The systemic analysis of the shOpping center, which
constitutes the basic framework of this dissertation, sug-
gests the following scheme: the shopping center as a
system; the shOpping center's functions; the shopping center
and the marketing concept; the shopping center's industry
evolution; the shopping center historical perspective; the
shOpping center's growth and its causal factor; the
shOpping center's effects upon the retailing system; a
taxonomy of shOpping centers; and the future trends of
shopping centers. Although shopping centers may be defined
and classified from different perspectives and vieWpOints,
the systemic analysis used here will permit a better
understanding of the system, its components parts, and its
interactions. The approach chosen also stresses market-

ing characteristics.

The ShOpping Center as a System

As organized behavior systems, shOpping centers
offer what Wroe Alderson refers to as closure: they are
able to make retailing "handle a greater output and to

Operate at a new level of efficiency."54 Because the

57

centers perform some otherwise missing, incomplete, or
unbalanced functions and activities within the retailing
system, they are capable of achieving differential
advantage in relation to nonadaptive institutions. In
order to reach the Operational level necessary for
marketing closure,the centers aggregate within a planned
and controlled environment a much more complex set of
elements than conventional retailing institutions.

The variables which affect a shOpping center
may be described and classified in two groups: internal,
controllable variables and external semi- and noncontroll-
able variables. In the first group are included the
physical site, building size and design, space allocation,
store mix, the center‘s administrative organization, and the
merchants' association. In the second group, semicontrollable
variables, are size of the trade area, relations with the
governmental system, and linkages with the existing road
network. Noncontrollable variables are level of income
in the area, growth of pOpulation and new households,

and counteracting moves of competitors.56

The Shopping Center's Functions

 

From a functional point of view, these internal
and external variables affect both the operational process
of the centers as a whole and relationships among subunits.
The fact that several retailing firms are function-
ing in a controlled environment gives them a close inter-

relation in many activities, some of which may be performed

58

in conjunction. It could be possible to lower distribution
costs and reduce expenses with joint promotions, common
maintenance, and shared parking spaces.

Using a concept of biological analogy developed
by A. C. R. Dressmann, it can be said that the institu-
tions located within a center show a pattern of convergence
for certain activities and specialization for others.
These two qualities make possible a better final result than
is achievable through divergent locational patterns and
undiscriminated trade.57 In other words, since the
convergence factor does not preclude the specialization
of component institutions in the center, the end product
is a better competitive environment at lower costs than
in situations where spatial monopolies or oligopolistic
situations may exist.

Another basic feature of the shopping center is
that it makes better use of land space since it reduces
the movement of people within the urban area. This
statement is related to the concept of central place,
according to which trade is almost exclusively center
oriented; that is, people move in the direction of trade

58

and vice versa. The wide range of product offerings

59

in modern cities would necessitate considerable use of

land for many single—unit stores; such a pattern requires
multistop shopping and also more space for movement among
stores. A shopping center, being in a single location, can
aggregate all the goods that otherwise would be offered by
a larger number of lower hierarchy stores. It can trans-
form dispersed and indifferent goods into central goods.59
The function of a shopping center, if conceived of in this
way, is to fulfill the needs of its surrounding region by
providing noncentral offerings in a central place. The
primary advantage is that if a larger quantity of goods

is to be sold, the additional capital investment required
will be better utilized where larger scale operations are
possible.

From the urban planning point of view, the shopping
center frees the city planner from the problem of how to
provide for tertiary level activities. The center allows
the core of the city to be used for public activities as
well as central services, congestion is avoided, and trade
can be relocated into a multinuclei pattern through
planning policies that are ecologically oriented; plans
for the location of retailing activity can be developed
which include sensitivity toward the ecological factors

influencing urban growth.60 Since the shopping

6O

center can Operate in noncentralized areas by taking
advantage of today's high degree of mobility, the city
planner can use this fact to suggest positive answers to
changes in the urban environment.

The_function of the center as a modern type of
retailing institution also may make it a catalytic agent
in reducing the rigidities of old locational schemes.
From another point of view, the centers will Open the
boundaries of the city and avoid the centripetal goods
flow patterns which generate congestion in the inner
city. In addition, Perry Bliss stresses that

shOpping centers are a strong enough innovating
force to bring about basic changes in older
location values; they compel large number of
retailers to join them or to adOpt the planning
and coordinating techniques of these new con—
trolled centers. ‘

Due to their physically specialized retailing
facilities, shopping centers function as "planned
Operated, and controlled units."62 This characteristic
generates the same public image.because the public looks
upon the centers as units and as single places to shop.
The Shopping Center and the
Marketing Concept

The shopping center may be considered as an
instrument for implementing the marketing concept, whose
main focus is on the customer. Consumer orientation in

retailing institutions, particularly shopping centers,

necessitates a high degree of compatibility with the

61

determinants of retail patronage. Because of its extreme
flexibility, a shopping center may include not only new
stores which the customers desire, but also those stores
which the customers are used to patronizing and which,
because of nonplanned location techniques, have been
scattered throughout the area. Obviously, if a shopping
center can perform these functions it will have provided,
in effect, one-stop shopping.

The proposition that new and specialized physical
facilities may implement and enhance the marketing con-
cept has been studied extensively in marketing literature.
Although written indirectly from this perspective and
not intended to deal with shopping centers in relation
to the implementation of the marketing concept, some
studies that should be mentioned are those by C. T. Jonassen

in 1955,64 Louis Bucklin in 1963,65

1961,66 and Charles Stonier in 1960.67 These studies

Persis Emmet in

seem to indicate that shopping centers have a distinct
advantage because of their capacity to fulfill locational
needs and to offer a greater depth and breadth of assort-
ment. The same point of view also is presented by

James Engel, David Kollat, and Roger Blackwell, who
mention that "the growth of suburban shOpping centers and
the loss in the market share of downtown retailers are
indicative of the importance of location (and parking

convenience) in influencing consumens' choice of a retail

62

outlet."68 The same authors indicate that merchandise

variety and assortment have been found to influence the
locus of purchase preference.6

The actual and attempted efforts to revitalize
downtown areas seem to prove that shOpping centers have
been successful in attending to consumers' needs; these
efforts follow the basic patterns used in shopping centers,
including protection from weather, easier accessibility
through pedestrian malls, low cost or free parking,
and more flexible business hours. To date, such revitaliza-
tion has not been very impressive due to the multi-
plicity of ownership and the consequent difficulties in
finding joint financial resources and common goals.

Finally, the modern shopping center serves the
marketing concept because of its ability to adjust to
the changing needs and habits of existing and potential
customers within a dynamic environment.70 The center can
do so because it supposedly is planned in accordance with
customer orientation and is designed to be compatible
with trade area descriptors; it integrates all the
functions performed and duplicated in previous locational
patterns; and, what is more relevant from an economic
viewpoint, it is able to operate on a larger scale than
individual stores or unplanned clusters, which is

crucial for profitable Operations.

63

The Shopping Center
IndustryiEvolution

 

 

Because the shopping center has served U.S.
needs so well,and because it may be viewed as a success-
ful ecological response of the retailing system to changes
in the environment and in pOpulation mobility, the number
of centers has increased substantially in the United States
since 1945. The center has become an important institution
in the U.S. economy and a distinct feature of the U.S.
retailing system. It can be said that there is a shopping
center industry in the United States tOday.7l
By virtue of the complexities related to the plan-
ning, design, financing, construction, and management
Of shopping centers,the industry includes firms and
technical skills from several sources. The urban planner,
the develOper, the architect, the marketing analyst, and
the financial consultant all play a specific role in the
development of centers. Since the projects are always
long term, it is difficult to define precisely when the
participation of one of these technicians begins or ends.
Victor Gruen suggests that the develOpment of
a center requires the joint effort and continuous work
of a team of experts who are supposed to perform special-

ized functions during the realization of the project;

64

the success of the future center depends upon the integral
collaboration and understanding among the team members.72
From an institutional point of view, the shopping center
industry is composed of participant and auxiliary agencies
such as marketing research firms, building contractors,
financing companies, real estate developers, and promoters.
According to the Urban Land Institute, there are
no official statistics regarding the actual number of
planned shOpping centers,73 but it points out that about
45 percent of total U.S. retail trade in 1970 was expected
to come from stores located in shopping centers. In a
recent seminar offered to businessmen, National Cash
Register do Brasil officers reported that there are
12,500 shOpping centers in operation in the United States,
with annual sales of approximately $100 billion.74 A
more accurate analysis of the figures and Operational
dimensions of the industry is found in the Urban Land
Institute's publication, The Dollars and Cents of Shopping

Centers, which is published triannually.76

 

A statistical study of the shOpping center industry

was published in 1966 by Chain Store Age. According to

 

the author, the great expansion of U.S. centers took
place after World War II; only 30 centers were reported

in 1940, and 75 in 1945; the industry was of relatively

65

small dimensions. However, during the last two decades
the number of centers has expanded impressively, as

shown in Table 1.76

TABLE 1.--Shopping Centers in the USA.

 

1955 - 1967 (Basepyear 1955)

 

 

Years No. of Centers Unit Increase % Increase
1955 1000 index = 100 0 0
1956 1600 = 160 600 60
1957 2200 = 222 600 37.5
1958 2900 = 290 700 32
1959 3700 = 370 800 27
1960 4500 = 450 800 21.5
1961 5500 = 550 1000 22
1962 6300 = 630 800 14.5
1963 7100 = 710 800 12.5
1964 7800 = 780 700 10
1965 8600 = 860 800 9
1966 10275 = 1021 1675 19.5
1967 11600 = 1160 1325 13
1970 13000 (Estimate)

 

The figures above are presented only for illustrative
purposes. A more extensive breakdown would be necessary

to demonstrate the evolution of the industry in terms of

66

its competitive power. Data would be needed on the sales
these institutions have been able to draw from other
retailing locations, the number of new stores which have
moved into shopping centers, and the increase in square
footage during the last three decades.77 The growth trend
in the industry is examined by Brian Berry, who mentions
changes in retail technology and metropolitan highway
improvements as the primary factors. He also notes that in
the competition between central unplanned locations and
centers the latter have been the victors.78
The overall develOpment of this industry in the

United States may be divided into the following periods:

lst Period-—Before l910--retai1ing was highly

 

concentrated in the downtown area.

2nd Period-—From 1910 to World War II——develop-

 

ment of commercial radial axes and
unplanned outlying centers.

3rd Period--After World War II to the present--

 

structures and patterns of retailing
location and design changed very
rapidly, with new equilibrium forms
not yet clearly identified in the
suburban areas.79

The future trends in this industry are a complex

subject since changes in societal values, environmental

problems, and the consequent alternations in buying

67

behavior are likely to have a major impact on the retailing
system. Despite the newness of this industry it is possible
to observe some modifications already being implemented,
such as the closed mall concept and the highly specialized
centers of Ball Harbor in Miami, Florida, and the
Colonial Center in Los Gatos, California.

The Shopping Center:
Historical Perspectives

 

 

Interestingly enough, the historical aspects
of the U.S. shopping center have not been the subject
of extensive treatment in the literature. Some scholarly
works, mainly doctoral dissertations, have dealt with the

80

subject, but perusal of the Journal of Retailing and the

 

Journal of Marketing yields very little on the topic. Even

 

these few sources do not emphasize the historical per-
spective.81 The limited number of sources may be explained
by the short life originally attributed to the planned
shopping center concept and by the fact that centers'

close relationship to consumer mobility developed only
after 1945.

The earliest operating"true" planned shOpping
centers were the Country Club Plaza, Kansas City, Missouri;
North Gate Center, Seattle, Washington; Shoppers World,
Farmington, Massachusetts; Evergreen Plaza, Chicago, Illinois;

and Cross Country Center, Yonkers, New York.82 The Urban

68

Land Institute, however, claims that in 1907 its
president, Mr. Edward H. Bouton, "built an architec-
turally unified building for stores set back from the
street. To convert this Open space from providing for
horse—drawn carriages to parking automobiles required
only paving the front grass area and the carriage drive.
The pioneering characteristics of Country Club
Plaza, the first true shopping center, are linked to
the innovative behavior of its builder, Jesse C. Nichols.
During his European travels he observed several
developments in modern cities in England which he decided
to experiment with in the United States. In building
Country Club Plaza, Nichols' idea was to create an out-
standing shopping area which could provide facilities
more profitable, more beautiful, and more convenient
than those existing in CBD shopping areas.84 It is
interesting that, perhaps unintentionally, this developer
incorporated several modern concepts of shOpping
center planning into his development: store mix plan-
ning, traffic control, free parking, analysis of the ratio
between floor space and parking lot capacity, and trade
area analysis. Gordon Stedman re—evaluated Country Club
Plaza in 1955 and remarked that the parking lot, which
originally was considered an "idealistic waste," had been
eXpanded into a triple-decked design and yet still was

insufficient to accommodate parking requirements.

69

This brief historical sketch of the first American
shopping center points out that this idea, which was
conceived fifty years ago by innovators unafraid of risks and
willing to depart from existing practices and patterns,
has flourished into an outstanding and unique character-
istic of the U.S. marketing system. The planning and
building of shopping centers at that period anticipated
the ecological characteristics of U.S. urban areas.

As innovative ventures these experiences laid patterns
for future developments and probably served as examples
for impetus to changes in the planning and locational
techniques of retailing which were eXpanded during the
late thirties.

The movement toward shopping centers slackened
during the Depression and almost ceased during the Second
World War, due to economic factors in the first case, and
car and gasoline shortages in the second. However, the
gradual postwar increase in the size of urban areas and
the range of product offerings again fostered the
opportunity for shopping center growth. The shopping
center itself became a downtown area around which a

small new city could form.86

The ShOpping Center Growth
and its Causal Factors

 

 

Many of the causes of growth of the shopping

center as a major component of the U.S. retailing

70

system have been mentioned briefly. At this point special
emphasis will be placed on the shOpping center function
as a major component of the retailing system.

In layout and design, the shopping center is the
only form of retailing institution which simultaneously
can accommodate all the changing characteristics of the
modern retailing process. The shOpping center may draw
traffic from larger trade areas and, at the same time,
offer sufficient parking in prOper balance between retailing
and parking Space. Consequently,centers can Operate on
a scale adequate flmrthe complexities and dimensions of
mass retailing. Furthermore, because of their architectural
features, these institutions are more adaptive than
conventional stores, which may find themselves limited
in space by the layout and design characteristics of
their central locations.

Another important aspect is that centers can be
adapted in the planning stage to the characteristics of
the geographic region in which they are to be located.

A wide gamut of design and store mixes is available to the
developers. Contrary to downtown shOpping districts,
modern shOpping centers may be created before an area has
reached economic maturity,and they can be planned with
allowances for future growth and eXpansion. This flexi—
bility makes the centers much more responsive to changes
in the surrounding areas than their central city counter-

parts.

71

Finally, since shOpping center ownership is to
some extent controlled, the hours of Operation are more
easily prescribed than in conventional multiple merchant
clusters. The causal effect of centers Operational
features has been discussed previously.

Many of the factors mentioned here are common
not only to the United States, but also may be observed
abroad. Five years ago there was not one regional shopping
center in Western Europe. Even Paris, with a population of
12 million including its suburbs, had none; but today, near
Paris, stands PARLY 2, whose 700,000 square feet will make

it the largest center in EurOpe when it is fully occupied.87

Effects of ShOpping Centers
Upon the Retailing System

 

 

The systems approach used in this dissertation
also permits an evaluation of the overall effects Of the
shOpping center upon retailing Operations. A review of
the literature suggests that this topic became a concern
to retailing writers and theorists in the mid-fifties.
Before this period the industry was still too new to offer
any solid basis for discussion.

For the purposes of this dissertation the over—
all effects Of shopping centers on the retailing system
will be analyzed from three different perspectives:

(1) effects observed on previously existing retailing

institutions; (2) changes in locational patterns of the

72

retailing system within the urban area; and (3) changes

in buying habits due to the emergence of shopping centers.
An understanding of these aspects of the U.S. shopping
center will be useful in predicting future developments

in Brazil.

In 1960 Eugene Kelley and Paul Smith pointed out
that shopping centers and central business districts were
competing retailing systems. They suggested that the
complex interaction among their variables should be
evaluated under a new approach, which they called
"systems analysis."88 These authors used such pioneering
conceptual tools as the mutual relationship among clusters
of stores, the flows within the system, and the input-
output concept. Inputs to the system were merchandise,
information, manpower, and equipment, while outputs
were defined as the sales and profits generated by the
system.89 The systems analysis approach used in this
seminal article indicated that an evaluation of the many
variables which compose the system generally could be
used to determine whether or not a system would be
profitable, survive, and grow. In addition, the authors
pointed out that systems analysis could be used success-
fully in evaluating either the then ten—year-old planned
shopping centers or the thousand-year~old CBD, which had

0 I 90
"evolved from trial and error experiences."

73

Within the scheme of Kelley and Smith's systems

analysis, several effects in the retailing system may

be related to the emergence of shopping centers. The
centers attracted business from existing stores and
established a definite trade area in which the probability
of selling to existing households was higher than that
of the scattered retailing clusters or the CBD. This
effect is closely related with another--the generic deter-
ioration of central city retailing.

Because centers were planned in accordance with
the specific characteristics and potential of a certain
expected or target trade area, the merchandising patterns
became much more formal than in the previous organiza-
tional settings. This characteristic changed somewhat
the general trend toward scrambling merchandise then
prevalent in so-called non-shopping center retailing.

Another interesting and relevant effect of the
shOpping center movement was the creation of a higher degree
of solidarity among downtown retailers. In the mid-fifties
and early sixties they initiated joint promotions and a
general(fiEOrttorehabilitate downtown trade, which, despite
nominal growth, was losing business to noncentralized

institutions located mainly in planned centers.

74

The most important effect of centers on locational
patterns was the change it produced in the overall shape
of urban areas. As will be discussed later, shOpping
centers were able to transform urban structures from the
usual concentric, star, and sector shapes into the now
common polynuclear urban pattern.92 It is toward these
newly formed nuclei that cities' social and economic lives
have begun to gravitate. These centers act as poles of
attraction and have become a primary factor in the increas-
ing trend toward decentralization. Because of the
integrated merchandising plans of most shOpping centers,
the areas around them are, in some instances, self-sufficient
in terms of retailing, which is leading to continued
decentralization. These characteristics, which today are
a common part of the U.S. scene, were observed by William
Applebaum and Saul Cohen as early as 1961.93

The shopping center also has had a substantive
effect in relation to changes in the specific place where
purchases are made; more Specifically, it has been an
extremely powerful factor in changing buying habits.
In his dissertation, which was published in 1956 in a
series of three articles in the Journal of Retailing,
Gordon H. Stedman reported that following the rise of the
shopping center, there was an increased tendency among
urban shoppers to change their purchase locale. What

seems even more important, after this change took place,

75

shoppers developed a certain degree of preference and
loyalty for the chosen new center.94

In research conducted in New York in the late
fifties, T. Dart Ellsworth and associates made similar
findings. Studies made in eight centers appeared to indi-
cate that centers were able to increase the purchase rate
per customer. Furthermore, because of family shopping
trips, the shOpping basket was more diversified than in
similar trips to the CBD.95 Charles Hindersman analyzed
the impact of centers in a large metropolitan area. He
claimed that they were the reason for reduced sales in the
downtown area and had become the preferred place for
women's and men's apparel purchases.96

Obviously, shopping centers have had a definite
impact on U.S. retailing. Evidence indicates that
these institutions are a peculiar and well-established
characteristic of the U.S. distribution system and that

they have changed the profile of the urban structure and

the buying habits of Americans.

Taxonomy of Shopping Centers

The classification of shOpping centers into
several categories and according to different Operational
characteristics is undertaken here in order to explain the
relationships of the diverse categories or types of centers

to the retailing process in a specific trade area. Thus,

76

the classification will be made from an interactive rather
than merely a descriptive perspective. A formal inquiry
into the taxonomy of centers shows that marketing objectives
are the independent variables in the planning of a
center, whereas the physical dimensions can be considered
as dependent variables.

Each of the characteristics which define a center
have a relevant effect upon the retailing system of a
certain region. By the same token, they are fundamental
to an explanation and evaluation of the functions and
dimensionscfiéicenter's impact relative to its trade area.
The systemic approach used in this dissertation also
requires a complete evaluation of the Operational charact-
eristics of the retailing institutions, since these will
serve as parameters for the recommendation of shOpping
center sizes in specific locations within the Greater S.
Paulo Metropolitan Area.

Operational Characteristics.--A taxonomy of

 

centers also will permit an overview of how these in-
stitutions have been perceived during various stages of
develOpment by different authors in marketing literature.
In addition, the taxonomic approach will seek to classify
centers in terms of relevant Operational characteristics
such as size, site design, parking, store mix, and

so forth. It is these variables which funcion as in-

puts to the subsystem which enable the analyst to

77

predict what types and dimensions of trade areas

will be compatible with the system to receive a set

of adequate outputs from it. Finally, the taxonomy can
provide parameters within which to plan a shopping center's
dimensions. It is obvious that these dimensions are

inputs, or costs; outputs are the centers' sales volumes, or
revenues. Therefore, the positive balance between costs

and revenues relative to potential are enhanced when one

can establish in advance the Operational dimensions of

a center in relation to its market.

Accordingly, a shopping center may be classified
by its operational characteristics, by other physical
dimensions, and relative to its location within the urban
area. For each of these general descriptors there are
specific measurement criteria which may be applied in
order to make the process of classification orderly and
meaningful. Table 2 displays the major descriptors
and their respective measurement criteria. The inter-
action among the descriptors at different levels dictated
by the measurements will indicate the diverse types of
centers. Table 2 was develOped from extensive research
of existing technical information on the shopping center
industry and seems to represent a synthesis of the

accepted criteria for classifying centers.

78

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Other Classificatory Schemes.--Before elaborating

 

a formal and generic classification, one should examine
the contributions on the subject in marketing literature.
The major work in this area comes from marketing scholars,
architects, urban planners, and geographers through their
research on retailing locations, decentralization, and the
evolution of retailing institutions.
In 1949 Mertes stressed the degree of control as
the relevant factor for classifying centers, thus his
two categories, uncontrolled and controlled centers.9
Geoffrey Baker and Bruno Funaro made a comprehensive
analysis of existing centers in 1951, but from an archi-
tectural and physical design perspective. Only the size
and store mix dimensions were used in discussing the
three categories of centers mentioned in their work,
namely, neighborhood, community, and regional centers.99
In his classic study of retail location published
in 1958, Nelson indicated there were two categories of
centers: convenience and shoppers' goods. He also pointed
out that the most logical basis for classifying centers
was in terms of the kinds of goOds purveyed and the types
of stores which the centers contain.100 Nelson argued
that the most frequently employed method of classification,

which used size and characteristics of the trade area,

was misleading because of the difficulties in identifying

83

 

 

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86

such characteristics.’lOl Nelson's statement was made at
a time when quantitative tools for evaluating marketing
activities were not as developed as today.

In 1960, in their fundamental "Shopping Town-USA,"
Victor Gruen and Larry Smith showed that the relevant
characteristic for classifying a center was the identifi-
cation of the major tenant. According to them, a neighbor-
hood center's major tenant was a supermarket; the community
center was identified by a junior department store; and the
regional center by one or more major (full line) department
stores.101 In his dissertation Eugene Kelley made a
complete analysis of shopping center characteristics and
emphasized the planned and unplanned differences as major
dimensions of classification. Kelley has stated that the
morphologic aspects of centers are not as important in
classification as the functional dimensions.103 In 1960
Emmet performed an integrated classification of centers
using information from other authors and diverse official
sources. His work was a substantial contribution because
of the ranges covered and because he made it possible to
classify centers with different physical dimensions.“104

The Urban Land Institute offered a complete study
with a list of indicators for types and sizes of centers
in 1968. The following indicators were mentioned: lead-

ing tenant, gross leasable area and its parameters,

usual minimum gross leasable area, and minimum population

87

support.105 A recent study by Joseph De Chiara and Lee

Koppellman points out the physical dimensions which the
centers must have in order to be included in one of the
three major categories.106 The ULI's criteria and those
of De Chiara and Koppellman will be the basis for the
classificatory framework used for analytical purposes in

this dissertation.

Physical Dimensions.--The physical classificatory

 

dimensions which will be used in the analysis are formally
presented in Table 3. The extensive and detailed taxonomy
of shopping centers shown in that tablesmaanto indicate
that these institutions follow a defined pattern in the
United States; this pattern determines the functions per-
formed by these centers within the retailing system and,
more specifically, the nature of the trade area. This
framework will be used later, not only for comparative
purposes, but also to develOp the basic structure of the
centers which can be recommended for the GSPMA. Taken into
consideration will be the necessary modifications and
adaptations for a geographic region which has different
socioeconomic descriptors. However, this dissertation's
premise is that, despite differences in the level of
economic development and environmental factors, the
functional characteristics and main objectives of certain

institutions remain quite similar.

88

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93

Future Trends

 

Crystal ball gazing is not an easy task when deal-
ing with a complex system such as retailing, especially
one which operates within the dynamic milieu of the urban
area which faces the continuous impact of changing
social values and living habits. The task of discussing
the future of shopping centers must be done from a dialect-
ical perspective. The subject must be approached from a
broader point of view than a simplistic analysis which
would only furnish estimates regarding the eventual rise
or decline in the number of centers in the United States.

Trends in the United States.--First, the problem

 

will be examined from the U.S. perSpective. In the
United States,shopping centers now are a definite part

of the fabric of urban life and a stable component of the
retailing distributive process, and they will remain so.
The eventual growth or decline in the absolute number of
units will depend, of course, upon trends in urbaniza-
tion of existing cities or in the creation of new cities.
A future decline in the number of urban central areas is
expected, and the possibilities of CBD renewal seem
unlikely since the ecological movement will stress the
avoidance of crowded areas and overpopulated central
traffic routes.107 With few exceptions, it seems most
probable that the decentralization trend will continue

and that future institutions will be planned and specially
designed stores located at urban peripheries in integrated

shopping centers.

94

The changes in existing centers will depend on the
impact of technology and its effects on social values
and attitudes. It is clear that shopping centers as
entities must understand the interplay of sociological
and technological trends. They must face such problems
as new product and service expectations, new ideas about
how the customers will want to use his shopping time, and
the prospective impact of at-home shopping. Eugene Beem
predicts at least two major changes in retailing: (1)
probable increase in the importance of certain specialty
goods stores, and (2) a possible decline of convenience
goods stores because of the possibility of at-home shopping
and direct delivery.108

If these developments occur, it is foreseeable
that shopping centers will have fewer supermarkets and
drug stores and more specialty stores selling within very
specialized patterns. The most serious threat may be at-
home shopping. Long-distance shopping devices and the
possibilities of tele-electronic data processing would
allow for extra convenience in home shopping; despite the
proximity of centers and the availability of parking, the
selection of merchandise at home and automatic delivery
would be, by far, a faster alternative. Even if at-home
shOpping develops,however,nwny’shOppinganuispecialty goods

109 If the

will continue to be purchased at shopping centers .
at-home shopping concept does not come about due to tech-

nological constraints, there are other predictable changes

95

during the next ten years, most of which would affect the
existing shopping center structure.

E. B. Weiss believes an increase in automobile
shopping is conceivable by 1975. "Retail stores of various
types will be laid out so as to permit shoppers to drive
right into the store to do split-second shopping without

"110 If this possibility material-

getting out of the car.
izes, the impact on shopping centers would be interesting;
certain stores, instead of parking spaces, would require
runways to provide waiting space for customers. To
operationalize this idea,ajustments in the merchandising
and checkout processes would be necessary. Due to the
rising cost of prime locations, Weiss's predictions are
not inconceivable; future centers may be multilevel
designs, with multilevel department stores and parking
facilities.111
Another trend in the retailing system is the
emergence of conglomerated stores, which offer
food and durable goods in a single location. These
institutions, because of their narrow margins, need
economies of scale to reduce costs, and they require
large selling areas. If centers continue their expansion
into suburban areas,modifications in their actual design

and tenant mix patterns will be necessary.112

96

Up to this point,the discussion was focused on
Operational changes in future centers and on the requisite
adjustments they probably will have to make in their
structures and physical design. However, environmental changes
and modifications also may alter the configuration of
shopping centers. The so-called ecological concern will
change population distribution and mobility over space.

It is very unlikely that cities will continue to grow in
monolithic blocks; future interurbia will be conurbations
of self-sufficient socioeconomic' areas which will require
centers suited to their specific dimensions. Hopefully,
centers will be designed in such a way that they will
adjust to environmental characteristics and will not mar
the environment with massive blocks of concrete and steel.
These institutions would be expected to be sensitive to
their surroundings. Achievement of such a state of affairs
would require not only modifications in applied technology,
but also changes in the organizational behavior of retailing
system components: retailers, developers, shopping center
owners, and real estate companies.

Trends Outside the United States.--The future of

 

shopping centers in other countries will follow the

U.S. pattern with the necessary adjustments to environ-
mental differences. As Colin S. Jones states, the varia—
tions between U.S. centers and those in other countries

"stem from the time elapsed [or time lag] between the

97

relative growth of retailing in each country, rather than
from great variations in [permissive] conditions."‘113
Consequently, it is realistic to presume that in the more
developed areas of Brazil there is sufficient economic
maturity to allow for the emergence and growth of shopping
centers.

The areas in which these new institutions will
emerge are apt to be more advanced than other parts of
the country and are likely to display economic descriptors
similar to those of the United States. Obviously, all
conditions are not identical; for example, the automobile
ownership rate is lower in Brazil, the costs of retailing
operations vary,and rents and construction costs tend to
be higher in absolute and comparative terms. These dif-
ferences do not preclude the development of centers, but
they will serve as guidelines and limitations. The center,
as will be demonstrated later, will be a partial, but
powerful, means to solve such urban problems as congestion,

the high mortality rate among retailing stores, and satis-

faction of basic consumer needs.

As the automobile industry matures, as income
levels rise, and as telecommunications improve, the
shopping center will represent a logical and efficient
means for planning retailing distribution over space,

not only in large metropolitan areas such as S. Paulo,

98

but also in smaller cities in the progressive southern
states of Brazil. In larger cities where crowded conditions
slready exist, these institutions will Operate as ex post
facto solutions to the urban crisis. In growing but smaller
cities the planned use of shOpping centers will avoid the

ill effects of older retailing locational patterns.

Spatial Dimensions of the Retailing System

In order to overcome spatial differences between
the point of production and the point of consumption, the
retailing system both moves goods and attempts to attract
customers to its locations; these two activities, which
belong to the basic obtaining and servicing demand functions,
generate flows within an urban area. The dynamics of this
process are linked not only with the components of the
retailing system, as such, but also affect all the other
activities of the urban society, such as living conditions,
housing locations, industrial activities, use of land, and
so forth. An analysis of these phenomena will be made here
because it is a basic premise of this dissertation that
there is a mutual interaction between the retailing system
and the conditions in the urban environment.

In its initial stage,the retailing system follows
the trends and patterns of the city. However, as it grows

and as the urban system modifies, retailing may shift its

99

locations. As a natural consequence, the structure and
direction of movements of peOple and goods within the
urban area are altered. It is difficult to pinpoint the
exact initial and terminal points of this phenomenon since
locational changes affect the fabric of the city. For
example, areas with low household and traffic density may
become crowded and congested and require new locations
either for housing or for trade. Nevertheless, with a
better understanding of the urban system and an application
of a higher level of location theory, it is conceivable
that some of the uncertainty and ill-effects mentioned
above can be reduced or minimized in existing areas, or
may be avoided altogether in newly developed regions.

There seems, then, to be a strong reason to examine
a wide set of analytical tools in relation to this subject;
they will be required later in developing the normative
parts of this dissertation and, of course, will be used
for application purposes. The remainder of this chapter
will be structured along the following lines.

1. The urban system will examine the city as a

 

result of evolutive urban patterns. Theoretical
contributions will be viewed with an emphasis

on the role of the retailing process as a force
affecting urban dynamics and the characteristics

of the urban fabric.

2. The retailing system within urban space will

analyze how retailing is spread over the urban

100

space. Trade area concepts and dynamics,
theories of retailing location, and models for
evaluating trade areas will be examined.

The analysis will follow the systemic approach used pre-

viously.

The Urban System

 

Cities exist within the ill-defined contours of the
urban system. In order to evaluate cities' characteristics and
to attemptEIbrief, meaningful classification of cities in
terms of their external and internal orientation, it first is
necessary to discuss the nature of the urban system. Jay
Forrester conceives of this system in a very theoretical and
abstract form. Although his seminal concepts are operation-

ally lacking, they can serve as a useful framework.114

Forrester's Urban Dynamics

 

According to Forrester, the urban system may be
defined as a high-order, complex-mu1tiple-1oop, and non-
linear feedback structure which acts within a limitless

115 . .
environment. High-order refers to its large number of

 

variables; multiple-lopp implies not only numerous vari-

 

ables, but also relations among them; and nonlinear

 

feedback is used to indicate that the rates of transforma-

 

tion within the structure for a given set of inputs do not

produce linear (linear equation) outputs in many situations.
Forrester states that the urban system acts within

and is part of a limitless environment in which an extensive

set of interchanges can occur. If, for example, an urban

101

system is attractive, it is able to draw people from the
external environment; if it is unattractive, the Opposite
is true. Since there are large relative differences in
size between the urban system and the external environment,
it is very unlikely that the urban system will affect the
environmental equilibrium except in the special situation
where an urban area has the major percentage of the total

116
land space. Forrester's multiple-loop characteristic

also may eXplain why an existing road network can be a
leading factor in the development of housing and shopping
centers at one point, but later may become insufficient
due to an increase in traffic in the area.

The foremost value of Forrester's scheme is that it
permits conception of the city within the urban system
as an entity and as a vital expression of the operation of
that system. The city is contained within the system
although its boundaries may be defined in several ways:
political limits, levels of population density, major
socioeconomic activities, and so forth.117

The several and highly specialized activities
which occur within cities dictates their form, their
growth, and even their problems. It is not rare to observe
cities growing across their political and official spatial
boundaries. It also is possible for man-made institutions
to alter the characteristics of a previously stable city,
thus requiring adjustments in its natural and unplanned

118
growth pattern. Such ecological adjustments pertain to

102

the system and definitely cannot be considered simple,
independent, and random outcomes of the city's life.
Programs to aid ecological adjustments may be passive, may
be "normative social action," or, a third type, which are
preventive, may lead to the solution of urban problems.
This latter approach avoids the determinism of some
ecologists, who contend that certain areas and portions
of the city must display lower levels of quality of life
and that nothing can be done to avoid this trend. Indeed,
the low quality of life is one of the most crucial aspects
of modern cities. A contributing cause may be the poor
locations of retailing institutions which reduce leisure
time, increase traffic congestion, add to total dis-
tribution costs, and so forth.

These phenomena exist also because planners,
marketers, and other responsible individuals did not take
into consideration that, in some cases, the location of

trade is more important to the movement of people and

goods than other urban flows such as the movements toward
working and housing areas which are routinized.120 But
because the movement toward trade is erratic and random,
it requires more urban space. However, if location principles
are used, these movements can be diverted to a central place
which will service the entire trade area.

In order to be able to locate retailing institutions
properly, one first must have solid information about the

urban system's structure and the functional aspects of the

city. In the second stage the output of the evaluation of

103

the urban system is used as a basis for application of the
models derived from location theory. Therefore, it is
necessary to discuss the urban structure before focusing on
the cities, their evolution, and their patterns as related

to the retailing process.

The Hinge Factor

 

The change from a concentric city pattern to a poly-
nuclear urban complex has been examined by Jean Gottman. He
points out that this trend is observable in several areas in
the United States and in other parts of the world,121 and
cites the hinge factor as the most important causal variable

122 This factor

in the emergence of large metropolitan areas.
refers to the role a city performs in relation to its sur-
rounding areas in terms of political, manufacturing, com—
mercial, and financial activities. Due to these multivariant
activities and the needs for extensive movement and a great
deal of specialization, cities displaying the hinge factor
are likely to expand over suburbs, initially following the
transversal axis and then the directions of railroads and
highways. This process is occurring in the GSPMA; adjacent

cities are being aggregated and formed into a monolithic

urban block.

City Structure

 

The urban system's main goal is to mold man's environ-

123

ment, to realize his aspirations. More pragmatically,

this statement may be translated into normative policies in

104

urban planning which may include regulations concerning
land use, the location of specialized activities, or the
structure of the street network within the urban space.
Obviously, these policies are higher—order issues
compared to retailing location and, more Specifically, the
expression and formulation of norms for site selection of
decentralized retailing centers. However, it seems clear
that the total organization of the lbwer-order system must
follow the general patterns of the higher. In sum, as a per-
sonal value statement,the retailing structure of a city must
be organized and designed in such a way that it will further
the achievement of the city's central goals, namely, freedom

to live in adequate housing, freedom to work at chosen locations ,

and freedom to buy where it is more convenient. This

ideal state of affairs at least may be approximated through
mutual effort and a certain degree of compatibility

between urban planning and retailing activities.

Among the goals of the urban system, one of the
most important in terms of the present analysis is the
sound planning and design of the city and its road
network. The retailing system must perform its normal
functions within the constraints of location and design
features. To arrive at wise decisions in the search for

compatible and lucrative locations, the retailer and

105

others involved must analyze the nature oftfluacity. To do so,
they must examine the city and its component elements.

In their classic article,124 Chauncy Harris and
Edward Ullman describe two major aspects of cities: external
characteristics and internal structure. In examining the
former, in relation to locational patterns and major functions,
the authors attempted a descriptive taxonomycflfthe following
city types: (1) cities as central places; (2) cities as
transportation centers; and (3) cities as specialized service
centers. The most important contribution of this analysis
was its effort to generalize the structural nature of
urban areas; at the same time it raised the point that
modern metrOpolises present a hybrid configuration, a
blending of the three pure forms suggested by the authors.

To clarify the internal structure, a Simple but
rational framework was proposed: (1) axial growth theory
(developed by Richard Hurd); (2) the concentric zones theory
(proposed by Ernest Burgess); (3) the sector theory (developed
by Homer Hoyt); and (4) the multiple nuclei theory (con-
ceived by Ullman and Harris). These four categories repre-
sent generalizations regarding patterns of land use.

Harris and Ullman noted that varying combinations of
these three patterns may be occurring within large metro-

125

politan areas today. This phenomenon makes the analysis

106

of city structure more complex, on the one hand, but, on
the other, it permits a better understanding of the
structural characteristics of urban land for retailing

location purposes.

The City Fabric

 

External Characteristics

 

Only those external characteristics which bear
some relationship to the objectives of this thesis will
be evaluated. Among these, the city as a central place
concept seems relevant. Simultaneously, it can explain
both the interaction of cities within their relative
position in a geographic space and the degree of
central place functions to be performed within their
boundaries. A city of a higher hierarchical level is
assumed to have a wider range of retail institutions,
since the greater the centrality of the city, the higher
the order of goods and services that can be provided and

the larger the population trade area}26

Because shopping
centers also are high hierarchy central places, it is
understandable why the opportunity for a large number of
centers of different sizesexistsvfiibin a metropolis.

Some cities also function as transport centers.

This factor has only minor implications for the location

107

of retailing institutions, since these institutions are
oriented to serving local and not regional trade. The
relevance, if any, lies in the location of commercial
clusters at the intersection of principal and minor axes;
the major axis is the center for transportation activities}27
This is the well-known Aspinwall rule of uniformity and is
no longer widely applicable because of the impact of the
automobile and the size of modern metropolises.

Another external characteristic of cities is
that they may be the locus of very specialized services or
activities. This is a dominant force in shaping city
structure since housing and trading subareas follow the
basic patterns set forth by the major activities. An
example of this phenomenon is the location of trade and
housing in Washington, D.C., a city which was planned
around its major activity, government. Location studies

emphasize not only the places where people live, but also

their movement toward the city's major service areas.

Internal Characteristics

Internal characteristics , which are related to the
shape of cities and their morphologic features , are explained by
the four basic theories previously mentioned. Despite the
changes that modern technology has brought to the structural

typology of urban areas since they were written, these

108

theories may serve as a solid basis for initial discussion.
It is worthwhile to note that they have been used in
almost every analysis of the functions of retailing insti-
tutions and in trade area evaluations.

By way of introduction,one can say that ecology
and its forces shape a city's structure; its Specific
internal dimensions result from the socioeconomic inter-
action of specialized groups over space and at different
periods of time. The morphologic characteristics of cities
after they mature, which may require a century or five
decades, place definite constraints on urban activities.
Accordingly, every action or program concerned with the
planning and location of specialized retailing establish-
ments must begin with a consideration of a city's
morphologic patterns.

The following theories were develOped in the early
decades<1fthis century. lflmaauthors were mainly interested
in the generic explanation of urban land use, and none of
them focus particularly on retail trade area location
or on the phenomena related to retailing decentralization.
However, their theoretical framework is extremely useful
for explaining changes in urban structure and why some

retailing areas have been developed within urban limits.

109

Hurd: The Theory of Axial Growth.128--As early as

 

1903, Richard Hurd pointed out that urban develOpment Spreads
out from the city's center, following the routes of trans-
portation lines, thus creating an octOpus or star shape.129
As time passes, land between the original axes is occupied,
but the basic Shape remains. New communities are likely to
emerge in the vicinity of external terminals or inter-
changes with secondary roads; in cities where the auto-
mobile has been used with frequency, the pattern follows
major highway routes.

For the purposes of this thesis it is interesting
to observe that commercial strips and dispersed store
clusters along these axial routes have been a constant,
principally in areas where peOple could Shop after or
during commuting to work. An observation of suburbs in
countries like Brazil, which has low car ownership,
indicates this pattern in some cases. Housing, followed by
minor commercial centers, is then within walking distance
of railroad stations.130 Many of the largest metropolitan
areas were formed prior to the impact of the automobile

industry, and therefore their internal structure is

compatible with Hurd's theory.

110

One of the basic limitations of Hurd's axial
growth model is that he comments neither on the originating
factors nor on the activities which take place during the
pioneer period. As noted before, his concerns were
oriented more with the ways in which urban land was
occupied and how empty spaces between the axes became

urbanized.

Burgess: The Concentric Zone Theory.--Ernest

 

Burgess's theoretical framework is probably the most widely
used in urban ecology studies and research in related
disciplines.131 His concentric zone hypothesis proposes
that cities are configurated inmultiple circle patterns;
in each circle occur a series of Specialized activities
which dictate the physical characteristics of housing and
land use within them. The entire scheme conceives of
cities as divided into five land use zones.

Zone 1. The central zone in almost every urban
area is the commercial core where numerous activities
occur during the day, but relatively few at night.132 In
this zone are concentrated mass transportation terminals,
public recreation buildings, and civic centers.

Zone 2. In the so-called transition zone, due to
the mixing of commercial transportation and old industrial

activities, the blight of early residential units takes

place. It is increasingly occupied by newcomers and

111

immigrants, dwelling units are used by more than one
family, and building maintenance is low because rent value
constantly declines. Zone 2 contains mostly convenience
stores with limited product offerings; small and decaying
independent merchants keep their own stores, but the ShOps'
mortality rate is high. The process tends to be rein-
forced by the continued operation of larger retailing
units in the central core and by the emergence of modern
and more efficient institutions in outlying regions.133

Zone 3. The low class residential area or zone of
independent working men's homes is, according to Peter
Salins, essentially composed of modest and dense housing
occupied by what some have called the"respectab1e poor."
Commercial activity in this area is not very significant
since the inhabitants have more mobility to shOp in the
CBD or at shopping centers.

Zone 4. The zone of better residences or the
middle-class area,houses small businessmen, professional
people, and clerks who live in Single dwelling units or
apartments interspersed with shOpping centers.ly1 Most
retailing activities are located here, an outgrowth of
the trends toward decentralization and the rise of
dormitory suburbs.

Zone 5. Burgess labeled Zone 5 the commuters

zone, or area of high-class residences. It is

characterized by expensive houses located along major

112

roads and railway lines. It is apparent that this
structure was conceived by Burgess in the late 19205'
it is far removed from the actual configuration
of present urban areas. Modern transportation, new
urban planning concepts, and the impact of new techniques
of retailing institution site selection have changed
drastically the shape of this particular zone. Although
shopping centers are not located in the core of these
areas due to zoning restrictions and/or higher land costs,
their existence is closely related to the increased
population density of suburbia.

Burgess's ideas and theoretical framework are
not applicable today, but they can serve as a solid con-
ceptual basis for other urban ecology analyses. His
theory is particularly limited by the subsequent impact
of the automobile, by the deep differences in the geo-
graphic morphology of urban land, and by the complex
interactions of the multiple variables of urban systems.
The wholesale system, for example, in many towns remains
in the same concentric circle because it relies upon the
use of railroad terminals and free access to highways.
The continued blight of Zones 1 and 2 iS,in some ways,a
confirmation of Burgess's concepts in relation to the
specific characteristics of these sections of the cities.

Burgess's model cannot be applied to largermetropolitan

113

areas with differentiated geographic forms without the

risk of creating confusion and unprecision.

Hoyt: The Sector Theory.--Starting with Burgess's

 

basic concepts, Homer Hoyt developed the theory that cities
grow in sectors along the major transportation axes and
that there is a certain degree of homogeneity in the land
use throughout and around these routes. Hoyt's major
concerns were the value of real estate property in the
various sectors, their changing characteristics, and their

135 He maintained that if one sector

impact on rent values.
originally develops, for example, as a high rent-high
price area, this pattern continues centrifugally from the
center of the city, thus forming a more or less homo-
geneous sector. This prOposition is highly contested
today on the grounds that intracity highway systems and

cities' zoning regulations constitute barriers and

constraints.

The basic tenets of Hoyt's theory most relevant to

this dissertation are the following:

1. The hierarchies of housing quality and the
format of land use in modern cities are functions of the
income and social rank of the inhabitants of various
sectors.

2. The interactions of the urban eco-system

generate attraction, and clusters of homogeneous activities

114

and buildings can be considered an obvious result of
these phenomena.

3. Due to the radial-concentric shape of the
sectors,the densities of land usage tend to decline from
the center in the direction of the peripheral limits.136

4. This lowering density is the causal factor
generating empty spaces within urban areas.

5. The rate of expansion toward outlying areas
is greater for sectors near rapid transit lines and
commuting routes Since the travel time between the city
and external zones is less in relation to other sectors.

Hoyt's scheme has some advantages since it
considers the factors of income, social class, and life
styles within urban areas. It also attempts to evaluate
man-made factors such as roads, bridges, and large public
buildings, all of which can modify the patterns suggested
by the model. The homogeneity concept, which refers to
the similar use of land within a sector associated with
the attraction of building units within that sector,
may reasonably explain the decentralization phenomenon in
the United States. The major limitation in Hoyt's
reasoning, as in Burgess's, is that the concentric or
sector patterns cannot define the great majority of urban
area structures. In many cities the sector patterns cannot
be observed at all, or simply may disappear with the ex-

pansion of the urban area.

115

Harris and Ullman: The Multiple Nuclei Theory,--
Chauncy Harris and Edward Ullman contend that "in many cities
the land-useijsnot built aroundeasingle center but around
several discrete nuclei."137 One of the most relevant tenets
of their theory for the present analysis is that the "retail
district is attached to the point of greatest intracity

138 Accordingly, "retail districts benefit

accessibility."
from grouping, which increases the concentration of
potential customers and makes possible comparison
shOpping."139 Finally, "heavy concentration of pedestrians,
automobiles, and street cars in retailing districts is
antagonistic both to the railroad facilities and the
street loading."140
These propositions appear extremely relevant to
the locational patterns of adjustment and change which
were followed by retailing institutions,not only in the
CBD, but later, when the process of decentralization was
implemented in the great majority of urban areas in the
United States. Since the city was transformed into a
polynuclear structure, in each of these nuclei the same
patterns were repeated. Consequently, decentralized
retailing clusters wenalocated in places of greatest
accessibility. Furthermore, the institutions followed
not only the largest concentration of potential customers,
but also moved out of the heavy traffic congestion of

neighboring related activities, such as transportation and

wholesaling.

116

These concepts seem to be the most relevant for
retailing systems' analysis because their constructs are
highly compatible with the structure and flow patterns of
modern cities. The empirical observation of large metro-
politan areas indicates that their configuration and
dynamics are much more in accordance with Harris's and

Ullman's reasoning than with the other conceptual

schemes examined.

The Retailing System and the
Quality of Urban Life

 

 

The preceding analysis of urban structures and
their conceptual framework points out the intimate rela-
tionship between retailing activities and the structure of
cities. It also can be said that the retailing process
may affect the quality of urban life positively or
negatively. The basic assumption made here is that the
retailing process is a requisite of urban life; the very
existence of cities and their growth can be traced to the
fundamental need for trade.141

It is first necessary to state what is meant by
the quality of urban life and how the retailing system may
contribute to increasing or reducing that quality. The
quality of urban life means freedom of choice, the use of
leisure time in meaningful and creative activities, and

convenience in acquiring,in the marketplace, the daily

basket of needs and wants for personal or household use.

117

That quality increases when individuals or groups may
perform,without strain or difficulty,the activities which
are the very reasons for the formation and growth of urban
conglomerates. In many urban sociology analyses, among
all the reasons given to explain the emergence of cities,
one of the most important is the need for trade and the
exchange of goods and services. These activities are
performed by the continuous movement of people and goods
over urban Space.

If these activities are performed with decreasing
friction and at declining average time rates, it is possible
to say that in some way the quality of life is increasing,
Since the marginal time derived from efficient movements
may be diverted into creative, individually selected
activities. If the reduction of accessibility and the
increase in friction causes a decline in leisure time, it
is clear that the quality of life is declining. The
evaluation of such phenomena is not simple; it involves
the establishment of complex criteria and trade-off
measurements to define and evaluate the quality of urban
life,and such tools have not been developed. However,
some efforts in this direction have been made by scholars,

142and Edgar Hoover.143

notably Hans Blumenfeld
Blumenfeld views the city as "an economic machine"
which attracts people,not only by the prospect of living,

but also by the hope of making a livin.g.l44 To perform

118

these functions, primary, secondary, and tertiary activities
are necessary. These require a great deal of Specialization
in location and in the characteristics of the institutions
which compose this complex system.145
An adequate gauge for measuring the value of time
expended is offered by Hoover, who suggests that if a man
earns $5.00 per hour, the value of a half-hour trip to the
market is $2.50. Accordingly, if a conveniently located
shopping center saves an average of 45 minutes per week in
Shopping time, which otherwise would be Spent in commuting
longer distances to downtown, the total time saved per
year would be 45m x 52 weeks = 2,340 minutes, or 39 hours.
The Opportunity cost saved on this improved shopping
schedule would equal 39 hours x $5.00, or $195.00 per
year for each individual. Assuming a community shopping
center which serves a pOpulation of 10,000 households
with one purchasing agent each, the total opportunity cost
saved would equal $195.00 x 10,000, or $1.95 million
annually. Although these calculations are presented only
for the sake of demonstration, it seems clear that they
are based on a logical and internally consistent premise.
Another factor in assessing the proximity advantage
of Shopping centers is that they reduce the need for travel-
ing long distances even when shopping goods are involved.

As Hoover demonstrates, if ten minutes of additional

119

travel cost, for example, $1.50, it would be worthwhile to
travel ten minutes only if $1.50 could be saved; that amounts
to 15 percent of a $10.00 item, but only 1.5 percent of a
$100.00 TV set.146
Shopping centers usually are not ten times more
distant than the CBD, nor are their prices usually 15
percent more than those of other retailers. Thus, shopping
centers at decentralized locations enhance the quality

of urban life,not only in qualitative terms, but also in

economic and quantitative terms.

Retailing Systems Within the Urban Space

Up to this point, fundamental theoretical considera-
tions about the structure of cities have served as means
to study the locational patterns and functions of the
retailing system within the urban areas from a macro-
perspective. No attempt has been made to define or evaluate
trade areas and other parameters related to retailing
institutions, so the discussion now will be oriented toward
the analysis of these concepts. They will be viewed from a
microperspective Since they will be used later in the
normative part of this dissertation.

First, we recall that retailing activities
originally were located in the CBD, then eXpanded along the

major radial axes, and finally reached a polynuclear

120

configuration, where outlying shopping centers emerged.
Clearly, it is a three-stage process. The determination
of trade areas for the two early stages is difficult for
many reasons, but primarily because during the CBD's pre-
dominant period there were no adequate statistics avail-
able, and because a definite concern regarding trade areas
did not exist and most customers would shop in downtown
areas. Furthermore, in the second-stage expansion,

the volume of traffic generated by any one store was not
easy to determine. Traffic generally was composed of
passing commuters and people living within walking dis-
tance. Such erratic movement patterns would make precise
assessment difficult.

Only in the last stage has there been increased
attention in the body of knowledge to trade area analysis
and determination. It is obvious that trade area evalua-
tion is a legitimate concern when one remembers,that quite
simply, retailing is or must be located near peOple;
the corollary is that retailing must follow people in
their movements within the urban area. Mapping population
and determining its movement over space represents a
basic step in the management and control of retailing
systems and in the operation of retailing institutions.
Consequently, consideration of some selected models and
concepts related to trade area configuration and evaluation

may be useful.

121

The analytical scheme will follow a logical pattern
and will be oriented mostly toward models which may offer
some insights relative to this dissertation's objectives;
it is not possible to cover all contributions to and concepts
in this particular area in a limited space. Since our
objective is to establish normative criteria related to
areas or microregions where it will be possible or
advisable to locate shopping centers in the GSPMA, no
attempt will be made at this point to discuss site
selection theory and applied techniques.

The review of trade area analytical tools suggests
that the studies and their models may be classified into two

147 (l) trade area, or delineation and evalua-

categories:
tion of trade areas' macrodimensions, such as Size,
potential, and so forth; and (2) site analysis, or evalua-
tion of a specific location or a set of alternative
locations within a trade area. In both categories there

is a great deal of emphasis on factors such as size of the
trade area, population, number and relative location of
households, nature of population and goods movements within
the trade area, and measurement of income. The constructs
seem to be useful building blocks for determining the

market potential in a prospective area. It is from these

important measurements that location decisions are derived.

122

The location models discussed here will fall into
category 1. They were chosen because of their consistency
with the central evaluation technique adopted in this
dissertation, that is, establishment of a model relating
costs and revenues to potential. Before analyzing these
models,it is necessary to define the concept of trade

area that will be used.

Trade Area Analysis

 

The Trade Area Concept:
A Review

 

Several authors have offered definitions of the
trade area concept; these range from very simple proposi-
tions to complex formulations based on mathematical and
statistical constructs. Manuel Plotkin defines it as
the "geographic area from which a store draws its cus-

"148

tomers. Jac Goldstucker gives an operational concept,

defining trade area as the geographic Space "in which the
costs of contact between buyers and sellers are minimal,"

SO that the satisfaction of both consumers and businessmen

must be optimal.149 Lalonde extended this reasoning into

a short but perceptive definition: "the perimeter for

150

consumer Space preference." It is interesting that

the latter takes into account the concepts of probability
and movement over the Space that are studied by William

Reilly, Paul D. Converse, and David Huff.151

123

The breakdown of a trade area into its components

has been done by Richard Nelson,152William Applebaum,153

. . l 4
and Victor Gruen and Larry Smith. 5
Nelson divides the trade area into regular octants

and examines the total amount of sales in eacthased on

the assumption that,ceteris paribus, the spatial shOpping

 

behavior in each subarea is relatively homogeneous. This
expensive procedure has been outdated by other methods.
Applebaum delineates primary, secondary, and
tertiary trade areas, each of which may be depicted in a
concentric circle of one-quarter mile. Potential sales
may be mapped by spotting the origin of customers in one
specific location, such as a single store or a shopping
center.15 The first subarea around the store or shopping
center is the core area, and it is from here that the
greatest portion of business is drawn. Depending upon
the characteristics of its retailing institutions, the
core may generate as much as 70 percent of total sales.
The secondary area draws from 15—25 percent of the trade,
and the tertiary or fringe area contributes the remainder.156
Gruen and Smith also believe the trade area, which
they define as the geographic space "from which is
obtained the major portion of the continuing patronage

may be

subdivided into primary, secondary, and tertiary areas. 57

necessary for steady support of a shOpping center,‘

124

The Shapes and contours of these subareas are subject to
the specific topographic conditions of the surrounding
environment which may facilitate or hinder the accessi—
bility to any specific location. Gruen and Smith stressed
the importance of driving time as an independent variable
in the configuration of each of these areas. In other
words, the most reliable method for defining the trade
area's boundaries is to evaluate the travel time via the
existing major routes.158

From an extensive review of the literature, the

following table has been compiled to establish generic

sub-trade area parameters.

TABLE 4.--ShOpping Sub-Trade Areas. Generic Parameters.

 

 

Subareas Percent of Sales (1) Driving Time (2)
Primary or core 65% - 80% 5-15 minutes
Secondary 15% - 25% 10-20 minutes
Tertiary or Fringe 5% - 10% 15-20 minutes

 

Sources: The Community Builders Handbook, p. 290; Gruen and
Smith, Shopping Town, p. 33; John Shaver, "Los
Angeles Rapid Transit System Report," Sho in
Center Study, LOS Angeles, 1961, p. 18; and Lima,
Shopping Centers, p. 75.

 

 

 

 

1The figures shown are maximum and minimum ranges.
2The descriptive parameters tend to vary according
to the Size and category of the store or shopping center.
For example, the tertiary trade area for a neighborhood
center might be only 15 percent, whereas a supermarket in
a regional shopping center may draw 20 percent of the
traffic from as far away as 25 minutes travel time.

125

An advanced concept of a trade area is given by the
gravitational school, which originated from the works of
Reilly, Converse, and Huff.159 The gravitationalists use a
more operational approach to evaluate the characteristics
and dynamic patterns of trade areas. Their work is based on
quantitative techniques and probabilistic formulations of
spatial shopping behavior. According to Huff, a trade area
may be defined as:

A geographically delineated region containing poten-

tial customers for whom there exists a probability

greater than zero of their purchasing a given class

of products or services offered for sale by a particu-

lar firm or by a particular agglomeration of firms.160
Such a conceptual scheme has a major advantage of being able
to focus on consumer behavior as the principal variable
defining the contour of a trade area. The probabilistic
nature of these models allows for the evaluation of vari-
ables such as time and distance, and also takes into con-
sideration the competitive attraction among institutions
located in one particular area.

From these various trade area definitions will be
drawn the Specific one to be used here, bearing in mind that
our objective, at this time, is the study of macrolocation,
or location within the major limits of a trade area, not
microlocation, which is involved with Site selection or
evaluation. The locational studies which will be developed
later will select and pinpoint principle areas in the GSPMA

which may represent sufficient sales potential for profit-

able operation of Shopping centers.

126

Trade Area: An Operational
Concept

 

It is necessary to select an adequate definition of
trade area which will be operational in relation to the
characteristics of the region studied and compatible with the
dissertation's constructs.161 In other words, we must find a
definition capable of describing a market area and its com-
ponents to verify if a specific region may provide profit
potential for Shopping centers of different sizes. Obviously,
the conceptual scheme used hereafter will be oriented toward
determination of general trade areas within the environmental
constraints of the GSPMA which may present an adequate
market potential threshold for "cluster or groups of planned

stores."162

The objective is not to access the Specific
trade area of a particular shopping center (existing or
proposed) on a certain Site.

Therefore, we shall say that trade area is a geo-
graphic space which, due to its socioeconomic and ecological
factors, is able to support the necessary threshold for the
location of one shopping center of a certain size (cluster or
grouping of planned retailing stores with off-street parking
facilities). Such a definition is consistent with the cost-
revenue analysis approach in which inputs (costs) and outputs
(revenues) are evaluated in relation to market potential, in
this case the constituent variables of the trade area.163
Furthermore, the definition indicates that a simulation of

the interaction among the geographic space descriptors and

the operational characteristics of the proposed institution

127

will predict the Spatial buying behavior patterns before the
institution begins operation. Another advantage of our
description is that it conceives of the trade area in terms
of a "demand surface" which must contain potential customers
for the center under scrutiny.164
A limitation of this approach is that it does not con-
sider existing competition, but since this scheme will be used
here for trade area analysis from a macroperspective, such a
limitation will not invalidate its application. In addition,
the limitation is not very important because centers located
according to the framework's pattern would be central places.
These are likely to display differential advantages because
they would supply all conceivable goods to all parts of the
trade area.165
A final remark regarding the advantage of using the
threshold concept is that, in accordance with the central
place principle, if consumer services activity is located in
a certain decentralized region, it may attain economies of
scale and agglomeration without having to serve the entire
urban area. "The shopping centers located in such form, turn
to be a focal point for access for work, shopping and recrea—
tional trips. The basic central pattern of access, centri-
petal movement of people, and centrifugal movement of goods
and services is replicated in each part of the urban area."166

Having elaborated the Operational concept which will

be used later for modeling pruposes, the discussion must move

128

on to the consideration of some of the measurement tech-

niques for evaluating retail demand over Space.

Trade Area: Evaluation Techniques

 

A large body of methods, techniques, and theoretical
constructs have been generated by scholars and others for
the purpose of solving problems related to trade area
analysis. Since a complete synthesis of the total available
information pertaining to this subject is not possible here,
the discussion of this tOpic in the literature will be
oriented toward that most relevant to this work. Specifi—
cally, attention will be focused on techniques concerning the
definition and evaluationcflfgeneral trade areasanuitheir pros—
pects for the location of shopping centers. Research related
to trade area evaluation was initiated by William Reilly in
1931, expanded by Paul D. Converse in the forties, and found its
quantitative evaluation with David Huff in the sixties.167
An outstanding contribution has been made by Professor
William Applebaum of Harvard University.

A differentiation must be made between techniques
applicable to the evaluation of existing institutions' trade
areas and those oriented1x>the measurementcflffuture opportun~
ity for proposed institutions. In accordance with the
objective of this dissertation and its Operational defini-
tion of trade area, both sets of techniques are needed to
prescribe the characteristics and feasibility of Shopping

centers in the GMSPA.

129

The problem of evaluating trade areas will be
solved through the measurement of their conventional
descriptors: population, income, densities, number of
households, and so forth. This approach is consistent
with Applebaum's analogue method for estimating potential,
according to which "similar stores and similar market
factors make for approximately analogous situations."168

In other words, areas with similar descriptors will
be receptive to retailing institutions which have Similar
operational characteristics. The basic taSk is to'
assess the trade area for projected centers based on
analogous experiences in other areas. Adjustments then
can be made in relation to size and other operational
characteristics of the center, Since these are the control-
1able and dependent constructs of the process.

Trade Area: Selected
Measurement Parameters

 

 

The evaluation of a trade area requires a first
set of measurement parameters which must be capable of
quantifying the market opportunity within the geographic
space under evaluation. A second set must be able to
determine the projected amount of opportunity that will
accrue to an institution,or a cluster of institutions,that
eventually will locate in the area. This process is an
interactive one. The characteristics of the store and the

features of the trade area Simultaneously will generate

130

the answer to the basic question: How much will an
institution or a cluster of institutions be able to sell

if located in an area with certain economics descriptors?

First Set of Parameters.--The first set of

 

measurements are given below.

1. Size of the area must be given in km? as a

 

first approximation to construct the remaining parameters.

2. Population is the most general indicator of

 

potential market. This information is a convenient basis
for market estimates because of its availability.169
3. Income defines the pOpulation'S ability to
buy and may be a source for deriving other useful
measurements such as household income, personal income,
disposable income, discretionary income, and market

opportunity.

4. Number of households indicates the number of

 

dwelling units within an area; it is important in
determining the degree of urbanization, population density,
and buying behavior patterns.

5. Population density, as does measurement 4,

 

indicates the degree of urbanization and is useful to
determine whether or not a certain area may provide the

necessary threshold for retailing location.

131

6. Mobility is assessed by the ability of the
area's population to move over space. It is a function of
the automobile ownership and public transportation
facilities within the area. The basic methods for measur-
‘ing this factor are traffic counting, analysis of the
origins and destinations of Shopping trips, and measure-
ment of travel time and distance.

This initial set of measurements, as mentioned
previously, defines the basic features of a trade area, but
it does not take into consideration the impact of an
institution with certain dimensions Operating in the area.

For this purpose we need a second set of measurements.

Second Set of ParameterS.--A second set of

 

measurements is needed to reflect the Spatial

shopping habits of people living in the area in

relation to the attraction of a particular retailing

institution. According to Applebaum, the Operational

features of one center in one area may, due to the analogue

principle, be transferred to another.170 Furthermore,

what applies to individual stores may be extrapolated to

Shopping centers with some adaptations.171
1. Size of the average trade area involves

determination of the area from which some existing

institution draws its customers.172

132

2. Driving time around the existing or proposed

 

location is given in 5- or 10-minute intervals and may be
obtained by several methods: customer or household inter—
view, license plate checking, or credit records analysis.

3. Driving distances, from the point of origin of

 

customers to the store they are patronizing, include all
modes of transportation (private, public, and walk-in)
measurement.

4. Drawing power is a function of the percentage

 

of actual customers by origin of trip, driving time, and
driving distance. For example, 35 percent of the customers
of shopping center 5 come from the surrounding subarea E,
which measures 1.6 km.2 (1 square mile), and spend an average
173

of 10 minutes to reach the center.

5. Customer mobility involves determination of the

 

number of automobiles owned by customers patronizing the
institution. This parameter may be calculated, also, in
terms of percentages of customers owning one, two, or more
cars. The mobility assessment also must take into considera-
tion the mode of transportation used by the customer to

reach the location. For example, 60 percent use cars, 30
percent use public transportation, and 10 percent walk in.

6. Demographics, as determined by the following

 

criteria, may prove useful in estimating expenditures:

133

a. Household income
b. Household ownership

1. Rented

2. Owned and paid for

3. Owned and not paid for
0. Household head

1. Sex

2. Age

3. Education

4. Employment

d. Number of people in household

e. Food expenditures.

The methods for obtaining the information for the
second set vary from the conventional customer interview in
the store, to analysis of public statistics, to customer
Spotting in the surrounding region, to the most sophisti-
cated techniques of indirect evaluation, as suggested by
Alfred Eisenpreis.174

The techniques used later are based on the theory
and methodology discussed up to this point. They will take
into consideration the urban structure of the GSPMA,
information related to demographics, and the primary data
developed in some field studies at existing centers. These
matters will be explained and discussed in detail in chapter

4. In the meantime, background material concerning the urban

structure of the GSPMA should be provided.

A Summary of Theories and Concepps

 

The theories and concepts analysed in this chapter
are extremely relevant to the evaluation of the shopping
center industry and to the elaboration of this dissertation

normative model.

134

Our analytical framework assumes that a set of solid
theoretical constructs represents a good departure point
from which the analyst can evaluate the systems performance,
and to establish logical relationships for modelling
purpoSes.

The previous analysis represents a synthesis of con—
tributions from marketing, retailing and urban geography.
Marketing and retailing concepts were analysed because they
explain the evolution and the performance of retailing
institutions within the urban Space. Urban geography
theories describe the cities, their structure, their evolu-
tion and their relations with retailing activities.

In summary our concern is with the retailing, its
institutions, its location, and with the movement of goods
and people over the urban space.

The theories examined in this chapter may be classi-
fied according with their field and their objectives. The

following scheme seems to be satisfactory:

Retailing Theories

 

These theories describe and explain the role of
retailing institutions from a systemic perspective. Their
contributions are focused on: (1) the retailing institutions
as components of the marketing system; (2) the functions and
the activities which must be performed by these institutions

to create and to serve demand; (3) and, on the structural

135

changes in retailing systems, their operational character-

istics and effects.

Spatial Location Theories

 

These theories analysed retailing institutions from
a logistic perspective. The contributions in this area
examine: (1) the decentralization process; (2) the quali-
tative and quantitative dimensions of trade areas; (3) the
relative location of trade areas within the urban Space;
and (4) the principles and policies which guide site

selection.

Urban Geography Theories

 

These theories describe, analyse and explain the
urban systems. They provide a wide set of analytical tools
to examine: (1) the complex interactions within the
environment; (2) the external and internal characteristics
of modern cities; (3) the structural pattern of urban
areas; (4) the ecological adjustments of urban entities
and their effects on quality of life; and (5) the measure-
ment of trade areas and their flows within urban space

boundaries.

The Relevance for Analytical Purposes

 

All the concepts and theories examined above will be
used in the remaining points of the dissertation. Basically
these concepts were applied to: (1) describe and explain

the evolution of retailing in the GSPMA; (2) to describe

136

and to evaluate the shopping center industry in the GSPMA;
and (3) to develop the normative model for shopping center

location.

Conceptual Foundations

 

Alderson, Baranoff, Erickson and Lewis theories and
contributions were used to study shopping centers as retail—
ing systems. Since these constructs are basically conceptual
foundations they are needed to understand the system, its

components and interactions.

Evolutionary Aspects

 

Gist, Hollander, Mertes, Applebaum and Cox's ideas
were useful to explain the evolutionary dimensions of
retailing institutions. These concepts were applied to
explain the evolution of retailing from its Simplest forms
up to the modern Shopping centers; the contributions in
these areas were useful to expand Taylor's analysis of
marketing and retailing in Brazil, as well as to solidify

our analysis of GSPMA'S retailing evolution.

 

Trade Areas

- Lalonde'S,Markin's, Nelson's theories, associated
with the gravitational models from Reilly, Converse, and
Huff offered an adequate support to examine the relation—
ships between shopping centers and their trade areas.
These concepts were used also to perform a micro analysis
of the shopping center industry in the GSPMA, and to

develop this dissertation model.

137

Retailing Decentralization

 

The contributions from urban analysts such as
Forrester, Harris and Ullman, Burges, Hoyt and Hurd,
associated with the studies from Blumenfeld and Hoover were
used to support the conclusions of this dissertation, which
will indicate the need for retailing decentralization and

the expansion of shopping centers in the GSPMA.

Basis for Model Construction

 

The analytical framework developed in this chapter
is also an important set of inputs for modeling process.

Our model will be elaborated according with the
following conceptual guidelines: (1) the assessment of
market opportunity in the GSPMA will use Professor Erickson's
methods and will draw upon demography concepts suggested
by Plotkin, Eisenpreis and Applebaum; (2) the evaluation
of land Site, takes into consideration the relations among
the Site location characteristics, the trade area, and the
physical and operational dimensions of the shopping centers.
This analysis will be based on Mertes' studies, on Markin's
concepts, on Nelson's principles and on the gravitationalists
contributions; (3) the cost parameters and relationships,
which are inputs to the model, will be studied according
with the concepts of trade area analysis suggested by
Applebaum and Huff. This reasoning assumes a high degree

of compatibility among the trade area characteristics and

138

the shopping center physical dimensions; (4) the criteria

for investment, which we will develop in the model will be
derived from the theoretical concepts of retailing theory,
and from finance analytical techniques. These criteria

will integrate the fundamental contributions from Alderson,
Baranoff and Paul Smith who studied retailing and shopping
centers from a sistemic perspective; and (5) the introduction
of probabilistic dimensions in the model will use statistical
tools, in association with concepts and principles derived
from the contributions of Lalonde and Huff who studied the

multiple effects of competition on the trade areas.

Conclusions

 

The theories examined in this chapter will be used
to evaluate the Brazilian environment, to measure the present
performance of Shopping centers in the GSPMA and to construct
the normative model.

These theories are integrated into a meaningful and
multidimensional analytical framework, which provides
synthesis and in the same time permits prescriptive state-

ments.

FOOTNOTES: CHAPTER II

lReavis Cox, "Consumer Convenience and the Retail
Structure of Cities," Journal of Marketing,24(April 1959):
355-362.

21bid.

 

3Frank Meissner, "Planned ShOpping Centers," in
Ronald E. Gist, ed.,Management Perspectives in Retailing
(New York: Wiley, 1967), pp. 80-85.

 

4Markin, Retailing Management, p. 17.

 

5Wroe Alderson, Marketing Behavior and Executive
Action (Homewood, I11.: Richard D. Irwin, 1957), p. 326.

 

61bid., p. 326.

7See, for example, Stanley C. Hollander, "The Wheel
of Retailing," Journal of MarketingIZS, no. 1 (July, 1960»
37-42; Eli P. Cox and Leo G. Erickson, Retail Decentraliza—
tion (East Lansing: Bureau of Business and Economic Research,
Michigan State University, 1967); and Delbert J. Duncan,
"Responses of Selected Retail Institutions to Their Changing
Environment," in Peter Bennet, ed., Marketing and Economic
Development (Chicago: American Marketing Association,

1965): pp. 583-602.

8Hans B. Thorelli, "Ecology in Marketing," Southern
Journal of BusineSSIZ (October 1967)Il9—25. Professor
Thorelli defines the relevant environment as "the sum of all
factors and phenomena which may affect an organization, or
which may be affected by the organization."

9

 

 

 

 

Ibid., p. 20.

lOIbid., p. 21.

11Richard J. Lewis and Leo G. Erickson, "Marketing
Functions and Marketing Systems: A Synthesis," Journal
of Marketing; (July 1969), 10-19.

 

139

140

12The complementary nature of obtaining and servicing

demand functions, by means of which the "ability to service
demand can be used aS a demand obtaining force" as mentioned
by Lewis and Erickson, also can be Observed in the operations
of the retailing system. Better physical facilities and
locational patterns (servicing demand) are likely to increase
drawing power and share of market (obtaining demand). This
interpretation of Lewis and Erickson's concepts is compatible
with Baranoff's analysis of the Operational characteristics
of retailing.

13Lewis and Erickson, "Marketing Functions," p. 12.

l4Thorelli, "Ecology," p. 24. Thorelli calls these
characteristics task environment,"that is, "the market in
which the offerings of the organization is exchanged for
customer dollar on which the survival of the organization
directly depends."

15For an extended discussion on the nature the
relationships between the activitieSIsee Lewis and Erickson,
"Marketing Functions," p. 17.

16For a good analysis of this special aspect of
convenience,see Ronald E. Gist, Retailing--Concepts and
Decisions (New York: Wiley, 1968), pp. l9-25.

 

 

7Seymour Baranoff, "Retailing as an Operating
System," in Reavis Cox, Wroe Alderson, and Stanley Shapiro,
eds., Theorypin Marketing,2d series (Homewood, 111.: Richard D.
Irwin,—l964l) p. 156.

lBIbid., p. 162.

 

19Wroe Alderson, Marketing Behavior, p. 77. Alderson
defined circularity as "a sequence of steps arranged one after
another, but in such a way that the process returns to the
point from which it started."

20David A. Revzan, Perspectives for Research in
Marketing: Seven Essays (Berkeley: Institute of Business
and Economic Research, University of California, 1965), p. 6.

21Malcolm P. McNair, "Improving the Dynamics of
Retailing in an Expanding Economy," in Stanley C. Hollander,
ed., EXplorations in Retailing (East Lansing: Bureau of
Business and Economic Research, Michigan State University,
1959), pp. 3-8.

 

 

 

 

141

22The theories about and the concern with retailing
systems dynamics have been a constant in marketing literature;
for other perspectives see: Wroe Alderson, Qynamic Marketing
Behavior (Homewood, 111.: Richard D. Irwin, 1965), in partic-
ular, chap. 9; for a historic perspective: see Robert Bartels,
Thp_gevelopment of Marketing_Thought (Homewood, I11.: Richard
D. Irwin, 1962), expecially chap. 8, where Bartels examines
the changes in the environment of retailing and emphasizes the
point that the principal changes in this area are "related to
the manner in which people choose to live." Bartels also
notes that following World War II "convenience came to be
defined in terms of easiness of access to retail market place,
parking facilities and one stop Shopping for both related and
unrelated items, and freedom of choice" (pp. 140-141).

23For a Similar type of analysis see the following:
Alton F. Doody, "Historical Pattern of Marketing Innovations,"
in William Deeker, ed., EmerginngonceptS in Marketing,
Proceedings of the Winter Conference of AMA (Chicago:
December, 1962), pp. 245-56; Thomas A. Staudt and Donald A.

Taylor, "A Managerial Introduction to Marketing," 2d ed.
(Englewood Cliffs, N.J.: Prentice Hall, 1970), pp. 310-16;
and Edward Brand, Modern Supermarket Operation (New York:

 

Fairchild Publications, 1963), pp. 242-44. Brand made an
extensive analysis of product assortment and its relation
to stores' Operational patterns.

24Samuel Feinberg, What Makes ShOpping Centers Tick
(New York: Fairchild Publications, 1960). Feinberg
denominates the "new" institutions as suburban clusters,
which, according to him, is a generic term for all types of
shOpping centers located out of the central business district's
limits.

25Colin S. Jones, Regional Shopping Centers: their
location planning and design (London: Business Books, 1969),
pp. 141-520

26Gist, Retailing, p. 83. Gist says that in
the absence of precise tools of measurement or fully repre-
sentative data, the scientists may develOp a "working
hypothesis" regarding the explanation of a phenonenon. These
working hypotheses must be conceived as first approximations
to an acceptable explanation. Furthermore, reasoning
according to these guidelines can provide logical analogies
and empirical verification of retailing system dynamics.

 

 

142

27Ronald Gist, Marketing and Society: A Conceptual
Introduction (New York: Holt, Rinehart and Winston, 1971),
see especially chaps. 15 and 16. The quotation is from page
362.

 

281n the GSPMA the same phenomena may be observed
in relation to the so-called armazens (generally family
owned and Operated food stores) which are being replaced
by the supermarkets. For interesting analysis see Knoke,
"OS Super-mercados no Brasil," p. 91.

29Some schools of thought in marketing believe that
institutions must change before the environment and must
become an active force in changing the economic level within
certain areas. For interesting discussions on this subject
see: Richard Holton, "Marketing Structure and Economic
Development," Quarterly Journal of Economics, 67 (August
1953), 361; Peter F. Drucker, 1rMarketing and Economic Devel-
opment," Journal of Marketing, 22 (January 1958), 252; and
Walt W. Rostow, TrThe Concepts of a National Market and its
Economies--Growth Implications," in Proceedings, Fall Con-
ference of the American Marketing Association, 1965, p. 18.
Rostow's ideas were seminal for extensive research in the
role of marketing as a change force.

3OGist, Marketing and Society, p. 363. Gist labels
this the theory of adjustment.

31Malcolm McNair, "Significant Trends in the Postwar
Period," in A. B. Smith, ed., Competitive Distribution in a
Free High-Level Economy and Its Implications for the
University (Pittsburgh: University of Pittsburgh Press,
19587: PP. 1'25.

32

 

 

Hollander, "The Wheel of Retailing," p. 37.

33Ibid., p. 39.

34In less develOped economies, as will be discussed
later, decentralization and the shopping center movement
were delayedbecause of the time lag in the develOpment of
the automobile industry. In the specific case of GSPMA
the process of urbanization came much earlier than the
automobile industry. For another example of conformity
see Collin Jones, "Regional Shopping Centers," pp. 5-6,
where he examines the evolution of GEM discount house in
England.

35Victor Gruen and Larry Smith, Shoppinngowns--
U.S.A.--The Planning of Shopping Centers (New York: Reihhold
Corp., 1960), p. 140.

fit-I‘ll

143

36For a complete discussion of the dialectic process
theory see Gist, Retailing, pp. 106—109, and Marketing and

Society, pp. 370-371.

 

 

37Bernard J. Lalonde, "The Logistics of Retail
Location," in William D. Stevens, ed., The Social Responsi-
bilities of Marketing (Chicago: American Marketing
Association, 1961), pp.567-575.

38Ibid., p. 567.

 

 

391bid.

40William Applebaum, "Guidelines for a Store Location
Strategy Study," Journal of Marketing, 30, no. 4 (October
1966) 42-45.

41John E. Mertes, "Structure Theory for Site
Analysis," Journal of Retailing 40, no. 2 (Summer 1964)
19-30. In this article Mertes classifies "spatial position"
as a form of differential advantage. He also emphasizes that
locational advantage is a competitive position which is
difficult to assail or to neutralize.

42Ibid., p. 22. The reasoning discussed above is
illustrated by Mertes in his article by this simple diagram:

 

 

 

Convenience <0 > Choice

-Accessibility

43Ibid., p. 23. Mertes uses the term comparison goods

 

instead of the conventional and widely used Shopping goods.
44

 

Ibid., p. 26.

45Adapted from Markin, Retailinnganagement, p. 207,
for purposes of this discussion.

46Richard L. Nelson, The Selection of Retailing
Location (New York: F. W. Dodge Corp., 1958), pp. 51-56,
65-680

 

 

47Ibid., p. 54.

144

482239., PP- 27: 28, 29, and 31.

49Homer Hoyt, "The Structure and Growth of
Residential Neighborhoods in American Cities," (Washington,
D.C.: US FHA, 1939); and Harris and Ullman, "The Nature of
Cities, pp. 14-15.

50Nelson, Retailing Location, p. 66. The rule of
compatibility is expressed by the equation:

 

_ 1 P PS
V-I(VL+VS)xV x(\T-x.\—]—),
.1; L s
V
s
where:
L = large stores;
5 = small stores;
VL = volume of larger stores;
VS = volume of smaller stores;
PL = purposeful purchasing at L;
PS = purposeful purchasing at s;
I = degree of interchange; and
V = increase in the total volume of two stores
OBS: Purposeful purchasimg means purchases made
in accordance with the purpose which generated
the ShOpping trip.
If:

<
u

$5,000,

V = $ 600,

'U
ll

80%,

30%, and

*U
m
ll

25%,

145

then
1 8(5,000) .3(600) _
0.25 (5,000+600)-§666 [—57000—_ + ~—€66——] —
600
. 600 . 4,000 180 _
0‘25 (5'600) 5000 [5,000 + 600] ‘
1400 - 0.12 (0.80 + 0.30) =
168 - (1.10) = $184.80.
OBS: This result is the additional business which
will be gained by the two stores together.
lJames Simmons, "The Changing Pattern of Retail
Location, Chicago" (Chicago: University of Chicago Press,
1964), Research Paper No. 92.

52Paul E. Smith, "Prescription for a Successful
Shopping Center," MSU Business Topics 14, no. 4 (Autumn
1966):l7-26.

53Ibid., p. 19.

 

54Wroe Alderson, "The Analytical Framework Of
Marketing," in Ben M. Enis and Keith K. Cox, eds, Marketing
Classics (Boston: Allyn and Bacon, 1969), p. 12.

55OBS: In this dissertation the CBD, a cluster
of stores, a Single standing department store, and a new
supermarket are not considered true shopping centers
because of their multiple ownership and lack of control
in store mix.

56For another similar classification of shOpping
center variables,see Smith, "Prescription," p. 24. Smith
perceives the system as composed of two major sets, the
external and internal environments, but does not define
the degree of controllability of these variables.

57A. C. R. Dressmann, "Patterns of Evolution in
Retailing," Journal of Retailing,44, no. 1 (Spring 1968),
64—81, 79. The pattern of convergence when applied to
retailing explains how different types of institutions within
a common environment perform Similar activities deSpite
their diverse Size and product mix, for example, common use
of ShOpping center parking areas.

 

 

olII! III ’I .l. I {I l I! ‘I

146

58Donald F. and Ruth C. Mulvihill, Geography of
Marketingpand Urban Growth (New York: Van Nostrand
Reinhold, 1970), p. 134.

59Ibid. The Mulvihills state that dispersed goods
are those being offered at dispersed locations in a trade
area; indifferent goods are those being offered either
centrally or in dispersed locations.

60For a detailed discussion of the factors which
influence urban ecology see Gerald Breese, Urbanization
in Newly Developing Countries (Englewood Cliffs: Prentice
Ha11,41966), p. 109. Among those factors, the most
relevant to the present analysis are: concentration of
peOple at or near central locations; centralization,
which explains the development of the CBD; decentralization,
which is a function of mobility and competition; segrega-
tion, which is defined by the clustering and sorting out
of land use, population groups, and activities in a
harmonic form; and specialization, which is a result of
segregation and the best explanation of why homogeneous
stores concentrate in Specific areas.

 

 

 

 

 

61Perry Bliss, "Schumpeter: The Big Disturbance
in Retailing," Social Forces, October 1960: p. 76-

62Ibid., pp. 72-76.

63Ibid.

64

Christensen T. Jonassen, Downtown versus
Suburban Shopping (Columbus, Ohio: Bureau of Business
Research, Ohio State University, 1955).

65Louis P. Bucklin, "Retail Strategy and the
Classification of Consumer Goods," Journal of Marketipg
27, no. 1 (January 1963):50-55.

 

 

 

6Persis R. Emmet, "Development and Location of
Shopping Centers in the San Francisco Bay Area, California"
(unpublished Ph.D. dissertation, Stanford University, 1961).

67Charles E. Stonier, "Off Street Parking to Attract
Downtown Shoppers," Journal of Retailing, 36 (Fall 1960),
145-149.

 

68James F. Engel, David T. Kollat, and Roger D.
Blackwell, Consumer Behavior (New York: Holt, Rinehart and
Winston, 1968), pp. 452-456. These authors stress the condi-
tion that "shopping centers usually rank higher than downtown
stores in terms of friendliness" (p. 453). Such a character—
istic is also another factor leading to the implementation of
the marketing concept.

 

(If ll Ill! (1"(‘I

147

691bid.

7OFrederick D. Sturdivant, Managerial Analysis in
Marketipg (Glenview, 111.: Scott, Foresman, 1970), p. 2.

71In 1957 shopping centers were formally recognized
as an industry by the formation of the International Council
of Shopping Centers in New York. This trade association's
main objective is to promote the interest of owners and
managers of planned centers.

72Gruen and Smith, Shopping Towns, p. 65.

 

 

 

73The Community Builders Handbook (Washington, D.C.:
Urban Land Institute, 1968), p. 272.

 

74National Cash Register do Brasil, "Shopping Centers,"
a seminar offered at the School of Business Administration
of S. Paulo, S. Paulo, Brazil, September 1971.

75The last year available from this source is
1969. The publication gives figures related to rents paid
by tenants and the relative percentage of floor area occupied
by each category of tenant for a select sample of U. S.
shopping centers.

768. O. Kaylin, ed., Executive Edition, Chain
Store Age (April 1966), p. E8. The data furnished by this
source originated from information provided by the ULI.

77For a study developed according to this suggested
scheme see Brian J. Berry, Commercial Structure and
Commercial Blight, Research Paper No. 85 (ChiOago: Depart-
ment of Geography, University of Chicago, 1965); see also,
Simmons, Chapging Patterns, p. 6.

78

 

 

 

 

Berry, Geography, p. 120.

 

79Simmons, Changing Patterns, pp. 6-8.

 

80See Eugene Kelley, Locating Controlled Regional
Shgpping Centers (Sagatuck, Connecticut: Eno Foundation
for Highway Traffic Control, 1956); Paul E. Smith,
Shopping Centers Plannipg and Management (Chicago: National
Retail Dry Goods Association, 1956); and Geoffrey Baker
and Bruno Funaro, ShoppingiCenter: Design and Operation
(New York: Reinhold Publishing, 1951), in which is found
a complete analysis of the Country Club Plaza. Claimed
to be the first U.S. shopping center, it was built in
Kansas City, Missouri, in 1925.

 

148

81See John E. Mertes, "The Shopping Center--A New
Trend in Retailing," Journal of Marketing,l3 (January 1949),
372-378; and Gordon H. Stedman, "The Rise of Shopping
Centers," Journal of Retailing,31 (Spring l955),ll-26.

82Kelley, Locating Controlled Regional Shopping
Centers, p. 8.

83The Community Builders Handbook, p. 271. The same
source indicates that Jesse Nichols, developer of the Country
Club Plaza, was inspired by Mr. Bouton. Hugh Potter, owner
and developer of River Oaks Shopping Center, Dallas, Texas,
followed the same pattern in 1931.

84

 

 

 

 

Baker and Funaro, Shoppipg_Center, p. 81.

 

85Stedman, "The Rise of Shopping Centers," p. 16.

86
p. 160.

Mulvihill and Mulvihill, Geography of Marketing,

87"Europe's New Shopping Centers," Business Abroad
(October 1968),22-28.

88Paul E. Smith and Eugene J. Kelley, "Competing
Retail Systems: The Shopping Center and the Central Business
District," Journal of Retailing (Spring 1960),11-18.

89

 

 

Ibid., p. 11.

901bid., p. 16.

91See Paul H. Nystrom, "Downtown Shopping Revival,"
' Journal of Retailing,34,no. 3 (Fall 1958),129-132; and
George Fisk, "The Replanning of Center City Shopping
Districts," Journal of Retailing, 35, no. 2 (Summer 1959),
80-84. Nystrom argued that downtown retailing was to be
considered as an ailing patient, and that the trade in
these areas does not die but fades away. Fisk suggested
that "mass communication and private transportation tech-
nology had a disruptive effect on downtown trade, that
some effort towards reorganization following European

 

 

models should be attempted." Neither author mentioned
the impact of increasing car ownership upon this phenomenon.
92

Ralph Thomlinson, Urban Structure--The Social

and Spatial Character of Cities (New York: Random House, 1970),

 

chap. 8, especially pp. 150—151.

149

93William Applebaum and Saul B. Cohen, "The Dynamics
of Store Trade Areas and Market Equilibrium," Annals of the
Association of American Geographers,51 (March l961),73-101.

94See Stedman, "The Rise of Shopping Centers,"
pp. 11-26, and Gordon H. Stedman, "Impact of Shopping
Centers Locally and Downtown," Journal of Retailing,32
(Spring l956),25-39. The latter article deals with the
relations between shopping centers and the local govern-
ment, and it is not relevant to the points discussed in
the quotation.

95T. Dart Hellsworth, et al., "Changing Trends in
Regional Shopping Centers," Journal of Retailing,34, no. 4
(Winter 1958),177-184.

96Charles H. Hinderman, "Impact of Shopping Centers
in Downtown Cincinatti," Journal of Retailing,34, no. 4
(1958)1185-188.

97For a complete analysis see "Parking Requirements
for Shopping Centers," Technical Bulletin No. 53 (Washington,
D.C.: Urban Land Institute, 1964).

98

 

Mertes, "The Shopping Center," p. 376.

99Baker and Funaro, Shopping Center, p. 10.

100Nelson, Retailing Location, p. 175.

1“Ibid., p. 176.

102Gruen and Smith, Shopping Towns, p. 52.

 

103Kelley, "Location of Controlled Regional Shopping
Centers," pp. 10-11, 66-67.

104Emmet, "Development and Location," pp. 1-24.
This author devised another form of classification, the
integrated center. This has all types of stores operating
interdependently to perform various merchandising practices
and physical distribution functions (p. 22).

105The Community Builders Handbook, p. 267. This
lassification has become, in a certain way, an official
guide to appraising shopping centers in the United States.
Many other authors, such as Gist, Markin, Rachman, and
McCarthy, have used the same criteria in their textbooks.

150

106Joseph De Chiara and Lee Koppelman, Plan Design
Criteria (New York: Van Nostrand Reinhold, 1969), pp. 231-
234. .

107William Lazer, et al., CELS-80: Consumers
Environment & Life Styles of the 19805 (Benton Harbor,
Mich.: Whirlpool Corporation, 1971TTpp. 30-32.

108Eugene R. Beem, "Retailing in the 1980's,"
Marketing Insights,l8 (November 1968),20-24.

109A major constraint on these trends is that at
present the cost of extensive application of closed
circuit TV for in-home shopping is still prohibitive for
mass retailing uses. See Altoon F. Doody and William R.
Davidson, "Next Revolution in Retailing," Harvard Business
Review (May-June l967),4-16. The predictions made by
these authors in 1967 were:xfi:yet materialized.

110Ernest B. Weiss, "What Will Retailing Be Like
in 1975?" Advertising Age,37 (March 7, 1966),ll9-122.

111

 

 

 

 

 

 

Ibid., p. 119.

112See Walter Gross, "Retailing in the Seventies:
A Projection of Current Trends," Baylor Business Studies
(February-March-April l969),pp. 19-31. Gross maintains
that Shopping centers will continue to be the perfect
substitute for downtown business districts for a long time.

113Jones, "Regional Shopping Centers," p. 153. The
words in brackets were added for clarity.

114See Jay Forrester, Urban Dynamics (Cambridge,
MaSS.: The M.I.T. Press, 1969). This book represents an
initial but sophisticated attempt to describe and explain
the characteristics and the dynamics of urban systems.

115Forrester, Urban Dynamics, p. 107. For a complete
and illustrative discussion of Forrester's conceptual frame-
work, see especially pp. 107-114, "Notes on Complex Systems,"
and chap. 2, "Structure of an Urban Area," pp. 12-37.

 

 

 

116Ibid., pp. 15, 17.

117Ibid., p. 13.

118For a complete set of definitions of a city see
Ralph Thomlinson, Urban Structure (New York: Random House,
1969), pp. 37-42.

151

119The fundamental contribution to development of
the urban ecology concept is credited to Ernest W. Burgess
and Roderick D. MacKenzie, eds., The Cit (Chicago:
University of Chicago Press, 1925).

120Thomlinson, Urban Structure, p. 110.

 

121Jean Gottman, "Megalopolis or the Urbanization
of the Northeastern Seaboard," Economic Geography, 33 (July
1957), 189-200.

 

122Berry, Op. cit., p. 17. The author defines
metropolis as an urban system with drawing power of about
40 miles, 100,000 people, and over 1,100 retail outlets
including an array of all types of stores.

 

123Charles S. Ascher, "What Are the Cities For?"
Annals of the American Academy of Political and Social
Science, 262 (1945), 23.

124Chauncy D. Harris and Edward L. Ullman, "The
Nature of the Cities," Annals of the American Academy of
Political and Social Science, 262 (November 1945), 7-17.

 

 

lzslbid., p. 16.

126Eric E. Lamford, "The Evolving System of Cities
in the USA," in Issues in Urban Economics, Harvey S. Perloff
and Lowdon Wingo, Jr., eds. (Baltimore: Johns Hopkins
Press, 1968): P. 87.

 

127Leo V. Aspinwall, "Rule of Uniformity" (paper
presented at Marketing Theory Seminar, Darmouth College,
1953). (Mimeographed, Boulder, 1955.)

128Richard M. Hurd, Principles of City Land Use
(New York: The Record and Guide, 1903).

129See Thomlinson, Urban Structure, p. 145. For an
illustrative discussion of these contributions see also
Daniel P. Salins, "Household Location Patterns in Selected
American MetrOpolitan Areas" (unpublished Ph.D. dissertation,
Syracuse University, 1970), especially pp. 8-42.

 

130Pedro P. Geiger, Evolucao da Rede Urbana Brasil-
eira (Rio de Janeiro: Centro Brasileiro de Pesquisas
EdfiEécionais, 1963), pp. 177-178. The author points out
that Similar phenomena can be observed in Rio de Janeiro and
the GSPMA.

 

152

131Ernest Burgess, "Urban Areas,‘ in Chicago, An
Experiment in Social Science Research, T. V. Smith and L. D.
White, eds. (Chicago: University of Chicago Press, 1929),
pp. 113-138.

 

 

132Ibid., p. 118.

133For an excellent discussion of these problems,
see Edgar Hoover and Raymond Vernon, Anatomy of a Metropolis
(Cambridge, Mass.: Harvard University Press, 1959).

 

134Thomlinson, Urban Structure, p. 145.

 

135Homer Hoyt, The Structure and Growth of Resi—
dential Neighborhoods in American Cities (Washington, D. C.:
Federal Housing Administration, 1939), pp. 112-122.

 

 

136See Collin Clark, "Urban Population Densities,"
Journal of the Royal Statistical Sociepy, Series A, 114
(1951), 490-496. Clark developed his work based on Hoyt's
concept, the well-known density gradient formula, which is
expressed as follows:

 

_ (e - bx)
DX — Dm
where
DX = density at radial distance 5;
Dm = peak density at the city theoretical center;

-b = density decrease rate per unit distance (slope);
x = radial distance; and

2.718...

e

137Harris and Ullman, "The Nature of Cities," p. 14.

l381bid.

l391bid.

1401bid.

141For an interesting and extensive analysis of the

cause of cities' emergence, see Max Weber, The City (New York:

The Free Press, 1958); and Lewis Mumford, The City in History

 

(New York: Harcourt, 1961).

142Hans Blumenfeld, "Criteria for Judging the
Quality of the Urban Environment," in The Quality of Urban
Life, Henry J. Schmandt and Warner Bloomberg, eds. vol. 3,
Urban Affairs Annual Review (Beverly Hills, Calif.: Sage
1969), pp. 136-164.

 

 

143Edgar M. Hoover, "The Evolving Form of the Metro-
polis,‘ in Issues in Urban Economics, Harvey S. Perloff and
Lowdon Wingo, Jr., eds. (Baltimore: Johns Hopkins Press,
1968), PP. 237-283.

 

144Blumenfeld, "Criteria," p. 141.

145Ibid., p. 144.

146

Hoover, "Evolving Form,‘ pp. 241-242.

147For an extended and comprehensive synthesis of
trade area theory, see Jac Goldstucker, "Trading Areas," in
Science in Marketing, George Schwartz, ed. (New York: John
Wiley and Sons, Inc., 1965), pp. 281-319.

 

148Manuel D. Plotkin, "The Use of Credit Accounts
and Computers in Determining Store Trading Areas," in New
Directions in Marketing, Frederick E. Webster, Jr., edT_—
_(Chicago: American Marketing Association, 1965), p. 271.

 

149Goldstucker, "Trading Areas," p. 282.

150Bernard J. Lalonde, IDifferentials in Super
Market Drawing Power, Marketing and Transportation Paper,
No. 11 (East Lansing, Michigan: Bureau of Business and
Economic Research, Michigan State University, 1962), p. 59.

 

 

151See David L. Huff, "Defining and Estimating a
Trading Area," Journal of Marketipg, 28 (July 1964), 27-28.

 

l52Neison, Retailing Location, pp. 191-193.

 

153

Trade Areas, Market Penetration and Potential Sales,
of Marketing Research, 3 (May 1966), 127-141.

William Applebaum, "Methods for Determining Store

 

154Gruen and Smith, ShoppingATown, pp. 30-35.

 

l55Appiebaum, "Methods," p. 127.

Journal

154

156Extensive studies about the exact figures on each
subarea have been made. See, for example, Bernard J. Lalonde,
"The Logistic of Retail Location," in The Social
Responsibilities of Marketing, William D. Stevens, ed.
(Chicago: American Marketing Association, 1964), pp. 567-
575. This seminal study emphasizes the drawing power of
supermarkets located in several Situations ranging from
urban strips to regional shOpping centers.

 

 

157Gruen and Smith, Shopping Town, p. 31.

 

158Ibid., p. 33.

159For a comprehensive analysis of the development
of these theories, see George Schwartz, Development of
Marketing Theory (Chicago: South Western, 1963); and an
article by Schwartz, "Laws of Retail Gravitation: An
Appraisal," University of Washington Business Review, 22
(October 1966), 60-71.

 

 

 

160Huff, "Defining and Estimating," p. 38.

161Philip Kotler, Marketing Decision Making: A
Model Building Approach (New York: Holt, Rinehart and
Winston, 1971), p. 303.

 

 

162Threshold is the intensity below which a
stimulus produces no response. In a slightly different
perSpective, "threshold may be conceived as the minimum
point at which sales are large enough for a retailing
institution to earn normal profits." See an excellent
analysis in Richard A. McGarrity, S.J., "An Application
of Space Transformation in Evaluating the Urban Location
Pattern of a Multi-Unit Retail Firm" (unpublished Ph.D.
dissertation, Northwestern University, 1969), p. 61.

 

163For Similar conceptual schemes, see National
Association of Marketing Teachers, "Definition of Market-
ing Terms," National Marketing_Review (Fall 1935), p. 166;
G. E. Larson and M. N. Poteat, TrSelling in the United
States Market," Domestic Commerce Series, No. 29 (New
Series) (Washington, D. C.: U. S. Department of Commerce,
Government Printing Office, 1951), p. 13; Gist, Retailing,
p. 149; and Committee on Definitions, Marketing Defini-
tions: A Glossary of Marketing Terms (Chicago: American
Marketing Association, 1960).

 

 

 

155

164The concept of demand surface, that is, market
potential over space, was developed by Huff in his classic
article, "Defining and Estimating," pp. 39-42.

165Mulvihill and Mulvihill, Geography of Marketing.

 

p. 137.

166Hoover,‘Evolving Form," p. 262.

167See William J. Reilly, The Law of Retailing
Gravitation (New York: William J. Reilly, 1931); Paul D.
Converse, "New Laws of Retail Gravitation," Journal of
Marketing, 14, no. 3 (October 1949), 379-384; and David
L. Huff, "A Probabilistic Analysis of Consumer Spatial
Behavior," in Emerging_Concepts in Marketing, William S.
Decker, ed. (Chicago: American Marketing Association,
1963), PP. 444-450.

 

 

 

 

 

168Among the extensive contributions of Applebaum,
the following are relevant: Samuel S. Cohen and William
Applebaum, "Evaluating Store Sties and Determining Store
Rents," Economic Geography, 51 (January 1960), 1—35;
William Applebaum, "Store Trading Areas in a Changing
Market," Journal of Retailing, 37 (Fall 1961), 14-25;
William Applebaum, "Methods for Determining Store Trade
Areas, Market Penetration and Sales Potential," Journal
of Marketing Research, 3 (May 1966), 127-141.

 

 

169Walter B. Wentz and Gerald I. Eyrich, Marketing
Theory and Application (New York: Harcourt, Brace and
World, 1970), p. 381.

 

170Applebaum, "Methods for Determining," p. 140.

171Applebaum, "Evaluating Store Sites," pp. 1-35.

172This concept is similar to Lalonde's standard
trade area. See Bernard J. Lalonde, "New Frontiers in
Retailing Location," Current Business Topics, 1963, p. 8.

173Drawing power differs from attracting or pulling
power. Lalonde identifies it as the "mean average" of
the distance between the customer's residence and the
location of the store. Determination of the parameter
must take into account 90 percent of the total store
patronage.

156

174Alfred Eisenpreis, "An Evaluation of Current
Store Location Research," in New Directions in Marketing,
Frederick Webster, ed. (Chicago: American Marketing
Association, 1965), pp. 243-250.

 

CHAPTER I I I

RETAILING SYSTEMS IN BRAZIL--PATTERNS OF

CONTRAST AND EVOLUTIONARY CHARACTERISTICS

The analysis of the U.S. retailing system and its
evolutionary dimensions allows us to describe the Brazilian
system within the same framework. However, the marketing
process in an economy like Brazil's has specific character—
istics, such as a rapid rate of change and deep regional
differences, which require an analytical approach focused
on its particularities.

The rate of change in Brazil's retailing system
is expressed in the number of new organizational arrange-
ments, by the wide range of new and improved techniques
applied to retailing management, and by the rapid degree
of adjustment demonstrated by retailers Operating in large
urban areas in Brazil. Despite this rapid adjustment,
which is impressive to the marketing observer, there are,

pari et passu, a considerable number of institutions operat-

 

ing with lower-level technology in less developed areas
of the country, or, in some instances, near their more

modern counterparts.

157

158

In small cities, for example, one may see merchants
selling food in barrels, using an out-dated system of
measurement, and extending credit according to old fashioned
methods, such as noting customers' debits in a common note-
book. Sometimes, even in more advanced areas, it is
possible to observe, pedlers selling fabrics door-to-door
in areas where there are many large stores offering the
same merchandise. Despite the wide adoption of self-service
for nonfood items, one may see stores with many clerks
standing idle in the doorway when there are no customers.
Because of low-cost labor, these stores do not use modern
concepts of maximum exposure, internal traffic patterns,
and fast checkout. Many storekeepers still believe in the
principle of large unit marginqido not apply techniques
for improving stock turnover and do not use methods to
identify economic order quantity (EOQ), although some of
their competitors make a wide use of such techniques.

These phenomena may be explained partially by the relatively
low cost of 1abor,resulting from the inflationary trend

that has been prevalent in the Brazilian economy. This
factor may represent a rich field of analysis for inquiries

based on the wheel pattern theory discussed previously.

Contrast Types

 

Differences in the level of marketing know-how

and applied retailing techniques have been discussed in

159

the marketing literature and will be used here to explain
the evolutionary characteristics of the Brazilian retail-
ing system.1 These differences may be divided into two
broad categories: differences in time lag, or the time
required for retail institutions to reach a similar level

of applied technologY; and spatial differences, or

 

variations in the level of applied retailing technology
observed in a specific period of time among institutions
located in different areas. Sometimes it is possible to
observe variations in the operational level of institutions
located in the same area at a certain period. The two
cases are exemplified by regional and local contrasts.

A simple scheme for classifying local and regional

contrasts is suggested below:

 

Retailing Contrasts
Type Relevant Characteristics

1. Regional Reflect the operational patterns of retail-
ing systems which differs from region to
region. IS expressed by the diversity of
institutions with a wide range of size,
functions and sales volumes in different
areas.

2. Local Reflect local differences in retailing
patterns. Is expressed by the conditions
through which within a same area is likely
to be observed,retailing institutions
operating with a wide range of variation
in their operational and applied retailing
techniques.

 

160

Regional contrasts are constantly changing and being
lessened by the impact of economic development more
specifically,by improvements in national highway networks,
which create better communication, and by mass production,
which requires mass retailing.2 The regional contrasts
may be explained in terms of regional economic descriptors
and fall mainly within the framework of a macromarketing
analysis.3
Local contrasts may be observed within urban areas
and are being reduced at a rapid rate because of urbaniza-
tion, the increase in automobile production, and the
impact of the diffusion of marketing techniques. The pace
of change, of course, is faster in more advanced urban
areas, where new institutional arrangements have been
introduced into the marketing scene during the last two
decades. These have transformed the environment and have
hastened the decline of old—fashioned noninnovative

institutions much more rapidly than marketing analysts

could have predicted ten years ago.

Contrast Characteristics

 

In 1959, Donald Taylor made a comprehensive
analysis of the retailing system in Brazil. It included
a synthesis of the retail institutions in that country and
their evolutive operational characteristics. The author

mentioned the contrasts in the level of marketing among

161

different areas. Taylor's attempt at a taxonomy of retail-
ing institutions in Brazil points out the similarities
between the operational patterns of various stores in

Brazil at that time and of their U.S. counterparts forty
years previously. Taylor stated that general stores located
in sparsely populated areas of Brazil were Similar to the
U.S. general store, especially regarding the variety of
merchandise (hardware, food, and textiles).4

Taylor also noted that several stores
were performing such functions as extending credit on a
year-to-year basis, barter, and extensive haggling.
Interestingly enough, similar functions were once per-
formed by U.S. general stores.5 The major dimensions of
the retailing system in Brazil as observed by Taylor,may
be schematized as in Table 5.

Taylor's study was a synthesis of the retailing
climate in Brazil ten years ago and furnishes a good
background for analyzing the existing contrasts within the
system today, as well as its evolutionary traits.

Theoretical Explanation
of Contrast Patterns

 

 

The origins and the causes of regional contrasts
from a macrOperspective are outside the confines of this
dissertation, whose SCOpe is focused on a microperspective
of the marketing process and, more specifically, the retailing

system.6 However, the specific characteristics of the

162

TABLE 5.--Taxonomy of Brazilian Retailing System--l960.

 

 

Types of Retailing Operational and Locational Features
a. General Store Selling hardware, food, and textiles, located in small
(1910-1940) towns, generally one to three stores in each location,

surviving rural areas in the surroundings, extensive
haggling and sometimes barter were used in transactions.
Extended credit according to the seasonal crops.a

b. Farm-owned Store A quasi food grocery owned by farmers to sell bare
(1900-1940) essentials to workers.b

c. Limited-Line Stores Stores selling groceries and textiles located in larger
(1920-1950) towns and cities, with an extensive level of personnel

sales service and person-to-person monthly credit; the
volume of operation related to the size of the

community.
d. Specialty Store Dealing in nondurables and durables such as candy,
(1930-1960) umbrellas, shoes, mens shorts, lingerie, and so forth;

located in large metropolitan areas in outlying shopping
districts and the CBD. Stock assortment with narrow
depth in the lines carried.

e. Department Stores Operating on a similar basis as their American counter-
(After 1930) parts, selling a broad range of products, using
extensive installment credit, and located in the CBD.
High operational cost due to no self-service. These
department stores mainly originated from international
retailing corporations.C

f. Supermarket The first institution of this category was founded in
(After 1953) Sao Paulo in 1953. It was the first type of Brazilian
institution to use self-service and scrambled mer-
chandising. Supermarkets cater to the upper-income
segment of the population and face a great deal of
competition from the armazens and feiras.d

 

Source: Adapted from Taylor, "Retailing in Brazil."

a . . . . . .

The chronology is an attempt to indicate relevant periods of rise to decline of
the diverse institutional categories. There is no published secondary data on this subject
with the exception of some for particular areas or cities.

b . . . . . . .
These institutions disappeared due to labor legislation and better transportation
facilities.

C I . I O

The best example of these stores are the British and French stores Operating in
Sao Paulo and selling mostly imported goods in their initial stages, such as Mappin Stores
and Mester and Blagge (Mesbla).

dArmazens are food stores selling over the counter and offering personal credit on
a monthly basis. Feiras are "travelling open markets made up of a large number of
independent vendors who set up a portable Stall in streets near residential areas, in the
early morning and dismantle the entire market by noon" (Taylor, "Retailing in Brazil").

163

contrasts and their relationships with microregions and urban
structures must be the subject of some concern.7 These
contrasts can be explained empirically if one considers

that retailing is a localized activity and. that the "bulk of
any establishment's sales are originated from persons (with

a certain level of income) within the immediate surrounding
area."8 The structure of retailing, from one perspective,
reflects the level of economic development of its micro-
region, and, from a more narrtmr viewpoint, its function
within the urban environment in which it operates.

Regional Contrast Patterns.—-The reasons why

 

retailing systems in Brazil present deep operational
contrasts within the country are universal and can be
compared on a theoretical basis with explanations of the
same phenomena elsewhere. The differences stem from
"economic dualism," which, in its overall dimensions,
indicates the existence of higher level marketing activities
in urban areas, which possess structural determinants
conducive to an extensive degree of Specialization.

Among these determinants the following may be mentioned:

(1) population distribution and characteristics; (2)
distances and travelling time interrelationships; (3)
restrictions on spatial clusterings; (4) type of stores,
product assortment, and reputation; (5) overall physical
dimensions and Shapes of trading centers and surrounding
territories; (6) nature of communication services; and

(7) historical factors.9

164

All of these determinants also may be taken as
guidelines to describe the Specific characteristics of the
retailing system in a large metropolitan area such as
S. Paulo. They can furnish a basis of comparison for sales
and their trends, and they also may be used to investigate
the relationship between the number of retail establish-
ments and population trends and densities. In addition,
these determinants are useful in studying the emergence of
new retailing institutions and their locational patterns,
since the environment provides certain Operating conditions
which limit the scope of the firm's activity and affect
its organizational structure.10 The determinants which have
created the higher level retailing system in S. Paulo will
be discussed later according to the framework developed
above.

Local Contrast Patterns.--Despite the homogeniety

 

within microregions in a changing economy like Brazil's,

it is possible to observe local contrasts. These are most
common in areas of the country where the polarization of
economic growth and the process of urbanization have created
conditions in which coexist peddlers and specialty stores
selling textiles; open markets (feiras) and modern super-
markets selling meat, fish, and produce: push-cart milkmen
and large dairy product chains; and unplanned commercial
clusters and regional planned shopping centers. The reasons

for these dualities in Brazil may be found in the economic,

165

social, and anthropological variables acting upon the
system, which may include any or all of the following:

1. Limited markets, due to lower population
densities and purchasing power, such as rural areas in
the Northeast;

2. low value of labor, which generates labor-
intensive retailing operational patterns;

3. Significant differences in economies of scale,

a product of l and 2, which preclude sufficient volume
to operate institutionalized retailing;

4. lack of initial capital for investment, since
only recently has the economy become geared to improving
marketing operations;

5. differences in shopping habits among the several
segments of the market, a function of differences in
income, education, mobility, and mass media exposure;

6. legal barriers to entry (protectionismL which
usually result from laws to protect certain strong political
groups such as farmers and fishermen;

7. poor transportation and communication facilities,
due to the slow expansion of the automobile and telecommun-
ications industries between 1940 and 1960;

8. conservatism on the part of those who want to
maintain the status quo;11 and

9. rigid 1aWs concerning land use and labor

relations.12

166

For example, until recently supermarkets were not
recognized as retailing institutions, Even today, in some
cities, unions prevent merchants from opening their
establishments during evening hours or weekends.

Another theoretical and more economically oriented
explanation for this dualism (although not written specific-
ally about the Brazilian case) is given by Reed Moyer:

the technical efficiency is low,but before condemning
retailing as an activity encouraging a misallocation
of resources, one must recognize that Opportunity
cost conditions support the excess use of labor on
economic efficiency grounds.13

Local contrasts are likely to decline faster than
regional contrasts; the confrontation of modern methods
of retailing with old manners of doing trade leads to
survival of the stronger and more adaptative members of
the system,who are capable of making ecological or environ-
mental adjustments. This type of institutional behavior

is a necessary condition for survival within an evolutionary

system.

The System's Evolution

 

A comparison of the present stage of Brazilian
retailing with the observations made by Taylor ten years
ago yields a neat illustration of an "evolutionary process
by which alterations occur in the structure and function
of the system."14 Within this frame of reference,it can

be said that during the last decade changes in the Brazilian

retailing system brought both modifications in functional

167

dimensions and in the Specific characteristics of retail-
ing institutions.

The present analysis will be focused on the
following points: (1) the changes in the level of per-
formance of existing institutions, taking as a framework
the taxonomy developed previously; (2) the emergence of
new (in relation to the environment) retailing institutions;
and (3) a brief analysis of the development of retailing
in the GSPMA. The analysis of points one and two will
refer to institutional changes occuring in Brazilian
retailing (mainly in urban areas) without focusing attention
on any specific region; the discussion of point three,
however, will be narrowed down to the metropolitan area,
which is of particular interest to the present dissertation.

Changes in the Level
of Performance

 

 

One general trend in the past ten years has been
the expansion of the distribution network of retailing firms.
Many dealers in home appliances and apparel now operate
several branches located not only in the same city, but
also in other cities and sometimes other states.15 Due
to the government's policies toward import substitution
begun in 1957, the localrmuusproduction of electrical home
appliances has created the opportunity for stores to carry

well-known brand names and sell broader lines of refrigera—

tors, washing machines, and TV sets.16 Some limited steps

168

toward franchising have been taken on an informal basis by
well-known restaurant owners, who have opened outlets
under their trade name which they sell to franchise operators.

Relations with customers during transactions have
been improved substantially. Although a bill of sale
still is written for cash purchases in some stores, there
is a generalized use of automatic cash registers, princi-
pally in supermarkets and large department stores. Post—
tranamfijon activities, such as delivery and installation
of high ticket items like TV'S and stero systems, have
been improved. This is mainly because many chain stores
are using and operating distribution centers, from which
the merchandise is shipped directly, thus reducing delivery
costs and raising the service level.

There have been serious legal restrictions on retail-
ing. Until 1958, supermarkets were not recognized by trade
laws, and in Rio de Janeiro and the State of S. Paulo, super-
markets gained official license to operate only in November,
1968. Despite these and other restrictions,sunmeprogress has
been made, for example, more flexible operating hours and
scrambled merchandising in supermarkets have been introduced. 17

It is in the area of credit that the retailing
system in Brazil has demonstrated the greatest ability to
innovate and to adjust to new market conditions. As
Taylor mentioned, ten years ago credit was granted mostly

on a personal, monthly basis. Today,the system makes

169

extensive use of mass credit, which is supported by the

so-called financeiraslB; by new and flexible legislation

 

regulating the creditor direto ao consumidomlz and by the

 

emergence of several credit card institutions which some-
times are owned by commercial banks.

Among all the retailing institutions in Brazil,
those which have demonstrated the largest growth are the
supermarket, which in the city of £3. Paulo alone number
over three hundred. These institutions, which were
subjected to many restrictions in their initial phase,
now are completely accepted in the Brazilian market and
are growing at a significant rate. Supermarkets first
began operating in S. Paulo and now may be found in almost
every state in the country.

Supermarkets originally were a nonconforming
example of the wheel pattern but now are strongly
entrenched in the retailing of foods to the lower and middle
classes. After many years of operating without formal
legal support, supermarkets have gained local legal recogni-
tion and even federal financial institutions are providing
long—term loans; these are being used to expand the number
of outlets of existing chains and to improve present
facilities.20 They first were located in commercial
strips near higher income residential areas and only in
larger Cities. Now they have moved to suburban areas and
to smaller towns and cities. Many stores have off-street
parking and modern layouts, with warehouse space and meat

cutting sections.

170

These institutions have had an impact on buying
habits, Since self-service and attractive merchandise dis-
plays have lured men as regular weekend shoppers, a task
previously performed only by housewives and maids. The
supermarket concept in cities and towns in the hinterland
of the State of S. Paulo has changed the old casa de secos

e molhados into modern self—service food retailers.21 In

 

 

Ribeirao Preto, a wealthy city in S. Paulo, for example,
local supermarkets are aggressive in pricing; as a result,
they draw business from smaller towns in the vicinity for
a radius of approximately fifteen to twenty miles.

In small towns, supermarkets locate in or near the
CBD. Few of them have tried locations outside the central
city nucleus. According to private sources,these institu-
tions in smaller cities account for 30 to 80 percent of
total food sales, a significant amount when one considers

that they began operating less than twenty years ago.22

Emergence of New Retailing
Institutions

 

 

The discussion of new retailing institutions in
Brazil will follow guidelines suggested by Ralf
Linton which are adapted to the perspectives of this
dissertation. The word noy_must be interpreted in
relative terms since what is considered new in one system
is not in another. According to Linton,23 innovations

must have some specific elements of form, function, and

171

meaning before qualifying a method, technology, or
institution as new.

Drawing upon Linton's concepts,it is possible to
say that a retailing institution is new in form when it
presents directly observable physical characteristics
that are different from previous institutions. An
institution is new in function when it can induce alter-
ations in the previous buying behavior of the individuals
or households within its area of influence. Finally, an
institution is new in its meaning when it is perceived
objectively or subjectively as new by its customers.

The last concept is rather difficult to explain
in other fields of social science, but it seems to be
more concrete in retailing. Accordingly, the meaning of
a new retailing form of operation may be conceived of as
the increase of preference in relation to previous
alternatives, or as comparable with a greater feeling of
convenience being introduced into the system by the inter-
action of the customers and the new form of retailing
organization. For example, a shopping center which offered
parking and one-stop shopping in an area where there
previously existed only unplanned commercial clusters
would be preferred by most shoppers, who would regard

it as a more convenient place to shop.

172

Consequently, shopping centers, hipermercados,24

 

and some new forms of service retailing offered in Brazil
are new in relation to a particular market; they have
changed the physical dimensions and spatial locational
patterns of the conventional downtown department store and
their suburban branches. Another effect of the evolution
of these new institutions, aside from their impact on
store design and locational decisions, and one that seems
more relevant, is their influence on the value of land.
The impact has been twofold: the value of outlying land
has increased because of consumer preferences for alter-
native locations, and the rent value of land already in
use at conventional locations has decreased.25 Since
Shopping centers in GSPMA will be described and discussed
in more detail in chapter 4, at this point only the other
new forms of retailing will be mentioned: hipermercados,
multinational operations, leasing of automobiles, and
credit institutions.

Hipermercados.--The hipermercados draws upon the

 

 

concepts of joint operation, completeness of offerings,
and discount prices. The first such store was inaugurated
recently in the GSPMA; it belongs to a large supermarket
chain and was installed on due premises of an empty
factory building. It offers a complete line of products,

both in depth and width, and an extensive range of services

173

such as carry-out food, laundering and pressing,car sales,
banking and financing, and cooking lessons; these numerous
services may be explained by the relatively low cost of
labor in the area.

The hipermercado, also called Jumbo,is located on

 

 

a nine-acre site, has about 100,000 square feet of building
area, and is arranged in a cluster design. Although far
from attaining the conceptual organization and dimensions
of a real and planned shopping center, this institution
does reveal a great deal of the evolutionary trends of

the retailing system. The same chain plans to open a

second store in 1972, and another is scheduled for Brasilia,
the new capital of Brazil.26

Multinational OperationS.--Another feature of the

 

evolving' Brazilian retailing system is the multinational
company. For example, the same chain which owns the

hipermercado described above operates on an international

 

scale; they own supermarkets in Lisbon, Portugal, and

are planning to Open a hipermercado in Luanda, Angola.27

 

It is interesting that the growth of the Brazilian consumer
market has attracted these international storekeepers.
Recently,a Japanese chain, Yaohan Department Stores and
Company, began operations in S. Paulo with a similar
supermarket-discount department store. It is located in
the suburbs, has 60,000 square feet of building area, and

has 100 parking spaces on its third floor.28 It is too

174

early to evaluate the eventual result of this multi-
national trend, but it does indicate an increasing inter-
nationalization in the Brazilian retailing pattern.29

Automobile Leasing.--In the area of service retail-

 

ing, automobile leasing has expanded significantly in
the past decade. There are numerous local firms leasing
Brazilian-made cars, and recently a large American firm
entered the Brazilian market.30

Credit.--Also in the area of service retailing,
credit has grown tremendously. Its use has gained extensive
acceptance among large urban retailers, and credit systems
are operated and controlled by banks, similar to the U.S.
pattern. This development, of course, is related to the
introduction and expansion of electronic data processing
methods in the country.

Development of Retailing
in the GSPMA

 

 

The evolution of the retailing system in the
GSPMA will be viewed from the following perspectives: (1)
an analysis of the historical aspects; (2) a description
of institutional changes in the area; (3) a study of
changing locational patterns; and (4) a simplified
chronology of the principal relevant periods in this
urban area's development. At this point,no attempt will
be made to deal with demographic and secondary data

related to the system; they will be examined in detail in

175

the descriptive analysis of the shopping centers in and

urban characteristics of the GSPMA.31

Historical Periods.

 

A. 1900-1945

As has been previously mentioned, the city of S.
Paulo is the economic and political center of the
state. Founded in 1554, it became the largest and
richest city in Brazil due to several socioeconomic
factors such as coffee production, a large immigra-
tion coefficient, and its industrialization in the
early 19205.

In such an environment the first large retailing
institutions appeared in the beginning of this
century. Most of these stores were branches of large
international groups,which operated in the import
and export trade. Basically, these firms imported
and sold durables and consumer goods to high-income
segments of the population. They were organized
into departments, but they operated for many years
without any of the mass retailing methods used by
their U.S. contemporaries. Stores were located
in the downtown area, which at this time was the
exclusive shopping district of the city. Since
they served a small limited segment of the population,
most of their sales were in cash; no credit system

was used other than the traditional monthly charge

176

account granted to a select number of privileged
customers.

Other institutions in the retailing system at
this time were handicraft stores, small stores
selling a few national products, food importers,
and retail service institutions. There was no
native automobile industry, and cars generally
were imported from the United States.32

The 1929 depression and World War II had two
considerable impacts on the city's economy.

S. Paulo's industrilization was retarded, and
coffee exports, upon which it depended heavily
during this decade (1930 - 1940), were considerably
reduced.33
B. 1945-1955

S. Paulo's retailing system did not change
notably until the end of World War II. The decade
from 1945 to 1955 can be described as the initial
phase of the take-off: new industries expanded,
new techniques were spread in agriculture, and the
urban explosion became a reality. Consequently, the
need to adjust and to improve the distribution
system became apparent. Among the outstanding
events of this period, one was especially Signi-

ficant: in 1955 import substitution policies were

inaugurated to correct Brazil's balance—of-payments

177

deficit. As a result of these policies, which were
supported by restrictive customs regulation and by
generous allowances for importation of duty-free
industrial installations, the local mass production
of home appliances and the creation of an automotive
industry became a reality in 1956. Industrial
urbanization emerged, which had a serious impact
on the structure of large cities like S. Paulo, Belo
Horizonte, and Porto Alegre. The effect of these
changes on the urban environment brought wide-
spread, substantial adjustments in the retailing
system of the GSPMA. In addition, large foreign
retailing institutions were bought by Brazilian
groups, thus opening the capital to the public.34
Realizing the market opportunity to distribute
the massive production of the Paulista industries,
many national retailing groups and enterprises were
immediately organized. Initially involved were
wearing apparel, electrical home appliances, and
durable goods, and, later, unusual locally
produced goods. These institutions, following the
old pattern, were located in the CBD, although they
used, by means of technology transfer, modern
techniques of contemporary U.S. retailing.
These included installment credit, newspaper
price advertising and promotion, departmentaliza-

tion, and scrambled merchandising.

178

A remarkable change in the traditional locational
pattern was introduced by Sears, Roebuck and
Company, which started its operations in S. Paulo
outside the CBD. Since most of the sites adequate
for retail trade already were occupied by independent
stores in the so-called unplanned business districts,
Sears chose to locate about three miles from the
downtown area. This decision, which began a trend
when some important retailers followed Sears' lead,
can be understood as dynamic, ecological, and
adaptive behavior of the retailing system. The
main causal factors for the trend toward decentrali-
zation were: the dispersal of disposable consumer
income; increased use of automobiles; increase of
the city's urbanized area; traffic congestion; and
changing buying habits in terms of marketplace
preferences, frequency of Shopping trips, and types
of retailing stores selected to sell Specific
household needs.35 This move toward decentraliza-
tion was not accompanied by substantial change

in stores' physical facilities or design.

179

C. 1955—1965

No other segment of marketing reacts so quickly
to changes in the environment as retailing. The
proof of this proposition in the GSPMA can be
observed in the decade between 1955 and 1965. In
1955, many definite patterns in Brazilian economic
develOpment were established, new policies in inter-
national trade were enforced, and, in 1957, the auto-
mobile industry began Operation. The process of
industrialization brought about population growth
within the boundaries of S. Paulo, and during this
period many social habits changed drastically. In
addition, industrial workers began to participate in
the retailing system with their limited but increas-
ing disposable income. Many segments of the middle
class widened their horizons by taking small trips,
buying inexpensive sports supplies, and shopping for
low-cost home appliances, such as electric irons,
radios, and blenders. There was a tremendous boom
in ready-to—wear apparel.

Due to the Spectacular increase of the S. Paulo
metropolitan area,the decentralization trend continued.
It became unprofitable for large department stores
to remain in the CBD; they opened branches in
suburban areas and initiated the use of more advanced

operating methods,such as extensive credit promotion,

180

addition of several product lines, and the use of
radio, newspaper, and television advertising. By
1960, the convenience of Shopping in the GSPMA

for those living in the cities of the interior
became so apparent that the large merchants extended
their operations to these areas, selling primarily
durables and shopping goods. This period marks the
origin of regional chain stores in the State of

S. Paulo.

While the retailing system was responding to
changes in the environment, other types of retail-
ing outlets reacted with changes in store design.
Several unique types of stores were planned and
put into operation in the GSPMA, some of the most
distinctive of which were the galerias.36 These
were located in downtown areas and along the
already established commercial strips, and in some
instancesIthey can be considered ancestors of the
Shopping center.

The lay-out of the galerias can be compared with
the old European-style commercial covered mall;
they generally were built perpendicular to the
main street and had three or four floors connected
by stairways or escalators. The most common tenants
of these centers are boutiques, sophisticated

specialtysnxmes carrying a limited line and having

181

a high margin and high-price policy. The galerias'
success was limited and there are good grounds for
saying they represent a fiasco in terms of adapt-
ability and profitability. An exception must be made
for those in excellent locations, but the success of
most can be evaluated by considering that many of
their little 500-square-foot stores were vacant for
years after the building was completed.

D. 1965-1970.

During the last five years, traffic in the GSPMA
has become chaotic; for the first time merchants
have begun to mention their parking facilities
in their advertising and to emphasize the con-
venience of decentralized locations. Since the lay-
out of older stores does not permit rearrangement
for private parking, many merchants have started
renting vacant lots, sometimes 300 yards away,
and posting advertisements of this convenience in
front of their stores. It seems clear, then, that
the socioeconomic conditions of the GSPMA were
ripe for a new type of retail facility that could
provide off-street parking. The environment, in
other words, required the development of shopping

centers.

182

In 1964,construction began on the first planned
Shopping center in S. Paulo. The event was extremely
important from a number of viewpoints; in
particular, in marketing it represented a land—
mark in store planning and design, and in real
estate operations it also was unique since the
environmental conditions of specific trade areas
created an interesting set of planning, locational,
and financing problems.

The Chronologngap
and the Contrast Patterns

 

 

Any overview of the development of the Brazilian
retailing system must bear in mind that there is a definite
time gap between the Brazilian and U.S. systems.

This gap generally stems from lags in economic development,
from variations in the process of institutionalization of
business management,37 and from variations in the specific
trends of urbanization.

Any or all of these internal differences, which
are peculiar to each system, may help explain, for example,
why the general store in Brazil was followed by department
stores, not by mail order houses. The primary cause in
this instance was limitations imposed by the inefficiency
of the Brazilian postal system. Differences in
product mix planning may be explained by the low level of

capital availability as compared with the United States.

183

Until l965,the Brazilian profit philosophy implied that
institutions Should adhere to high margin-low volume
policies, whereas in the United States these attitudes
changed even before World War II. These contrasts
exemplify the different operational levels in both systems,
but testing their cause and effect relationships lies
outside the scope of this dissertation.

The comparisons that will be made here between
the Brazilian and U.S. retailing system will be
oriented toward similar variables in the two systems,
even though these variables are likely to be influenced
by time lag. Furthermore, within this dissertation,these
Similarities will be noted only in conjunction with the
operational characteristics of shopping centers, and no
attempt will be made to explain causal factors. This
approach assumes that evolution in the systems bears a
close relationship with changes in internal (endogenous)
variables, and that external variables have little or no
effect upon the systems.

To illustrate the Brazilian evolutionary process
and its time lag in relation to similar developments in
the U.S. retailing system, a chronological table is
presented. It indicates, decade by decade, the
emergence of Specific types of retailing operations in
the Brazilian and U.S. environments. The usefulness of

such a framework is limited to representing a summary

TABLE 6.--Comparative Chronology--American and Brazilian Retailing

184

Systems.

 

 

 

 

 

 

U.S.A. Brazil Sources and

Period-Milestones Retailing Type Comments

R D R D
I. Scarcity General Store 1800 1860(a) 1910 1940 (a) From Fred Jones, "Retail
Retailing Stores in the US, 1800-
Limited Line 1900 1939(b) 1920 1950 1860," Journal of
Store Marketing, I (October,
1936), 1360.
Farm Owned (b) From Gist, Retailing
Store 1900 1940 Concepts, p. 100.

II. Specialization- Department 1861(c) 1945 1930 - (c) From Paul H. Nystrom,
Long Distance- Store Economics of Retailing
Impersonal (New York: Ronald Press,
Retailing 1934), p. 179.

Mail Order 1890 1910(d) - - (d) From Gerald B. Tallman
House and Bruce Blomstrom,
"Retailing Innovations
Challenge Manufacturers,"
flarvard Business Review,
SIptember-"ctober, lJOZ,
pp. 130-134.
III. Specialization Speczalty 1920(e) - 1930 1960 (0) This was not a definite
Store period, but a slow
emergence in some micro-
regions.
Decentralization Cnain Etcrr 19])(f) - 1945 - (f) Barger Study
IV. Sle-SCIVIC“ Supermarket 1'30fg) - 1:53 - (9) From Fred Alvine, "The
Supermarket Challenged,"
Business Horizons,
Untober, 1968, pp. 4&-
51.
Discount LiSCCUDt Store 1152(h) - - - (h) From Davidson and Doody,
"Lwased Department as
a Major Force in the
Growth of Discount Store
Retailing," pp. 39-46.
V. Specialization- Shopping 1945(1) - 1964 - (i) From the Community

Decentraliza-

tion- Mass

Retailing-

Special Build-
ings

Center

Builders Handbook, p.
271. The first US
Shopping Center reported
(1920) was the Country
Club Plaza, Kansas City,
Missouri, but the real
up-rise came after 1945.

 

 

R = rising trends
declining trends

0’) ll

OB
chapter.

= The chronology for the Brazilian System was developed from the taxonomy developed previously in this

185

of the analysis up to this moment, but it may serve to
trace eventual relationships between the stages of economic
development in each country and the responses of their
respective retailing systems.

It is interesting to note that,to date,the Brazilian
retailing system has not made extensive use of mail-order
shopping and that discount houses are not of great signifi-
cance. The first phenomenon, as previously mentioned, may
be related to the inefficiency of the postal system. The
lack of discount stores is due to inflationary trends in
the economy up to 1964 and because durable goods manu-
facturers strongly opposed discount houses, who
were supported by specialized and exclusive dealers of
national brand appliances.

From an overall perspective, the time lag between
the innovations and evolution of the Brazilian and U.S.
retailing systems averages about twenty years. Although,
as mentioned, this dissertation will not investigate the
causes and effects of this 1ag,the concept may be illustrated
by the following diagram, which is deduced from the

historical patterns discussed earlier.

186

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OOH OH mOH OEHBII.> MHmOB

H 1 . _ _ M
MOHOOU _ _ _
OOHOOOOM _ _ _ _ _
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HOOMOEJOmOm " _ _ _ u H
_ _ _ H
OOHOHm _ _ _
_ _ 0
03080mm aHmao _ _ _ _ _ a
mOwOHm “ OMOHm _ OMOHm _ _ _ m
HOOEHMOOwO OHOOU _ HOOEHMOOOO_ mHHOHOOmm OMOHm HOMOOOw _ m
r F
i 1 O 1 . _
_ _ _ _ _ _
_ _ _ _ _ _
_ _ _ IO O O
_ _
MOHOOU mOHOWOOm _ HOOMOEMOOOO“ OmOom “ n 4
MOUHO HHOE
_ _ mOMOHm _ _ _ _ m
_ _ 00H0H0000_ _ macaw OOHHEHH
_ muoum _ _ muon _ _ _ a
_ HOOOOmHO_ OMOHm OHOOO. HOOEHMOOOO OMOHm HOMOflOw _
_ _ _ _ H H
_ _ _ (H _ d
_ _ _ e
H> _ > _ >H " HHH _ HH _ H _ m
n _ _ _ _ _ s
_
ommH oemH ONmH oomH ommH coma

 

187

Greater S. Paulo Metropolitan Area:
Urban Structural Evolution

 

 

In analyzing the urbanization process in the S.
Paulo area, the theoretical concepts previously developed
will be applied to relevant secondary data. The first
task is to locate and delineate the area, its variables,
and its urban problems. This is not easy since even its
boundaries are the subject of controversy. Today within
the GSPMAItwo geoeconomic and micrOpolitical regions may
be identified: the City ofES. Paulo and the Municipio
of S. Paulo. 38 It is with these that we will begin (see

Figure 7).

Population Descriptors

 

The greater S. Paulo metropolitan area is located in
the southern part of Brazil in the State of S. Paulo (see
Figure 8). It is legally defined as a metropolitan area,39

encompasses 7.951 km2, and represents 3.2 percent of the state's

total area :10 Presently the GSPMA is composed of 37 municipios .

 

Among these, the Municipio of S. Paulo plays an important
role, particularly as the polarization point of urban
population within the GSPMA and in its percentage of land
use. According to the latest data furnished by the
Brazilian census, the Municipio of S. Paulo has an area

of 1.493 km2 and a population of 5,978,977.41

188

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HOmOH OOH OOOOMO>O OOOMO m.>HHo OOH HOOH O>MOOOO OH
mOHHmOMOHOH mH HH .AOzoMOV OHOOO .m Ho mHHU OOH OOO
“HmsHav oHana .0 Ho =oHaHoHape= 000 inc u13020302000
OOH HOV ”OOOHmOMIOMOHE OOMOH mOHOHOoo OOHmOM OHOE

.Adzmmwv OOMO OOHHHOQOMHOE OHOOO .m MOHOOMO OOBII.> OMOmHm

189

 

190

For the purposes of this dissertation,another micro-
region may be defined: the City of S. Paulo. This area,
composed of 48 districts, concentrates 5,186,752 inhabitants
in a highly urbanized space of 857kn3,42 It is on this
microregion that the normative part of the dissertation
will be focused. In order to demonstrate the relative

importance of each of these three regions the following

comparative table was prepared. The table indicates the

TABLE 8.--1970 GSPMA--Population, Area and Densities.

 

(l) (m 2 (3) Param

 

Area POpulation Area Km Density -
(1)3(2)=(3) Pop. Area

 

City of S. Paulo 5.186.752 857 6.052 63% 10.7%
Municipio of S. Paulo 5.978.977 1.493 4.004 73% 18.7%
GSPMA 8.206.129 7.951 1.032 100% 100 %

 

Source: IBGE 1970, Censo Demografico S. Paulo).

high degree of population polarization in the City of S.
Paulo, which constitutes 10.7 percent of the GSPMA but

contains 63 percent of the total population (see Table 8).

The Hipge Factor in S. Paulo

 

The GSPMA displays the hinge factor mentioned by

Gottman; it has grown without planning and zoning policies

191

adjusted to its dimensions, and its growth cannot be halted
unless the outlying regions also stOp growing. The absence
of good public tranSportation, associated with twenty years
of scarce supply of automobiles, has forced all public
services and tertiary activities to concentrate in the

core of the city and around narrow land ribbons following
the major axes. Actually, this scheme functioned well
until 1950, when the area had about 2.2 million inhabitants.
Subsequently, however, with the continuous growth of the
metropolis and the emergence of the automobile industry,
traffic conditions in the inner city became chaotic.

43 and this

Speeds average less than 12.5 miles per hour,
rate drOps drastically in rush hours when the movement
toward central locations is through a limited number of
major radial roads. It is along these roads that
retailing stores generally are located, a factor that
serves only to increase congestion due to the absence of
off-street parking facilities.

AS can be seen in Tablesa, the population of S.
Paulo has grown at a geometric rate during the last three

44 Such an increase in pOpulation will heighten

decades.
the demand for tertiary types of activities since most of
the increase is due to internal migratory contingents.
These are employed in the secondary sector and are likely
to demand immediate services and facilities from the

tertiary sector.45

192

TABLE 9.--City of S. Paulo--Demographic Growth.

 

 

Period Average Yearly Rate
1940 - 1950 5.05 %

1950 - 1960 5.23 %

1970 - 1980 4.97 % (projected)
1980 - 1990 4.64 % (projected)

 

Source: PUB Plan Urbanistic Basic.

In absolute terms the growth of the City of S. Paulo
also is impressive. Tablelo shows population coefficients,

growth since 1900, and projections up to 1990.46 The

TABLE]D.--City of S. Paulo-—Popu1ation 1900-1990.

 

 

Period Population (000) Index % Growth
1900 240 100 0
1910 430 186 86%
1920 579 241 34%
1930 950 395 64%
1940 1,305 543 37%
1950 2,154 897 65%
1960 3,709 1,290 ' 72%
1970 5,978 2,490 61%
1980 9,476 (Est.) 3,948 58%

1990 14,347 (Est.) 5,977 51%

 

193

figures indicate that S. Paulo has increased its pOpulation
about 25 times since l900,and that during the next two
decades it is expected to increase more than 2.4 times.
Italso is interesting that percentage increases

in the population during five of the last seven decades
have been above 60 percent. The two exceptions are the
19105 and 19405, which were years of international con-
flicts that affected the industrialization process of the
metropolis.

The location of such a large population in so
small an area has led to inadequacies in the urban infra—
structure; there is high concentration in the core of the
city, which has a high residential density and a great

deal of traffic congestion.

Urban Area Structural Changes

 

Prior to World War II.-—The growth of the

 

GSPMA since its foundation in 1554 has followed an
interesting pattern of urban structure and it may be
explained empirically by the theories we have examined.47
The initial central nucleus, settled in the
colonial period, is today's CBD. Around this original
settlement other small pioneer villages clustered for
strategic purposes (see Figure 9-a),but the nucleus was

and has remained the center of trade and political

activities. During this phase the urban structure followed

194

 

BHASIL

 

41"..IL. --1"'{§§LF“E'

 

 

 

FIGURE 8
LOCATION OF THE STATE OF SAO PAULO

195

Burgess's typical concentric zone pattern. Obviously, no
other circles were present at this time (seventeenth
century), but the eventual location of trade and resi-
dential areas were very consistent with his scheme.

In 1876 the first railroad linked S. Paulo
with Santos, the major port of Brazil; other railroads
followed, which increased the attraction of the central
nucleus, where their terminals were located. The railway
exercized a great centrifugal force on the growth pattern
of the city, and by 1900 it displayed the star-shaped
contours of Hurd's axial growth theory (see Figurer9-b).

Regarding Hoyt's theory, in the city's initial
stages, up to the 19205, land use for trade and resi-
dential areas followed definite sectorial patterns;
industry and low-income sectors were in the northern
part of the city, and well-defined high-income neighbor-
hoods were in the southwest.

In the late thirties up through the forties,
the emerging highway network had an impact on the city's
structure quite similar to that of the railways. Roads
eXpanded the urbanized area of the city, but since they
served mainly for production transportation and for mass
transit purposes, they reinforced the role of the CBD,
where they converged, as the most important trade area in

the city. During these phases,the structure still displayed

196

 

     

URBAN N CLE

HISTORICAL CENTER

 

I———--ROA08
----RAILROADB

 

(b)

 

FIGURES?
EVOLUTION OF THE S. PAULO URBAN AREA

 

197

the star-shaped pattern with large empty spaces between

the major radial axes.

After World War II.-—After 1940, as the city

 

and its population grew, trade began to decentralize. This
ecological, unplanned trend followed the major radial
transportation axes, which became transformed into
commercial axes.48 At this stage 8. Paulo began its
period of metropolitan life (see Figure 90), and its
configuration was highly consistent with Harris and
ULmans'polynuclei concept. The absence of private
tranSportation maintained the CBD as the major pole of
attraction, which created a peculiar pattern. Despite the
existence of numerous urban nuclei, there still is a
great deal of dependence on the CBD and the major com—
mercial axes for retailing purposes. According to
official sources, approximately two million people commute
daily to the CBD, and more than 100,000 daily trips to
the downtown area for shopping purposes are by private
transportation.49

This pattern of shopping movement over the
urban space reflects a type of behavior consistent with
locational characteristics prior to the emergence of the
automotive industry in Brazil. Today, however, this

spatial shopping behavior must be changed for several

reasons:

198

a. The rise in automobile ownership gives con-
sumers more freedom to select areas other than the CBD.

50 and

b. The CBD has only 34,000 parking spaces,
the continuation of shopping in the area will only increase
traffic congestion.

c. Retailing institutions can find locations
with lower land value in peripheral zones.51

d. The decentralization of retailing along
commercial strips would not reduce congestion in the inner
city, since these routes should be used for through traffic
and not as parking space for the customers.

This brief analysis demonstrates that S. Paulo has
passed through deep transformations since its settlement,
and that today there is a need to induce modifications in
its Operational characteristics in order to increase the

52 The opportunity for change is

quality of urban life.
now, before the effects of the automobile are felt even
more. It is necessary to recognize the structure of the
urban fabric and introduce a program of modifications with
priorities, among these,retailing location seems to be
one of the most important.

Despite differences in some of the characteristics
of the urban structure, such as low-income groups located

in the periphery, it is likely that the impact of the

automobile and the construction of new rapid transit

199

routes will enhance the escape to the suburbs. A new belt
of middle class population will form at the periphery,
reinforcing the opportunity for retailing decentralization
at strategic sites.

The Plano Urbanistico Basico (PUB) studies mentioned
that the automotive industry, since its advent in 1957, has
been affecting S. Paulo's urban structure by offering
public and private transportation to areas unreachable by
suburban railroad routes. A negative outcome has been the
increasing congestion in the downtown area and the com-
mercial strips.53 The same report notes, however, that in
many urban areas the use of automobiles has changed the
patterns for retailing location.

Retailing in the Greater S. Paulo

Metropolitan Area: Problems
and Trends

 

 

 

Land use studies conducted by the city of S. Paulo
municipal government indicate that only 8 percent of the
total urban area is used for commercial activities. Of
this area, one-third is located in the CBD and the
remainder occupies the major radial axes in a maximum
radius of seven miles around the city's inner core (see
Figure 10).55

S. Paulo's general trade location pattern, with a

powerful CBD and many unplanned commercial clusters in the

200

 

.pru H mm: UGMH Hafioumafioov omo may pcsoum mdmum
HMHUHmEEoo paw umpmsHo Hmmfloaflum Hflmcu ca Ummmms mfi.c0Humooa

HMHOHmEEOU onullmms Gama HmHOHmEEOU

.oaswm .m mo mpHUII.oH wusmflm

 

 

 

 

 

202

outlying areas linked by several commercial ribbons,56

is classic, but outdated. Because of these patterns, travel
time and distance parameters required for shopping trips
in the area have increased,despite the trend toward
decentralization and the increase in car ownership. This
condition is eXplained by the fact that the introduction
of automobiles into an area with narrow streets and into
a CBD with a high building density will hinder the eventual
positive aspects of a better application of transportation
technology.57 According to the PUB, in order to avoid a
possible repulsion steming from these factors,it is neces-
sary to create and implement a set of urban policies which
could reduce the so-called "diseconomies of conglomera-
tion."58

The analysis made by the city of S. Paulo municipal
government indicates that the phenomena mentioned above
are not a result of a total saturation of urban space,
but are the product of the unplanned and outdated distribu-
tion of tertiary activities caused by the nonsystematic
urban development of the city.59 A great deal of emphasis
must be placed on the actual location of tertiary
activities as well as on their desired location. The
basic policy suggested by the PUB is to decentralize
those retailing activities located in the central part of
the city, and,simultaneously,to preclude new stores from

locating in the area.60

203

Interestingly enough, the city planners took into
consideration the opportunity for the creation of shopping
centers and neighborhood commercial clusters with small

61 The

stores offering convenience goods and services.
studies selected three priority areas (Santo Amaro,
Itaquera, and Parelheiros) where shopping centers with
regional characteristics should be located with the support

62 The

and at the incentive of the municipal government.
studies and plans analyzed here also recommend norms and
regulations concerning future urban land use for com-
mercial activities.

Assuming that automobile ownership will increase
and that an adequate intraurban highway network will be
completed, the PUB suggests, as a basic guideline, the
location of commercial centers near the major interchanges
at outlying locations. The report mentions that "the
convenience which such institutions will provide to the
automobile shoppers is so great in relation to the previous
and old-fashioned forms of retailing that they will afford

"63 The PUB also stresses the pOSSible

a guaranteed success.
economies of scale which may be generated by the large size
of these future centers. They probably will use the same
amount of urban land, despite their larger size, because
they will be able to avoid traffic congestion caused by

the parking methods used at present locations.64

204

These PUB studies culminated in the establishment
of an ambitious master urban plan. Its priorities,
policies, and programs related to the future of tertiary
activities in the GSPMA are extremely consistent with the
propositions and objectives of this dissertation, so that
a brief analysis of the studies seems justified.

In defining a general policy of urban development
for the GSPMA, the PUB stresses "the need to promote the
organization of urban land use in order to expand the
opportunities for self-develOpment and the availability of
efficient urban activities."65

Concerning commercial land use, specifically, the
plan emphasizes the following major goals, ranked

hierarchically.

l. Metropolitan Level. In the metropolitan

 

inner core, highly specialized commercial activities must
be provided which allow for easy access and expansion of
parking facilities. Simultaneously, programs leading to
the decentralization of wholesaling and warehousing
activities must be implemented.

2. Subregional Level. In order to avoid the

 

continued polarization around the city's central zone,
it is recommended that subregional centers be promoted
to serve populations ranging from 1.0 to 2.5 million,

with complete and integrated facilities for such

205

diversified activities as retailing, services, regional
administration, educational facilities, and medical
centers.66

3. Local Level. The PUB recommends the installa-

 

tion of "local trade centers" with general retailing
facilities, recreation spaces, and ample parking areas to
attract approximately 400,000 people. At this level the
plan also suggests smaller centers to sell basic house-
hold needs.67

At the subregional level,the planners conceived
gigantic community centers whose objectives are outside
the scope of this dissertation; at the local level,
however, the centers proposed by the city planners are
quite similar to the shopping center concept as it is
widely used in marketing and retailing theory. As the PUB
indicates, the task of selecting locations for these local
centers is beyond the range of city planning programs,68
and requires a greater detailed analytical framework, which
lies in the domain of marketing technology. Such a task
can be performed by the application of spatial analysis
to evaluate microregional economic descriptors. The
remainder of this dissertation will be oriented to this
objective. It will use secondary and primary data and

surveys conducted at Brazilian centers as inputs to evaluate

the feasibility of shopping center operations:k1the GSPMA.

FOOTNOTES: CHAPTER III

1For other frameworks in which to study retailing

developments from a comparative perSpective,see Stanley J.
Shapiro, "Comparative Marketing and Economic Development,"
in George Schwartz, ed., Science in Marketing (New York:
Wiley and Sons, Inc., 1968), espeCIally Chap. 14. Shapiro
presents an interesting set of topics for discussion in
relation to unsolved and neglected issues in comparative
marketing and economic development. See also a seminal
article by Edward Cundiff, "Concepts in Comparative
Retailing," Journal of Marketing, 28, no. 1 (January 1965» 59—
63; another useful reference may be found in Peter D.
Bennet, "Retailing Evolution or Revolution in Chile,"
Journal of Marketing, 30, no. 3 (July 1966), 40-45.

2The rate of change and the decline in the economic
gap between regions must be viewed in relative terms and with
some reservation. A recent unpublished analysis con—
ducted by Professor Leo G. Erickson demonstrated that the
percentual market potential elaborated for all the states
in Brazil did not change substantially despite the total
increase of the whole system. This study was a reevaluation
of a previous analysis made in 1962. See Leo G. Erickson,

"Analvzing Braziling Consumer Markets," MSU Business Topics.
2 (Fall 1963), 726-736.

 

 

 

 

3Lima, Shopping Centers, pp. 82, 125.

 

4Donald A. Taylor, "Retailing in Brazil," Journal
of Marketing,24, no. 3 (July 1959). 54-58.

 

5See Paul H. Nystrom, The Economics of Retailing, vol.
1 (New York: Ronald Press, l934),p. 80T

 

6For a solid explanation of economic dualism in the
Brazilian economy.see Celso Furtado, The Economic Growth
of Brazil - A Survey from Colonial to Modern Times (Berkeley:
University of California Press, l968).pp.’264-70; for a
general and more theoretical framework,see John R. Hicks,
Essays in World Economies (Oxford: Clarendon Press, 1959).

 

 

 

7A microregion can be defined.for the purposes of
this dissertation as a geographic space with homogeneous
economic descriptors which may be served by one retailing
system for shopping needs (accordingly, mail-order shopping
is excluded).

206

207

8Douglas J. Dalrymple and Donald L. Thompson,
Retailing: An Economic View (New York: The Free Press,
I969),p. 92.

9Adapted from David A. Revzan, A Geography of
Marketing; Integrative Statement (Berkeley: University
California, 1969), pp. 150-151. A detailed analysis of the
framework suggested by Revzan seems to indicate that the
determinants are typical of distributive areas; these are
areas or microregions whose major influence is on centrifugal
or distribution flows (ibid., p. 146). Thus the assortment
of products and their attractive appeal for surrounding
areas become the focus of attention.

 

 

 

 

10Susan P. Douglas, "Patterns and Parallels of
Marketing Structures in Several Countries," MSU Business
Topics 19, 2. 39. In this article the author discusses the
limitations of macroeconomic indicators to evaluate the
marketing system, but suggests that "individual firms may
respond in different ways and in varying degrees in
environmental conditions." Thus, "the appropriate metho-
dology would be to study the evolution of marketing
structure over time" (p. 48).

11Adapted from Willard F. Mueller, "Some Market
Structure Considerations in Economic Development," Journal
of Farm Economics,41, 2, 420-421.

12Karl Polyani, The Great Transformation (Boston:
Beacon Press, 1957), pp. 76-77.

l3Reed Moyer, "The Structure of Markets in Develop-
ing Economies," MSU Business Topics 12, 4:43-60.

14For a complete analysis of changes in social
structures, see Everett M. Rogers and Floyd Shoemaker,
Communication of Innovations, A Cross-Cultural Approach
(New York: Free Press, l97l)7’pp. 7-17.

15An example of an organizational type is a
chain store,Super-Lojas Arapua, which sells a complete line
of home appliances and apparel. This firm has locations in
two states, 8. Paulo and Mato Grosso. The development
mentioned here indicates local, regional, and national
expansion.

 

 

 

 

 

208

16The most common names in this field are General

Electric, Westinghouse, Phillips,and Philco.

17Recently a supermarket operator was forced to
close at 6:30 p.m. instead of 8:00 p.m. simply because a
1956 city law, which never had been changed, indicated
6:30 p.m. was the regular closing time. Accordingly,
operations on Saturday and Sunday in this city, St.Andre,
S. Paulo are not permitted. Interestingly enough a public
survey conducted in St. Andre indicated that 95 percent of
the interviewers were favorable to evening and weekend
time schedules (0 Estado de Sao Paulo, [Brazilian newspaper]
6, October 1971).

18 . . . . .
Financeiras are Similar to saVings and loan
institutions in the United States.

19Credito direto ao consumidor is similar to
the U.S. arrangement whereby the ultimate consumer is
financed by commercial banks to buy durables such as cars,
refrigerators, and TVs.

20A recent regulation from the Banco Nacional do
Desenvolvimento Economico (BNDE) stated the conditions
for finanCing up to US $250,000 for the modernization and
expansion of supermarkets (Resolution 389/71 from the
BNDE, Rio de Janeiro, 16 April 1971, "Program of Moderniza-
tion and Reorganization of Marketing").

21Casa de secos e molhados are similar to wet and
dry goods stores.

22"05 supermercados em todo o lado," O. Estado de
Sao Paulo, 28 November 1971.

23Ralf Linton, The Study of Man (New York:
Applenton, Century, Crofts, 1936» pp. 402-404.

24Hipermercados are a conceptual and planned
adaptation of U.S. supermarkets, discount department
stores, and similar British institutions called super-
stores. In essence these stores are a huge complex com-
plex composed of a complete department store, a supermarket,
bank, and an automotive center. In Brazil there is only
one owner, and the automotive center services cars and
sells new and used units.

 

 

 

 

 

 

 

 

 

209

25For an extended discussion of the potential
impact of shopping centers in Brazil, see Alberto de 0.
Lima Filho, "Shopping Centers como Novos Sistemas de
Operacao Varejista," Revista de Administracao de Empresas, 9
no 2 (April-June 1969), 371491

6Journal do Jumbo [internal trade journal of the
Jumbo Hipermercados], September 1971.

27

 

Ibid.

28Supermercado Moderno, July 1971, pp. 4-9.

 

29For an extensive analysis of the forms, problems,
and risks of internationalization of retailing operations
see Stanley C. Hollander, "The International Storekeeper,"
MSU Business Topics, 17 (Spring 1969), 13-23.

30

 

This firm is Hertz Rent-A-Car International.

31The information discussed here is based on
previous research; see Lima, Shopping Centers, pp. 81-90.

32The growth of automobile registration in the
GSPMA showed a slow increase up to 1960, followed by a
rapid growth thereafter. These figures are:

 

 

 

Year Number of Passenger
Cars
1917 1,760
1924 6,623
1929 13,655
1940 22,739
1950 96,000
1960 120,662
1970 492,000
1971 641,404

Sources: (1) Juergen R. Langenbuch, A Estruturacao do

Grande Sao Paulo (Rio de Janeiro: 1971), p. 152; (2) data

from the Instituto Brasileiro de Cadastro (Niteroi: 1971);

(3) the figures for 1960-1970 were taken from graphic estimates
of the technical report of the Metropolitan Rapid Mass

Transit System of the City of S. Paulo, pp. 171.

 

210

33Celso Furtado, Obstacles to Development in Latin
America (Garden City, New York: Doubleday, 1969), pp. 14-15.
The author discusses both events and stresses the dependence
of a coffee-based economy on international affairs.

34Illustrative of these situational adjustments are
the Mestre and Blagge, which become Mesbla S.A. and the
Mappin's Stores, which became Lojas Mappin.

35For a complete discussion of these factors, see

William R. Davidson and Alton Doody, Retailing Management
(New York: Ronald Press, 1966), p. 113.

 

36Although galerias are similar to European-style

covered open malls, due fo the climate some of them are
not covered in the GSPMA.

37Donald A. Taylor, "Marketing in Brazil," in
Marketing and Economic Development, Peter D. Bennet, ed.
(Chicago: AMA, 1965), pp. 111-115. In his analysis, Taylor
demonstrates that differences in economic environment
necessitate different sets of variables for marketing
analysis relative to their intensity of impact and time
lag effects, that is, the effects of formal marketing
education.

8Municipio is a Portuguese word equivalent to
county. According to the Brazilian legislature this is
the smallest autonomous politico-administrative unit.

 

39Decree No. 48, 163, 3 July 1967, State of S.
Paulo Government.

40The State of S. Paulo is 247,989 kmz.

41VIII Recenseamento Geral (Rio de Janeiro:

Instituto Brasileiro Geografia e Estatistica, 1970), p. 143.

 

42PUB, vol. 2, p. 45.

43PUB, vol. 4, p. 123.

44903, vol. 1, p. 107.

211

45Ibid., p. 86. According to this report, 3 percent
of the growth will be generated from immigratory sources,
due to the hinge factor.

 

46These figures were compiled from O. Estado,
5 August 1965, and from PUB, vol. 1, p. 103.

 

47PUB, vol. 2, p. 21.

481bid., p. 44.

49PUB, vol. 4, pp. 17, 141, and Table T-34.

50Ibid., p. 151. These parking spaces may be
classified as follows: l4,000--private parking; 20,000--
public (curb parking).

SlPUB, vol. 2, p. 138.

52For an interesting discussion of the subject, see
Walter D. Harris, "Urban Quality in the Context of the
Developing Society," in The Quality of Urban Life, pp. 186-
210.

 

S3PUB, vol. 1, p. 41.

54Ibid., p. 42.

551bid., p. 82.

56Ibid., p. 104.

57Ibid., p. 218.

581bid., p. 147.

59Ibid.

60Ibid., p. 148.

6lIbid., p. 149.

GZIbid.

212

63Ibid., p. 175.

64I§id., p. 177. According to the PUB studies, 5
percent of total urban land should be used for retailing
locations.

651bid., p. 304.

66Ibid., p. 319.

67Ibid., pp. 319, 343.

681bid., p. 344.

CHAPTER IV

THE SHOPPING CENTER INDUSTRY IN THE

GREATER S. PAULO METROPOLITAN AREA

Introduction

 

ShOpping centers are a newly developed type of
retailing institution in the GSPMA. As mentioned in
chapter 3, the first planned and controlled center began
operation in 1965; after almost a decade, S. Paulo has only
three shopping centers despite the size of its urban area
and although this would be a better form of retailing
locational pattern for a city which is increasing its
automobile population at a rate of 30 percent per year
(see Figure 11).

This chapter's major objectives are to analyze
and compare the centers with each other and, when it
proves meaningful, to contrast them with the operational
characteristics of U.S. centers. The following analytical
criteria will be used.

(1) Descriptive analysis of the overall dimensions,
such as area of physical facilities, location in the city,
store mix, marketing characteristics and orientation,

organization and financial aspects.

213

215

(2) Analysis of the major operational dimensions.
The relation of retailing areas to parking areas,
store mix as a percentage distribution of the total area,
parking lot characteristics and capacity, trade areas,
drawing power, customer patronage characteristics and
financial aspects such as leasing agreements and con-
struction financing.

The central objective of this study is to describe
the overall dimensions of the shopping center industry
in GSPMA and to analyze the operational characteristics of
each center, having in mind their location within the
city as discussed in detail in chapter 3. Thus, this
chapter intends to evaluate the market power of each of
the existing centers operating within the environmental
conditions which also have been studied in the same chapter.

The next chapter then will provide indications regarding

districts or areas where shOpping centers could be located.
A major constraint to applying this technique is that data
regarding sales volumes are limited to short periods of
time and are for one center; information for other centers
had to be derived from lease figures and percentages.
Relevant data and information were collected
in several periods and with different objectives;
consequently, the material must be categorized. The first
category includes data collected by the author and other
researchers in Brazil for purposes not specifically

related to this dissertation.1 The second includes

216

information assembled specifically for this dissertation

in September 1971 by the author and a team of students

from the School of Business Administration of S. Paulo.
Despite time constraints and the lack of formal support

from the Brazilian centers' owners and managers, this effort
furnished data for a good analytical framework.

Iguatemi ShOpping Center:
Overall Characteristics

 

 

Iguatemi can be considered the first true
planned and controlled shOpping center in the GSPMA.
Because of its location, its store mix, and the way in
which it was planned and developed,it may be classified
as a pioneering and unique experience in the development
of Brazil's retailing system. It is located in district
26, near major traffic arteries, and is surrounded by
high-income neighborhoods. It is 6.0 km. from the CBD. Its
site, according to the classifications discussed in
chapter 2, falls into the so—called secondary shopping area,
and its location patterns in relation to the existing roads
and streets may be defined as pivotal (see Figure 12) . Iguatemi
shopping center is adjacenttx>a large peripheral avenue (Faria
Lima) and to one of the major, newly developed freeways
(Nacoes Unidas) which runs beside the Rio Pinheiros.
These thoroughfares and the characteristics of the adjacent.
district give the center one of the most privileged locations

within the city's urban area (see Figure 12).

217

 

 

 

 

 

 

AVE. REBOUCAS

 

 

 

 

 

fl

 

PINHEIROS RIVER

 

 

W

BU ILDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

B
Z
:3
U)
Lu
0
:1) PARKING
Z
a)
<2
Q
pi
>
<:
DIM
AV 3'

 

 

AVE. FARIA LIMA

 

FIGURE 12
IGUATEMI SHOPPING CENTER

 

 

 

218

The center was built during 1964 and 1965 on a
vacant lot of about 4 acres. It has a floor space of 17.350
m2 (approximately 187,000 square feet), but since the center
is built on three levels, the 17.350 m2 second level and
5.565 m2 third level make the gross building area about
40.265 m2 (approximately 247,000 square feet). This design
feature was an overdimensioning of building area relative
to lot size, as will be demonstrated later in this chapter.

Iguatemi represents a real advance in terms of
retailing facilities construction and architectural con—
ceptualization in the Brazilian environment. However, from
a retailing and marketing perspective,this institution falls
short; such sound techniques aS a balanced store 1nix
and plans for complete one-stop shopping facilities were
not applied. As will be discussed later, the leasable
area was allocated to an excessive number of small tenants
whose orientation is toward specialty merchandising; this
makes the center a high margin-low volume shopping place.
Due to the initial lack of marketing orientation,the center
must be conceived of as only a successful real estate
Operation.

Despite these limitations, Iguatemi has survived
and has become a prime retail location in S. Paulo. The
success of the center, which operates at lower efficiency
levels than similar IJ.S. - institutions,and which might

be more adequate if ideal retailing concepts had been

219

applied, is explained by several factors. First, there
is excellent market Opportunity in the surrounding areas;
second, traffic congestion in the area's competing
commercial strips has increased; third, a new pheripheral
freeway on the south side of the city has increased its
drawing power (lower isocrones); and fourth, expansion
of automobile ownership has increased consumer mobility.
This center is totally leased to private store-
keepers under an agreement Of fixed plus variable rent
(percentage of sales volume) quite similar to itstLEL
counterparts; administration and management Of the premises
are under the control Of a management company which belongs
to the original develOper, who also owned the construction
firm. In 1964 the center's promoter conceived an ingenious
mode of financing,land acquisition,and construction.
Instead of relying upon large investors, banks, or finance
companies, capital was generated from "participation quotas,"
which gave investors “the right to participate in the
center lease revenues." This scheme was unique and well-
suited to the Brazilian money market; it was efficient in
drawing financial resources from small investors and also
allowed planning flexibility to promoters and developers.
The plan assumed that the administration of Iguatemi would
be handled by a real estate management firm which, after
deducting its Operational expenses from the total revenue,

would distribute the excess profit among the investors.

220

The great majority of investors are dissatisfied
with their earnings, which are far below any other invest-
ment alternative. This failure precludes the use of
such a financing plan, which otherwise could prove workable
in future ventures of this kind.

Iguatemi Shopping Center:
Operational Descriptors

 

 

Shopping centers may be analyzed in terms of their
Operational characteristics from three perspectives: physical
facilities'parameters; trade area descriptors; and customer
shopping behavior.

The first perspective enables the analyst to evaluate
the center's architectural design and features and the degree
of compatibility with its retailing objectives. These may
be expressed by a prOper blending of store mix, internal
traffic flows, and parking availability. The second gives
insights about the impact Of the center upon its surroundings;
the analyst must delineate the boundaries Of the center's
trade area and furnish information to assess market penetra-
tion and drawing power parameters. The third perspective
generates estimators regarding patronage motivation, use Of
the center premises, frequency Of visits, car ownership,
customer income and expenditures at the center stores, and

so forth.

221

The following evaluation of Iguatemi will use this
format and will be performed in accordance with the taxo—
nomic guidelines established for these purposes in
chapter 22. The primary data used were drawn from continuous
field research conducted at the center from 1966 to 1971
under the author's guidance and supervision.

According to our taxonomic criteria, Iguatemi's
physical facilities parameters are detailed in Table 11.
There are several characteristic features worth mentioning.
First, the excessive building area exceeds its site
dimensions by about 7.000 m2. Second, large space is
allocated to internal malls which waste about 25 percent
Of the center's building area. Third, parking area is too
small relative to total building and rental space; the
center has a parking ratio Of 0.55 m2 and a parking index
of 1.9, which are extremely low in relation to its trade
area, location, and customer car ownership. Such figures
seem to indicate that retailing techniques were not followed
during the planning stage (see Figure 11).

Another peculiar feature of this center is that
since its Opening in 1965 it has increased the tenant
number by subdividing each vacant store into smaller units;
such a policy, according to information collected in 1971,
has resulted in 119 small units as Opposed tO the original
79 units.3 From a strategic retailing point of view,it is

difficult to see how the increase in the number of stores

222

TABLE 11.--Shopping Center Iguatemi Physical Facilities.

 

 

 

 

 

 

 

 

Descriptor Characteristic or Parameter
1. Design Hub type multiple floors - 3 floors
2. Site Area 33,500 m2 or 8.4 acres
2
3. Ground Floor Area 17,350 m = 186,754 sq. ft.
4. Total Building Area Ground floor = 17,350 m2 = 186,754 sq. ft.
First floor = 17,350 m2 = 186,754 sq. ft.
Second floor = 5,565 m2 = 59,901 sqJ ft.
Total Building Area== 40,265 m2 = 433,408 sq. ft.
5. Internal Malls (non- 2
selling areas) 10,770 m = 115,927 sq. ft.
2
6. Total Rental Area 29,495 m = 317,481 sq. ft.( (4)-(5) )
7. Parking Area 16,150 m2 = 173,837 sq. ft.( (2)-(3) )
. _ 2
8. Circulation Area 1,615 m = 17,384 sq. ft.(10% of (7))
9. Net Parking Area 14,535 m2 = 156,453 sq. ft.( (7)-(8) )
. r 2
10. Parking Space Size 25 m = 269 sq. ft.
11. Parking Capacity 581 cars spaces ( (9) I (10) )
. . 2
12. Parking Ratio 0.55 m = 0.55 sq. ft. ( (8)-(9) )
13. Parking Indes 1.9 parking spaces per 100 m of rental area. Given by the
following relation: 1.9 parking per 1000 sq. ft.
. (11)
number of car spaces _T——__——§' 317,481 sq. ft.
100 m /Rental Area 1000 sq. ft.
100 m
14. Store Mix (as % of Class % of Area NO. of Stores
area per major Food and Food Services 10% 9
class) General Merchandise 31% 2
Apparel 16% 42
Furniture/Home Appliances 4% 10
Other Retail 14% 41
Services Facilities 25% 15
TOTAL 100% 119
15. Leading Tenant Major Department Store

 

223

could bring real benefits to the center's customers or enable
economies of scale. The Opposite would seem to be true.

Iguatemi's trade area descriptors were evaluated
and analyzed several times by means of customers interviews;
such field research generated sound information regarding
trade area size, driving time, and driving distance.
Although each collection was limited to 200 interviews,
the information provides a basic picture Of competition
and customer preference within the market area's
geographic limits. Table 12 summarizes these data.

The table indicates empirical evidence Of some
theoretical concepts discussed in chapter 2. For example,
the percentage of customers coming from the secondary trade
area increased during the 1966-1969 period, whereas the
percentage Of customers from the tertiary trade area remained
almost constant. This fact may be explained by improved
traffic conditions in the area and because the center's
convenience became an extra attraction to pull customers
from farther districts. It also is interesting
that driving time inquiries indicate that 85 percent Of
patrons will not drive more than 30 minutes to reach the
center. This indicator is consistent with the driving
distance percentages analyzed in Table 3. In other words,
85 percent Of the center's customers come from areas not

farther away than 4 km. Another point to be noted is

TABLE 12.--Shopping Center

224

Iguatemi Trade Area Descriptors.

 

Descriptor

Characteristic or Parameter

 

Location in relation
to the urban area.

Location in relation
to the road network.

3. Drawing Power
3.1 Driving Distances
a. Primary Trade Area
(up to 2 km
radius)

b. Secondary Trade
Area (from 2 to
4 km radius)

c. Tertiary Trade
Area (from 4 to
6 km radius)

3.2 Driving Time

4. Population in the
Trade Area
4.1 Primary Trade Area
Secondary Trade Area
Tertiary Trade Area

Suburban - District NO. 26

Commercial Avenue - Faria Lima Av.

1966 Survey

District No. % of Customers District NO.

1969 Survey

% of Customers

 

 

 

 

 

26 28.3% 14

27 14.2% 27

14 6.6% 15

15 4.3% 26
53.4%

38 8.6% 13

6 6.6% 6

13 4.3% 29

39 4.3% 12

29 4.3% 39
28.1%

from 10 18.5% 25

districts 1

Others

Driving Time

24%
12%

8%
_21
46%

12%
10%
6%
6%
6%

40%

10%

2%
A
14%

% of Customers

 

 

tion

 

less than 15 minutes 58%
13 to 30 minutes 27%
30 to 60 minutes 8%
more than 60 minutes 7
District Number % of Popula
14, 15, 26, 27 and 28 = 266,228
6, 13, 29, 38 and 39 = 538,088
1, 4, 5, 12, 16, 24 and 40 = 450,139
TOTAL = 1,254,455

 

225

the high pOpulation coefficient within the trade areas:
804,000 individuals live within a 4 km. radius.

We now will focus attention on the demographics
Of the trade area and on findings related to customers'
shopping behavior. These data were collected by the same
procedures described previously, and analysis of the
results indicates patterns of shopping behavior consistent
with the theoretical constructs examined in chapter 2.

In Table 13, Iguatemi is examined in relation to
its customers' motivation and demographics, and some
interesting Observations can be made. It is clear that one
Of the basic reasons customers prefer the center is its
location (33 percent) and the fact that it Offers Off-street
parking (16 percent). Since no other retailers in the area
have the same or similar facilities, the convenience of
location and parking are obvious differential advantages.
Table 12 also indicates that Iguatemi is competing with the
nearest commercial street, where traffic congestion and
scarce parking make shOpping with a car time consuming; 85
percent Of the people interviewed declared they owned at
least one car.

Another point may be mentioned in relation to the
center: out Of 119 stores, 5 were preferred by 63 percent
of the interviewees. This seems to indicate that the

excessive number of small stores tends to reduce the

226

TABLE 13.--Shopping Center Iguatemi Customer Shopping Behavior and Demographics.

 

 

 

 

 

 

Question Motives and Attitudes Towards the SCI F%
1. Reason to patronize the Location 33%
SCI Product Mix 26%
Parking 16%
Retail Services 12%
Product Quality 9%
Other 4%
2. Preferred stores in the Department Store (1 store) 25%
SCI Variety Store (1 store) 14%
Supermarket (1 store) 12%
Shoe Store (2 stores) 12%
Other (114 stores) 37%
3. Other places in which Downtown 15%
like to shop Nearest commercial strip (Rua Augusta) 42%
Other 20%
NO prefererce 23%
4. Mode of Transportation Car 86%
to reach the Center Taxi 6%
Bus 5%
Walk-in 3%
5. Car Ownership per no cars 15%
customer household 1 car 43%
2 cars 30%
more than 2 cars 12%
Accumulative percentage at least 1 car 85%

6. Household Year Income Income 53 Class Midpoint F% x Class Midpoint
(USS) 0- 3,600 2 3 1,800 8 3,600
7,600- 7,200 6 5,400 32,400
7,200-10,800 20 9,000 180,000
lO,800-14,4OO 72 12,600 9011000

1,123,200-%100
I $11,232

n - 200 Obs: The household year income $11,232 reflects the

average household year income of the center
customers and cannot be interpreted as averages
for the districts in the center trade area.

 

227

eventual advantages which could be derived from large

scale Operation. In fact, most of the stores in the center
have an image of high price, high margin, and low volume
retailing. This fact leads to a final comment; the
relatively high average yearly household income (US$11,232L
as determined by the interviews, means that the center is
serving a high-income segment of the trade area population.

Lapa ShOpping Center:
Overall Characteristics

 

 

Lapa Shopping Center is located in district 40
(Lapa); its construction began in 1966 and it Opened
two years later. This is the second planned and controlled
shopping center in the GSPMA, and its promotion and con-
struction were handled by the same real estate firm which
developed Iguatemi. Site selection for this center was
based on the results of market area analysis provided by
hired consultants. At their recommendation, Lapa Shopping
Center was located in the core of Lapa district's com-
mercial zone, adjacent to the major retailing street.

According to the classification criteria develOped
in chapter 2, this center falls into a secondary shOpping
area locational category and it also may be classified as
an intersection type (see Figure 14). This locational
pattern is the principal constraint to the center's drawing

power and market share. On one side,the center faces

228

 

 

 

 

 

 

FIGURE 13
LAPA SHOPPING CENTER

229

competition from a large cluster of stores within walking
distance; on the other side, heavy traffic conditions make
car owners avoid the area. In addition, Lapa Shopping
Center's accessibility to an adjacent freeway is limited
by railroad tracks.

The center's major physical dimensions may be
described by the following parameters:

Land Lot area 7000 m2 (1.75 acres)

 

Total Building

 

 

Ground Floor 6900 m2 (74,270 sq. ft.)
lst. floor 1950 m2 (20,990 sq, ft.)
2nd floor 3900 m2 (41,979 sq. ft.)
3rd floor 1950 m2 (20,990 sq. ft.)
4th floor 3900 m2 (41,979 sq. ft.)
5th floor 1950 m-2 (20,990 sq. ft.)
total 20,550 m2 (221,228 sq. ft.)

The second and fourth floors are built with additional
wings at different levels, which eXplains the larger
areas.

These parameters demonstrated that an overdimensional
building design was used in relation to lot size. Since
the center's design was oriented toward saving space, a
limited 3.000 m2 (33,300 square feet) parking lot was
placed on part of the ground floor roof. The architectural
characteristics Of this center (see Figure 13), due to its

multiple levels and because of the substantial prOportion

Of area allocated to internal traffic needs, falls short

230

of meeting its retailing Objectives; internal circulation
is made difficult because of multiple staircases, and
these also reduce the area allocated to retailing purposes.
Lapa was designed to accommodate 118 tenants plus
an Office area to be occupied by the management company;
however, due to its poor design and because of its location,
the rate Of occupancy has been around 40 percent Of the total
leasable area since the GamerRSOpening in 1968. Furthermore,
store turnover has been constant, which means that some
storekeepers have gone bankrupt or have had to close their
Operations.
The reasons for the limited success Of this center
are quite clear to the marketing analyst. First, in addition
to its inaccessibility,the center does not Offer sufficient
parking facilities; if these were available, the inconvenience
of the high friction access partially would be reduced in
the minds Of prospective customers. Second, the center
merely replicated the existing store mix in the vicinity.
Since most of these stores belong to independent and long-
established storekeepers, they have a definite advantage
in price and Operational margins, and,in general,they have
a differential advantage. Third, the area's transient
traffic is composed overwhelmingly of lower-income commuters
who use the bus stop and adjacent railroad station; Obviously,
these customers prefer to shOp in the old-fashioned but

lower priced business district.

231

It is interesting that this second shopping center
experience cannot be considered an improvement over the
techniques used for Iguatemi. By and large, Lapa is another
real estate venture that has failed to meet its objective
as an innovative component Of S. Paulo's retailing system.
Lapa was financed similarly to Iguatemi, and it also has not
fulfilled expectations as a profitable investment.

It is difficult to forecast improvements in the
performance Of this center since its main limitations stem
from noncontrollable variables. Among these are trade area
shopping behavior and low purchasing power; over-utilization
of land space without the possibility Of parking area
expansion due to the lack Of buffer areas; and extreme
competition in the vicinity.

Lapa Shopping Center: Operational
Descriptors

 

Lapa ShOpping Center's problems will become quite
evident when operational measurements are applied to the
data collected. The format for evaluation will follow the
same framework used previously, and it draws upon informa-
tion collected in the same manner. Table 14 shows the
results of the analysis and permits some interesting
Observations to be made concerning Lapa's design features.

Compared with U.S. standards, and even in

comparison with Iguatemi, the errors in planning and

2232

TABLE l4.--Shopping Center Lapa. Operational Descriptors.

 

 

Descriptor Measurement or Parameter

1. Design Hub shape multiple level - six floors

2. Land Site Area 7,000 m2 (75,347 sq. ft.)

3. Ground Floor Area 6,900 m2 (74,271 sq. ft.)

4. Total Building Area 20,550 m2 (221, 198 sq. ft.)

5. Internal Malls 4,100 m2 (44,132 sq. ft.)

6. Total Rent Area 14,500 m2 (156,077 sq. ft.)

§E§;} To calculate total rent area were deducted

from the total building area the following

spaces: (1) Internal malls 4,100 m2 and (2) 1950 m2
occupied by the center management and

machinery house. Thus total Rent Area =

20,550 m2 -(4,100 m2 + 1950) = 14,500 m2.

7. Parking Area 3,000 m2 (32,292 sq. ft.)
8. Circulation Area 360 m2 (3,875 sq. ft.) ( (7) x 0.12)
9. Net Parking Area 2,640 m2 (28,417 sq. ft.) ( (9) - (8) )
10. Parking Space Size 25 m2 (29.9 sq. ft.)
11. Parking Capacity 106 cars ( (9) (10) )
12. Parking Ratio 0.146 ( (7) (4) )
13. Parking Index 0.690
Obs.: Calculated by the formula
Pc
P.I. = TRA
100

where: PI 8 parking index
Pc 3 parking capacity (11)
TRA = Total Rent Area

 

 

 

14. Store Mix Retailing Class % of the Area No. of Stores
Food and Food Services 10.83 4
General Merchandise ' 2.01 2
Apparel 10.53 7
Furniture/Home Appliances - -
Other Retail 4.32 7
Services 12.47 7
TOTAL 39.71

Obs.: These figures reflect the % of total renting
areas as September, 1971.

15. Leading Tenant Supermarket

 

233

design Of this center are obvious. The parking ratio of
0.146 and the parking index of 0.690 are good examples Of
these flaws; the effects were perceived during the survey
conducted last year, at which time the parking area was so
congested that the management enforced a one-hour parking
limit. Considering that almost 60 percent of the center's
area was vacant at that time, it is apparent that if the
center reaches higher tenancy its parking facilities will
become completely Obsolete.

Due to its inherent shortcomings, Lapa was not
capable, even two years after its opening of achieving
a balanced or at least a complete store mix (see Table 14).
There are no furniture and home appliance retailers, and
there is no department store.

Table 15 also describes the relationship between
the center and its trade area. Drawing power did not change
substantially from 1969 to 1971; assuming an increase in
the area's population, the center did not increase its
attraction or appeal for surrounding residents. Even if
the primary trade population had remained constant two
years after its opening, Lapa should have increased its
market penetration. Furthermore, there has been no sub-
stantial increase in the number of customers as measured
by driving time interval; a large percentage of customers
(53-56 percent) spend less than fifteen minutes to reach

the center. This condition may be explained by the center's

234

TABLE 15.--ShOpping Center Lapa Trade Area Descriptors.

 

Descriptor

Measurement/Parameters

 

1. Location in relation
to the urban area.

2. Location in relation
to the road network.

3. Drawing Power
3.1 Driving Distance
a. Primary Trade
Area (0-2 Km

radius)

b. Secondary Trade
Area (2—4 Km
radius)

c. Tertiary Trade
Area (4 Km-6 cm
radius)

3.2 Driving Time

4. Population in the
Trade Area

 

a. Primary Trade Area
(0-2 Km radius)

b. Secondary Trade
Area (2-4 Km.
radius)

c. Tertiary Trade Area
(4-6 Km. radius)

Suburban - District No.

40. Lapa

Business District Block - Catao Street

1969 Survey

District No.

% of Customers

 

 

4O

46, 29, 27,

28

l, 17 and
others

Driving Time

0-15 minutes
15-30 minutes
30-60 minutes
more than 60 minutes

District No. 1
40

 

27
28
29
30

31
39
72
47

TOTAL

District NO.

1971 Survey

% of Customers

 

46% 40

19% 46, 27, 29

35% 45, 44, 1
_____ and others
190%

Population (1970

 

123,634

44,457
34,046
101,396
30,035

99,405
176,731
30,924
100,031

1,091.295

% of Customers

 

 

 

1969 1971
53% 56%
24% 28%
15% 16%

8% 0%

100% 100%

 

235

low degree of accessibility and by its poor retailing
features. Thus, despite its large building area, Lapa
cannot be considered a true regional shopping center; its
deficiencies in planning and design reduce it to the
operational and trade area dimensions of a community
center. In conclusion, difficult access means that this
center, which is located in a trade area with more than
one million individuals, operates below full capacity.
Customers interviewed on the premises disclosed
that only 10 percent patronize Lapa because of its loca-
tion, and only 9 percent indicated parking as the main
reason for shopping there. Bearing in mind that parking
and locational conveniences are the basic factors which
legitimize the existence of planned and controlled centers,
it seems that this center has not fulfilled these condi-
tions (see Table 16). The store preferred by the inter-
viewees was a supermarket. Recalling the conceptual
framework discussed in chapter 2, this phenomenon is very
incompatible with a center of this size, in which the
leading tenant should be a department store. The fact
that the center does not offer a strong competitive thresh-
old may be deduced from the high percentage Of customers
(65 percent) who shOp alternatively in the neighboring

business district and downtown (CBD) (see Table 16).

TABLE 16.--ShOpping Center Lapa.

236

Shopping Behavior and Demographics.

 

‘UesfilOn

Motives and Attitudes Towards the 5C;

% Customers

 

(f)
a

Reason to patronize
the SCL

Preferred Stores at
the SCL

Other places in which
like to shop

Mode of transportation
used to reach the
center

Car Ownership per
customer household.

Customer Household Year
Income (USS)
(C35 = 0831)

Location 10%
Product Mix 23%
Parking 9%
Retail Services 27%
Product Quality/Price 24%
Others 7%
Supermarket (Pao de Acucar) 50%
Fabrics and Textiles 19%
Discount Shop 17%
Shoe Store 6%
Others 8%
Lapa's Business District 39%
Downtown (CBD) 26%
Augusta Street 9%
SCI 3%
fitters 23%
Car 40%
Taxi (let-out) 14%
Public (Bus and/or train) 22%
Walk-in 24%
£23.: The same question proposed in the 1969 Survey
prov1ded the following answers:

Car 29%
Taxi 3%
Public 42%
Walk-1n 26%

Car per Household

1969 Survey %

 

no cars 42% 52%

1 car 41% 38%

2 cars 15* 8%

more than 2 cars 2% 2%
Income F% Class Midpoint

1971 Surve %

F% x Class Midpoint

 

0- 3,600 20% 1,800
3,600- 7,200 25% 5,400
7,200-10,800 51% 9,000

10,800-14,4OO 4% 12,600

Average Income =

20x1,800= 36,000
25x5,400= 135,000
51x9,000 = 459,000
4x12,600=_5_0,_4_€&

680,400
100

Average Income = USS 6,804

 

237

Car ownership and annual household income in lapa's
trade area is significantly lower than in Iguatemi's, but,
despite the lower rate of car ownership, the center's
parking lot is insufficient and does not perform its func-
tion, namely, to offer convenient off-street parking for
patrons. The income figures shown in Table 16 are substan-
cially higher than the averages determined to elaborate the
income indexes (see chapter 5). Such differences may be ex-
plained by the fact that this center is serving only a small
proportion of the region's pOpulation.

The above analysis, which reflects conclusions
derived from Lapa's operational descriptors, leads the
analyst to affirm that this center does not represent
advancement or progress in terms of the application of the
retailing techniques. It is marred by a lack of sound
locational planning, improper use of land space, and
misapplied architectural design concepts. As a result,
four years after its opening, 60 percent of Lapa's leasable

area still is vacant, and there is constant tenant turnover.

Center 3

Overall Characteristics

 

The third experiment in shopping centers is Center
3, located in district 15 (Cerqueira Cezar) at the inter-
section of a major street of office buildings and the most
elegant commercial street in S. Paulo. This site may be

classified as a secondary shopping area relative to the

238

surrounding streets; its location is typically an inter-
ception site. The south entrance is on Paulista Avenue,
which,during the 19203,was the best residential district
in the city. Today, due to the construction of large office
and bank buildings, this avenue is an important business
and financial street. This center initially was financed
by private resources, but,due to a lack of funds,it was
transformed into a corporation. Construction was begun in
1969 and took about five years to complete.

The center's design is rather peculiar; the building
has 24 floors, but only the first four are allocated to
the center as such, the remainder being used as offices
by a major state-owned public utility company. For the
purposes of the present analysis, the building complex will
be evaluated only in relation to the areas pertaining to
the shopping center's operations and its underground parking
lot. According to this criterion,the center uses all of

its land lot, which is approximately 7,000 m2

(75,344 square
feet).
Since the building was constructed in multiple

levels with different areas,it is convenient to break

down its physical measurements

Selling Area

 

 

Ground floor = 5.144 m2 ( 55,370 sq. ft.)
lst floor = 6.980 m2 ( 75,132 sq. ft.)
2nd floor = 282 m2 ( 3,035 sq. ft.)
3rd floor = 4.131 m2 ( 40,466 sq. ft.)

Total 16.537 m2 (178,000 sq. ft-)

239

Parking Area

 

5.128 m2 (55,197 sq. ft.)

3.846 m2 (41,398 sq. ft.)
8.974 m2 (96,600 sq. ft.)

lst level underground parking

2nd level underground parking

 

The center's physical dimensions, the location of
the major tenants within the center, and its underground
parking facilities make it rather difficult to classify this
structure as a "real" shopping center. Despite the good
taste of its internal malls, which are made of expensive
materials, Center' 3 lacks competitive power in relation
to the unplanned store cluster along the nearby well—known
Augusta Street (see Figure 14). Difficult access to the
center, due to the location of its parking area and
constant traffic congestion in the vicinity, means that the
center suffers greatly from the Augusta Street cluster, which
operates as a powerful interceptor (see chapter 2).

Another major shortcoming of the center is its store mix.
As will be verified later, there is an excessive amount of
space allotted to service institutions and to several
apparel stores. Both factors precluded the center from
operating as a high hierarchy central place.

This center, similar to others in the GSPMA,is
leased to a private management firm under a rental agree-
ment which includes a fixed minimum rent plus a variable
amount based on sales percentages. In order to avoid

inflationary effects,the management added a clause in its

240

 

 

 

 

 

 

R. FREI CANECA

 

 

R. LUIZ COELHO

 

' BUILDING
' ' 'y

 

 

 

 

 

 

R. AUGUSTA

 

 

TO UNDERGROUND PARKING

 

 

 

 

AVE . PAU LIS TA

 

FIGURE 14
CENTER 3

 

 

 

 

 

241

rental agreements: the fixed rent segment also is adjusted
when the minimum wage increases; thus fixed rent is calcu-
lated as a multiple of current minimum wages. Such a scheme
is expressed in the following formula: Rent = K + Sp,
where K = number of minimum wages, and Sp = percentage of
sales.

Although Center 3's tenants at the time of the
field survey were far from satisfied with the center's
customer traffic and sales volume, almost all space was

rented.

Center 3: Operational Descriptors

 

As previously mentioned Center 3 was examined in
terms of its physical dimensions, in relation to its trade
area, and concerning its customer shopping pattern. Due
to its recent opening, the center was surveyed only once,
which limits the analysis of eventual changes that might
occur at different stages of a center's operational periods.

From Table l7it may be perceived that the center's
physical dimensions relationships are extremely difficult
to analyze within standard parameters because of its multiple
levels and irregular land lot measurements. However,
evaluation of relevant parameters such as parking ratio and

index, store mix, and total rental area is still possible.

242

TABLE 17.--SC-3, Physical Facilities Descriptors.

 

 

Descriptor Measurement or Parameter
1. Design Hub - open malls - multiple level underground
parking
2. Site Irregular shape, central block, three exits -
1.75 acres (see Figure ).
3. Ground Flor Area 5.144 m2 (55,370 sq. ft.)
4. Total Building Area 16,537 m2 (178,000 sq. ft.)
5. Internal Malls 3,142 m2 (32,820 sq. ft.)
6. Total Rent Area 13,395 m2 (144,182 sq. ft.) ( (6) - (5) )
7. Parking Area 8,974 m2 (96,600 sq. ft.)
. . 2
8. Circulation 1,076 m (11,581 sq. ft.) (0.12 x (7) )
9. Net Parking Area 7,898 m2 (85,013 sq. ft.) ( (7) - (8) )
10. Parking Space Size 22.6 (243 sq. ft.)
11. Parking Capacity 350 cars ( (9) % (10) )
12. Parking Ratio 0.54 ( (7) § (4) )
13. Parking Index 2.0 (10 % (4)/100)
14. Store Mix Retail Class No. of Stores % of Area
Food 7 24.2
General Merchandise 1 4.3
Apparell 15 7.5
Furniture/Home
Appliances 8.0
Other Retail 11 6.3
Services _4_ 49.7
TOTAL 42 100 %
15. Leading Tenant Junior Department Store

 

 

 

243

The parking ratio and parking index parameters are
extremely low by U. S. standards or even in relation to
the centers examined previously. The parking ratio (0.54)
may be explained by the center's architectural features and
by the high price of land in the area. The parking index,
on the other hand, reflects poor planning, since a center
with a large percentage of space rented to institutions
selling shopping goods and services requires a much higher
index. Another point which must be raised is that the
center rents almost 50 percent of its area to service
institutions such as banks and theaters; 15 of 42
stores, about 36 percent of the tenants, use only 7.5 per-
cent of the area, which is occupied mostly byapparel stores
selling high-cost,high-margin merchandise. These factors
indicate that mass retailing and proper tenant mix concepts
which are essential characteristics of planned and controlled
shopping centers,were not observed in the center's planning.

Trade area descriptors are analyzed in Table 18
according to the format used previously. This table indicates
that customer patronage does not follow standard patterns;

a larger percentage of customers are drawn from secondary
and tertiary areas--the center does not draw the majority

of its customers from the vicinity. There are various
explanations, but the most importantcnmzis the nature of the

surrounding area, which is typically a business district.

244

TABLE 18.-—SC-3, Trade Area Descriptors.

 

 

 

 

 

Descriptors Measurement and Parameters
1. Location in relation Central - District No. 15 (Cerqueira Cezar)
to the urban area
2. Location in relation Business and Financial Avenue - Paulista Avenue
to the road network
3. Drawing Power 1971 Survey
3.1 Driving Distance District No. % of Customers
a. Primary Trade Area 15, 26
(0.2 Km) 14, 5, 6 26%
b. Secondary Trade 17, 29, 4
Area (2-4 KM) 12, 39, 13 53%
c. Tertiary Trade 40, 38, 25, 21%
Area (4-6 Km) 16
100%
3.2 DriV1ng Time Time Interval
0-15 minutes 24%
15-30 minutes 50%
30-60 minutes 24%
more than 60 minutes 28
N = 200 100%
4. Population in the Trade District No. Population
Area No. 1 8,628
a. Primary Trade Area 5 62,988
6 65,659
14 92,697
15 44,770
26 50,258
b. Secondary Trade Area No. 4 62,931
12 49,840
13 82,644
27 44,457
29 101,396
39 176,731
c. Tertiary Trade Area No. 16 69,647
25 72,471
38 111,620
40 123,634

TOTAL

1,220,409

 

245

A second reason is the serious competition from the adjacent
commercial street, which,despite its crowded traffic condi-
tions,offers a much better store mix and is closer to the
residential areas.

The evaluation of Center 3 was concluded by
an analysis of its customers' shopping behavior and demo-
graphics; these data are shown in Table 19 and allow for
several interesting observations. Location and parking,
for example,rated very low among the patrons' motives,
whereas product quality ranked highest. Customer preference ,
as indicated by the table,is very unusual for shopping
centers, since the great percentage of customers said they
preferred the gift shops. Due to its location near the
adjacent commercial strip (Augusta Street and Iguatemi),
the center was an alternative shopping place for 52 percent
of its customers. Evidently,this center also has operational
limitations. Despite the large income of its patrons,it
falls short of being a complete and integrated shopping

facility, and thus loses an excellent market opportunity.

Final Remarks

 

The preceding analysis reveals that the shopping
center industry in the GSPMA is in its initial stage;
furthermore, the evaluation of the three centers' operational
characteristics, physical design, and trade area relation-

ships has demonstrated that this type of retailing operation

TABLE l9.--SC-3.

ShOpping

246

Behavior and Demographics.

 

Question

Motives and Attitudes

Toward the SC-3

% of Customers

 

1. Reason to "atronize
l"
S.:- 3

2. Preferred stores at
SC-3

3. Other places in which

like to shop

4. Mode of transportation used

to reach the Center

3. Car ownership per
customer household

6. Household year income

(08%

Location

Store mix
Parking

Retail Services
Prices

Product Quality

Apparell store
Supermarket
Bank

Gifts Store
Restaurant
Others

Augusta Street

f"_
.2111.

.pping Center Iguatemi

Downtown
chers

Car

Tax1

Bus

Walk-in

Deroqraphics

 

 

 

Jo of cars per household
No cars

1 car

2 cars
3 or more cars
x . a Class

Inco. c class Fe. Mid-Point

n- 3,500 2% 1,800
3,690- 7,200 8% 5,400
7,200-10,800 44% 9,000
10,800~l4,400 46% 12,600

Ex-Class

6%
20%
13%
16%
14%
31%

31%
11%
11%
22%
14%
21%

52%
40‘
4%
4%

56%
10%

6%
28%

26%
42%
22%
10%

Mid-Point
100

 

N
XXXX

46

5,400
9,000
12,600

Average Household Income per Year = 1,022,400 =

100

1,800 =

3,600
= 43,200
= 396,000
= 579,600
1,022,400

$10,224

 

247

is still less advanced when compared with U.S. patterns.

The overall constraints analyzed are related to the lack

of marketing orientation, since the greatest emphasis has
been placed on the real estate dimensions of these institu-
tions, and also because basic concepts of retailing location
and physical design were not followed.

In the case of Iguatemi Shopping Center, the location
is excellent but the excessive use of land space makes the
center's parking inconvenient, an undesirable characteristic
in a true shopping center. The locations of the other
two centers were poorly selected, since both are in congested
traffic areas with very limited parking space and suffer
from intensive competition from adjacent unplanned retailing
clusters. In the specific case of Lapa, the low income
level found in its northern trade area also limits its
success. In all three centers,there is an excessive number
of small stores,which generally operate with a high—price,
high-margin product mix. In one way or anothen this reduces
the centers' total sales volume and limits the patronage
only to higher income segments of the population. These
conditions should be avoided, since the land cost in the
area and the large investment in specialized types of stores

require large volumes of operation.

 

248

Relationships with
Theoretical Concepts

 

 

It is interesting to observe that many of the
theoretical concepts examined in chapter 2 are useful to
explain the low level of performance of the three centers
analysed above.

The location of Lapa and Center 3, for instance, did
not use normative concepts such as those mentioned by Nelson,
Paul Smith and Applebaum, these centers were located in
areas of difficult access and with large retailing com-
petition.

The layout and the physical design of the three
centers did not follow the concepts of proper store mix
and one stop shOpping suggested by Cox, Meissner and Bliss.
These centers do not provide sufficient parking, thus
reducing the convenience factor. In two centers (Lapa
and Center 3), the concept "total system" expounded by
Paul E. Smith, was not followed since these centers are
not adjusted to their environment, do not have a complete
store mix and do not draw business adequately from the
vicinity.

The analysis of trade areas descriptors and
shopping behavior at Lapa and Center 3, indicated that these
centers are not Operating consistently with the concepts of

drawing power and spatial shopping behavior examined by

249

Lalonde and Huff; this phenomenon occurs because basic
concepts such as driving time and driving distance were not4
taken into consideration for planning purposes.

Furthermore, is is important to mention that a
better knowledge of urban system theories would have been
useful to the centers' planners and developers in GSPMA.

Concepts such as Ullman—Harris, multiple nuclei
theory, if applied in the planning stages would have given
a better perSpective to the planners relative to the cities
internal characteristics and trends . In this case,
shopping centers would have been located in points of
greater intracity accessibility.

Hurd's, Hoyt's concepts, if applied during the
planning stages of these centers, would have contributed
a good understanding of the city, its present structure and
future growth. The use of Hurd's and Hoyt's constructs
in the location and planning stages would have given
insights relative to the shopping centers' areas and
their housing-trade patterns,

The concepts of Blumenfeld and Hoover, if applied,
would have given a proper perspective in relation to the
ecological role of these centers within their trade areas.
Since Lapa, and Center 3, are not contributing to reduce
traffic congestion and to improve convenience shopping in
their regions, it is possible to affirm that these

institutions are not fulfilling their objectives.

250

A basic conclusion can be derived from the analysis
above. Despite the outstanding growth of the GSPMA, its
shopping center industry is still incipient, since its
planners and develOpers failed to recognize in their first
eXperiences the characteristics of this large metropolitan
area and the impact of the automobile upon its urban

structure.

In conclusion, the shopping center industry in the
GSPMA needs a better orientation concerning locational
criteria, proper balance between the land site and the size
of the center's physical facilities, and the planning of
adequate store mix. The next chapter will be focused on
the development of normative criteria related to this

subject.

FOOTNOTES: CHAPTER IV

1The author is indebted to Professor Jacob J. Gelman
of the School of Business Administration of S. Paulo, who
provided extensive information based on research made under
his guidance. Professor Gelman's research followed the same
framework applied by this author in previous publications.

2The information concerning 1966, 1968, and 1969
were gathered from field research done during seminars on
retailing systems management at the School of Business
Administration of S. Paulo under the author's guidance.
The 1971 data were collected by the author and his associates
in field studies conducted for the special purposes of the
present dissertation during September and October of 1971.
The author is indebted to many of his students for their
cheerful responses to his research inquiries.

3Lima, Shopping Centers, p. 121.

 

251

 

CHAPTER V

CITY OF S. PAULO MARKET OPPORTUNITY

Introductory Concepts

 

The characteristics Of the institutions which compose
retailing systems stress the necessary conditions for compatibility
between the descriptors Of a trade area and the operational
dimensions Of its retailing institutions. In other words,
the effort performed by retailers must be in prOper
balance with the market Opportunity existing within the
trade area's boundaries. According to Wroe Alderson,

pppprtunity can be described in terms Of demand for a

 

specific product or service, or as related to a set of
products and services in demand within a certain geographic
area.1 Effort may be defined as the demand obtaining

and demand servicing activities performed by retailing
institutions to match market Opportunity. The demand or
market Opportunity of retailing institutions may be con-
ceived over space. Specifically in this dissertation,

the demand or market Opportunity will be analyzed within
the limits of trade areas defined in terms Of the city Of
S. Paulo's 48 districts, which are the smallest legal micro-
areas within the city's major limits.

252

253

In order to evaluate market Opportunity, it is
necessary to point out its principal dimensions or character-
istics. Rom Markin believes market Opportunity may be
assessed by the following dimensions:2 (1) market
pOpulation; (2) market pOpulation purchasing power; and
(3) market prOpensity or willingness to spend and consume.

In our case,only secondary data were available concerning
pOpulation and income; there were no information or published
statistics regarding consumption and spending patterns per
district. Thus, two other descriptors were selected to
evaluate the market Opportunity in each district: the

first is the spatial dimension Of each district, which may
provide indications about income distribution over space, and
the second is the number of automobiles in each district.

These two seem tO be a rational choice because they are
linked with density factors and mobility patterns within
districts. The size Of each district will be translated
into an index capable of evaluating market Opportunity per
district, automobile ownership will indicate, in relative
terms, that one district has more mobility than another,
and that the trade area within the district requires a
certain amount Of parking space for retailing purposes.
Therefore,market Opportunity in S. Paulo's 48 districts
will be evaluated by the following major descriptors: (l)
pOpulation per district; (2) income per district; (3) car

ownership per district; and (4) district area (sz).

254

Each of the first three will be transformed into indexes
which will be aggregated into a composite index, then
modified in relation to the area index (4); this measure-
ment will indicate market Opportunity relative to the area
Of each district.

In order to accomplish this task, it is necessary
to discuss the physical and geographic characteristics Of

S. Paulo's urban districts.

City Of S. Paulo: Urban Area

 

Geographic Characteristics

 

According to information provided by Instituto
Brasilieiro de Geografia e Estatistica, the City Of S.‘
PaulO's urban area is 842 kmz; it is composed Of 48 urban

2

districts Of irregular shape ranging from 1.12km (Se)

to 151.10 km2 (Socorro).3 These are clustered around the
District of Se, the center Of historical settlement and
the area in which the CBD is located. The other 47 districts
have develOped in eXpanding circles around this central
point and represent an interesting pattern; their area
increases in proportion to their distances from the CBD
(see Figure 15).

Figure 15 shows the urban districts' location
and contours, the major external limits Of the city,

and adjacent counties and rural areas . Districts have been

numbered from 1 to 48 starting from the CBD and following

256

a clockwise spiral. Adjacent counties are indicated by
letters and adjacent rural areas by the letters R.A.4
The major external limits Of the city are depicted by
heavy lines, whereas districts and adjacent counties are
represented by fine lines.

Despite their irregular shape and the large
difference among their demographics, the districts have
to be selected as a standard geographic unit (SGU) because
census information and other Official statistics are avail-
able by districts.5 Such a constraint may be avoided by

establishing relative indexes of market Opportunity for

each district.

Districts Demographics

 

The evaluation Of the relative market Opportunity in
each district began with data flnmnthe 1970 Brazilian census
and from S. Paulo Metropolitan Subway Research which were
analyzed and classified by districts. Table 20 shows
figures on the pOpulation distribution per district, the
area Of each district given in kmz, and the pOpulation
density in each district (inhabitants/kmz).

Three peculiar characteristics Of the SE districts
area can be Observed. First, there are large pOpulation
coefficients in the external districts Of the city; second,
districts clustered around the original CBD are irregular
in shape; and third, outlying districts are larger in area

than central ones.

257

The wide range in population density may be explained
by differences in housing patterns among the districts as
well as by the large variance within districts. Districts
4, 5, and 16, which have pOpulation densities Of about
25,000 per km2,are known for their small area and high
concentration of apartment buildings. Districts 33 and 43,
despite their large population coefficients,have a density
Of about 4,000 inhabitants per km2 because Of their large

areas (see Table 20).

TABLE ZML——City Of Sao Paulo——District Demographics 1970

 

 

Census.
District District Area Density
Name NO. POpulation (kmz) POp./km2
SE 1 8,628 1.12 7,703
BRAS 2 56,027 3.98 14,077
MOOCA 3 35,668 3.99 8,939
LIBERDADE 4 62,931 2.70 23,307
BELA VISTA 5 62,988 2.30 27,386
CONSOLACAO 6 65,679 3.84 17,103
ST. EFIGENIA 7 43,755 2.50 17,502
PARI 8 30,945 2.75 11,252
BELENZINHO 9 52,776 5.50 9,595
ALTO DA MOOCA 10 137,288 9.83 13,895
CAMBUCI 11 49,544 3.72 13,318
ACLIMACAO 12 49,840 2.81 17,336
V. MARIANA 13 82,644 9.36 8,829
J. PAULISTA 14 92,697 7.49 12,376
CERQ. CEZAR 15 44,770 2.16 20,726
ST. CECILIA 16 69,647 2.71 25,700
BOM RETIRO 17 25,853 2.48 10,424
V. GUILHERME 18 74,450 7.23 10,297
V. MARIA 19 116,916 11.19 10,448
TATUAPE 20 255,515 25.82 9,896

TABLE 20.--Continued.

258

 

 

District District Area Density

Name NO. Population (kmz) POp./km2
V. FORMOSA 21 96,822 8.72 11,103
V. PRUDENTE 22 359,597 31.76 11,322
IPIRANGA 23 173,355 16.35 10,602
SAUDE 24 236,555 21.48 11,012
INDIANOPOLIS 25 72,471 7.84 9,243
J. AMERICA 26 50,258 5.64 8,910
PINHEIROS 27 44,457 5.01 8,873
V. MADALENA 28 34,046 4.81 7,078
PERDIZES 29 101,396 8.80 11,522
BARRA FUNDA 30 30,035 2.53 12,780
CASAVERDE 31 99,405 7.11 13,981
SANTANA 32 200,490 34.07 5,884
TUCURUVI 33 360,504 89.07 4,047
CANGAIBA 34 60,265 9.11 66,615
PENHA 35 138,206 11.60 12,274
V. MATILDE 36 151,475 21.17 11,914
JABAQUARA 37 197,169 21.96 8,978
IBIRAPUERA 38 111,620 28.25 3,951
BUTANTAN 39 176,731 53.86 3,281
LAPA 40 123,634 21.84 5,660
LIMAO 41 70,232 6.15 11,419
COCHOEIRINHA 42 30,924 2.55 12,127
ST. AMARO 43 378,911 94.56 4,007
V. JAGUARA 44 52,140 8.46 6,163
PIRITUBA 45 86,401 23.39 3,693
N.S. do 0 46 141,863 11.85 11,971
BRASILANDIA 47 100,031 19.48 5,135
SOCORRO 48 166,494 151.10 1,101
TOTAL 5.264,048 842.00 (A)

 

NOTE: City's urbanized Area

= (A) 842.00

(Source - IBEGE - S. Paulo
Aspectos do Municipio de 8. Paulo 1968)

259

POpulation Index

 

POpulation is a key element in evaluating market
Opportunity. A useful way to compare population coefficients
and their distribution among districts in a major market
area is in terms Of indexes. These provide a clear indi-
cation Of relative differences among districts. TO convert

absolute pOpulation figures into indexes requires a simple

 

process:
D x100
pop. 4 = .2.T__ (5.1)
P
where: Pop. % = pOpulation percentage per district;
Dp = district population; and
Tp = total pOpulation;
then
P. = POp.%xlOO = N x Pop. %, (5.2)
1 100
N
where: Pi = pOpulation index, and
N = number of districts.

Table 20 was prepared using equations (5.1) and
(5.2), and the following figures were used to generate the

indexes:

T = 5.264.048 = S. Paulo's total population in 1970;

N = 48 = number Of districts; and

POp.% = percentage Of pOpulation distribution per district.

260

An analysis Of Table 21 indicates that there is a wide
range Of variation in the population indexes. The
smallest is 7.20 for District 1 (Se), and the largest
is 345.12 for District 43 (St. Amaro).

An interesting Observation is that 16 districts
(33 percent) have population indexes higher than 100,
which means populations Of more than 109,751. Another
relevant point is that the farther the districts are
from the core of the city, the higher the population index.
Such a characteristic is uncommon Of U.S. cities and
seems tO be the result Of working class and lower-income
people living in out-lying areas where the land value
is low. This large concentration of pOpulation in the
peripheral zones, combined with adequate decentralization
Of retailing, eXplains the need for movement toward the

CBD,which was mentioned in chapter 3.

TABLE 21.--Population Index 5. Paulo-—48 Districts 1970
Population--Distribution--%--Index.

 

 

District % Of

NO. Population Population Index
1 8,268 0.15 7.20

2 56,027 1.06 50.88

3 35,668 0.67 32.16

4 62,931 1.19 57.12

5 62,988 1.19 57.12

6 65,679 1.24 59.52

7 43,755 0.83 39.84

8 30,945 0.58 27.84

9 52,776 1.00 48.00
10 137,280 2.60 124.80

TABLE 21.-—Continued.

261

 

 

District % of
NO. Population POpulation Index
11 49.544 0.94 45.12
12 49,840 0.94 45.12
13 82,644 1.56 74.88
14 92,697 1.75 84.00
15 44,770 0.84 40.32
16 69,647 1.32 63.36
17 25,853 0.49 23.52
18 74,450 1.41 67.68
19 116,916 2.21 106.08
20 255,515 4.85 232.80
21 96,822 1.83 37.84
22 359,597 6.82 327.36
23 173,355 3.29 157.92
24 236,555 4.49 215.52
25 72,471 1.37 65.76
26 50,258 0.95 45.60
27 44,457 0.84 40.32
28 30,046 0.57 27.36
29 101,396 1.92 92.16
30 30,035 0.57 27.36
31 99,405 1.88 90.24
32 200,490 3.80 182.40
33 360,504 6.84 328.32
34 60,265 1.14 54.72
35 138,206 2.62 125.76
36 151,475 2.87 137.76
37 197,169 3.74 179.52
38 111,620 2.11 101.28
39 176,731 3.35 160.80
40 123,634 2.34 112.32
41 70,232 1.33 63.84
42 30,924 0.58 27.84
43 378,911 7.19 345.12
44 52,140 0.98 47.04
45 86,401 1.64 78.72
46 141,863 2.69 129.12
47 100,031 1.89 90.82
48 166,494 3.16 151.68
TOTAL 5,264,048 100.00

 

262

Income Index

 

Income index determination followed a procedure

similar to that for pOpulation:

 

Di x 100
i
where: Inc. % = income percentage distribution per district;
Di = total district household income per year; and
Ti = total household income per year for all
districts;
then
_ Inc. % x 100 _
Ii - 100 — N x Inc. %, (5.4)
N
where:
Ii = income index, and
N = number of districts.

Table 22 was prepared using equations (5.3) and
(5.4), and secondary data from the S. Paulo MetrOpolitan
Subway Research and the Plano Urbanistico Basico (PUB).6
Since the information available on income was in inappropriate
form, some adjustments were made. (1) Di (total district
household income per year) was defined as the total amount

Of salaries and other income earned by households within

the district during one year, in dollars. (2) The secondary

263

data available for income determination was derived from the
socioeconomic studies conducted by the S. Paulo's Metropolitan
Subway Research during 1968. These data were adjusted to
1970, assuming an increase of 1.02 percent in the real income
per year (5.6) and then transformed into U.S. dollars at a
rate Of conversion Of CR$5.00 to US$1.00 (5.7). These
equations are not presented in the text.7

Despite the limitations of the data and the necessary
adjustments, the information regarding income seems adequate
for establishing indexes to assess market Opportunity; they
will be used tO generate relative comparisons Of income
differences among districts (see Table 22).

Table 22 shows that the largest indexes are found
in major outlying districts with high pOpulations and in the
higher income districts which, despite their smaller popula-
tion coefficients, have high household income. Among the
districts in the first group are 43 (St. Amaro) and 24
(Saude); in the second group are 14 (J. Paulista) and
15 (C. Cesar). The lowest index is in district 1 (Se), the

original CBD, which also has the smallest area and pOpulation

coefficient.

264

TABLE 22.--1970—-Income Index, S. Paulo 48 Districts, District
Total Household Index--% Distribution--Income Index.

 

 

District Distribution % Distribution Income
NO. Total Income Of Income Index
1 3,043,200 0.19 9.1
2 19,581,600 1.23 59.0
3 13,569,600 0.85 40.8
4 26,140,800 1.64 78.7
5 35,738,400 2.24 107.5
6 38,030,400 2.38 114.2
7 17,642,400 1.10 52.8
8 10,672,800 0.67 32.1
9 16,567,200 1.04 49.9
10 38,148,000 2.39 114.7
11 22,228,000 1.39 66.7
12 24,657,600 1.54 73.9
13 45,196,800 2.83 135.8
14 56,246,400 3.52 168.9
15 27,981,600 1.75 84.0
16 32,371,200 2.03 97.4
17 9,691,200 0.61 29.2
18 18,540,000 1.16 55.6
19 24,900,000 1.56 74.8
20 59,808,000 3.74 179.5
21 17,505,600 1.10 52.8
22 72,998,400 4.56 218.8
23 50,959,200 3.19 153.1
24 80,296,800 5.03 241.4
25 33,360,000 2.09 100.3
26 40,250,400 2.52 120.9
27 30,180,000 1.89 90.7
28 11,402,000 0.71 34.0
29 55,788,000 3.49 167.5
30 11,244,000 0.70 33.6
31 21,336,000 1.34 64.3
32 57,021,600 3.57 171.3
33 76,730,400 4.80 230.4
34 10,226,400 0.64 30.7
35 31,428,000 1.97 94.5

265

TABLE 2 2. --Continued .

 

 

District Distribution % Distribution Income
NO. Total Income of Income Index
36 27,724,800 1.74 83.5
37 51,398,400 3.22 154.5
38 49,653,000 3.11 149.2
39 41,148,000 2.58 123.8
40 53,899,200 3.37 161.7
41 14,100,000 0.88 42.2
42 5,076,000 0.32 15.3
43 102,141,600 6.40 307.2
44 9,888,000 0.62 29.7
45 15,765,600 0.99 47.5
46 26,200,800 1.64 78.7
47 20,750,400 1.30 62.4
48 37,860,000 2.37 113.7
TOTAL $1,597,087,400 100.00

 

Car Ownership Index

 

Car ownership was selected as an index to evaluate
market Opportunity for two specific reasons. The first is
related to the higher consumer mobility in districts with
higher car ownership, and the second is because car owner—
ship is a good indicator Of disposable income, particularly
in countries like Brazil,where this item is very expensive
in relation to purchasing power.

The car ownership index was computed by means similar

to those used for population and income:

266

 

If
Cd x 100
Car % = -—E—————-, (5.5)
t
where:
Car % = percentage distribution Of car ownership
per district;
Cd = total car ownership per district; and
Ct = total car ownership for all districts;
then
_ car % x 100
N
where:
Ci = car ownership index, and
N = number of districts.

Table 23 was prepared using equations (5.5) and (5.6) and
secondary data derived from the PUB and from the subway
reports already mentioned.

Since information on car ownership per district
was for 1968, and that for 1970 was available only in total
number for the city Of S. Paulo, the 1970 figures per
district were calculated by prorating the total increase
(1968 to 1970) among the districts, taking into consider-
ation the 1968 figures. This process has a serious
limitation, since it may overestimate the figures for
high-income districts, which already had extensive car

ownership in 1968, and may underestimate car ownership

267

in lower-income districts, since the major segment Of used
car sales in S. Paulo is in these areas.

Table 23 indicates that the higher indexes of car
ownership are in high-income districts (for example,
districts 14, 26, and 29), and in middle-class districts
(23, 24, and 40) in the peripheral areas Of the city.
Interestingly enough,car ownership indexes are not high for
high-income districts near downtown, a typical example Of

this being districts 6 and 16 (see Table 23).

TABLE 23.--Car Ownership per District--l970 % Distribution
and Index.

 

 

Car per

District NO. District % District Index
1 522 0.11 5.2
2 4,304 0.87 41.7
3 9,808 1.99 95.5
4 10,279 2.09 100.3
5 9,447 1.92 92.1
6 12,394 2.52 120.9
7 5,035 1.02 48.9
8 5,533 1.12 53.7
9 8,790 1.79 85.9
10 14,950 3.04 145.9
11 8,349 1.70 81.6
12 5,072 1.03 49.4
13 16,917 3.44 165.1
14 18,953 3.85 184.8
15 14,524 2.95 141.6
16 12,744 2.59 124.3
17 2,786 0.56 26.8
18 3,772 0.76 36.4
19 6,916 1.40 67.2
20 21,861 4.44 213.1
21 3,465 0.70 33.6
22 17,923 3.64 174.7
23 18,988 3.86 185.2
24 23,687 4.81 230.8
25 12,057 2.45 117.6

268

TABLE 23.--Continued.

 

 

Car per
District NO. District % District Index
26 23,843 4.85 232.8
27 12,185 2.48 119.0
28 4,225 0.86 41.2
29 21,031 4.27 204.9
30 5,437 1.11 53.2
31 5,803 1.18 56.6
32 15,641 3.18 152.6
33 16,033 3.26 156.4
34 2,196 0.45 21.6
35 7,780 1.58 75.8
36 5,347 1.09 52.3
37 9,082 1.85 88.8
38 20,223 4.11 197.2
39 10,416 2.12 101.7
40 25,165 5.11 245.2
41 3,939 0.80 38.4
42 660 0.13 6.2
43 18,683 3.80 182.4
44 2,750 0.56 26.8
45 3,448 0.70 33.6
46 5,063 1.03 49.4
47 1,074 0.22 10.5
48 2,895 0.59 28.3
TOTAL 492,000 100.00

 

a composite index per district was prepared.

In order to conclude the market opportunity evaluation,

Composite Index

 

The three

single indexes discussed previously simply were summed:

(5.8)

269

where:
CC = composite index per district;
Pi = population index per district;
I = income index per district; and
Ci = car ownership index per district.

Because the main Objective was to aggregate the three
measurements into a single unit, no attempt has been made
to weigh any Of the three component indexes; each Of the
indexes had equal value in the calculation.

Using equation (5.8), Table 24 was prepared; it
shows the composite index in column 4 and the ranking of
the aforementioned index in column 5. The basic reason
forpreparing the index rankings was to demonstrate,by
ordinal measurement,the relative position Of each district.
It can be seen that the lowest composite index, 21.5
(district 1, Se) was ranked first, whereas index 834.7
(district 44, St. Amaro) was ranked forty-eighth. The
ranking also permits arrangement into a subjective but
meaningful scheme using interquartile classes; within the
context of this dissertation, the 12 lowest indexes were
placed in the first quartile, the 12 second lowest in the
second<quartile,and.so forth.8 As Table 24 indicates,
the higher indexes are in peripheral districts which have
large population coefficients; districts with medium
population coefficients,but with high and medium income

indexes,also are placed in the third and fourth quartiles.

TABLE 24 . --S .

270

Paulo--48 Districts--Market Opportunity 1970
Composite Index.

 

 

(l) (2) (3) (4) (5)
District Population Income Car Owner-

NO. Index Index ship Index (l),(2),(3) Rank
1 7.2 9.1 5.2 21.5 1°
2 50.9 59.0 41.7 151.6 11:
3 32.2 40.8 95.5 168.5 16
4 47.1 78.7 100.3 236.1 21°
5 57.1 107.5 92.1 256.7 24°
6 59.5 114.2 120.9 294.6 31°
7 39.8 52.8 48.9 141.5 9°
8 27.8 32.1 53.7 113.6 7:
9 48.0 49.9 85.9 183.8 18

10 124.8 114.7 145.9 385.4 34°

11 45.1 66.7 81.6 183.4 19:

12 45.1 73.9 49.4 168.4 15

13 74.9 135.8 165.1 375.8 33°

14 84.0 168.9 194.8 437.7 38°

15 40.3 84.0 141.6 265.9 26°

16 63.4 97.4 124.3 285.1 29°

17 23.5 29.2 26.8 79.5 3°

18 67.7 55.6 36.4 159.7 12°

19 106.1 74.8 67.2 248.1 22°

20 232.8 179.5 213.1 625.4 44°

21 87.8 52.8 33.6 174.2 17°

22 327.4 218.8 174.7 720.9 473

23 157.9 153.1 185.2 496.2 410

24 215.5 241.4 230.8 687.7 450

25 65.8 100.3 117.6 283.7 28

26 45.6 120.9 232.8 399.3 36:

27 40.3 90.7 119.0 250.0 230

28 27.4 34.0 41.2 102.6 40

29 92.2 167.5 204.9 464.6 39

30 27.4 33.6 53.2 114.2 8°

31 90.2 64.3 56.6 211.1 20°

32 182.4 171.3 152.6 506.3 42°

33 328.3 230.4 156.4 715.1 46:

34 54.7 30.7 21.6 107.0 60

35 125.8 94.5 75.8 296.1 32

271

 

 

TABLE 24.--Continued.
(l) (2) (3) (4T (5)

District Population Income Car Owner-
NO. Index Index ship Index (l),(2),(3) Rank
36 137.8 83.5 52.3 273.6 27°
37 179.5 154.5 88.8 422.8 37:
38 101.3 149.2 197.2 477.7 400
39 160.8 123.8 101.7 386.3 35
40 112.3 161.7 245.2 519.2 43°
41 63.8 42.2 38.4 144.4 10:
42 27.8 15.3 6.2 49.3 20
43 345.1 307.2 182.4 834.7 480
44 47.0 29.7 26.8 103.5 5
45 78.7 47.5 33.6 159.8 13°
46 129.1 78.7 49.4 257.2 253
47 90.7 62.4 10.5 163.6 140
48 151.7 113.7 28.3 293.7 30

 

In order to provide a better illustration, figures

and rankings from Table 24 have been plotted on the city's

district map according to a scheme presented in Table 25.

TABLE.ZL--Composite Indexes Quartile Distribution and Map

 

 

Coding.

Quartile Index Rank Lowest Highest Range Map Code
lst. 1° tO 12° 21.5 159.7 135.2 8
2nd. 13° to 24° 159.8 256.7 96.9 3
3rd. 25° to 36° 257.2 399.3 142.1 T
4th. 37° to 48° 422.8 834.7 411.9 Q

 

272

 

 

 

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273

 

 

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274

Since the relative difference among districts already
is expressed by the indexes, the rationale for developing
the quartiles was not based on the range between the lowest
and the highest index, but on ranking of the first fourth
lowest indexes, the second fourth lowest indexes, and so on.
Consequently, the intraquartile range differs among the
quartiles.

The indexes plotting on the map indicate that the
lowest indexes generally are in the north section of the
city, while the higher indexes are in the wealthy districts
in the southwest sector and in the large peripheral districts.
A major shortcoming is that the process does not take into
consideration that the districts, which represent SGU's
(Standard Geographic Units), differ drastically in relation
to their areas. A district with a high index may drop sharply
in its ranking if a density factor is taken into consider-
ation; in other words, such a high index may have been
arrived at because the district had a large area. In most
Of these situations in the specific case of S. Paulo, the
larger districts are located at the periphery and have the
largest population coefficients, mostly composed of unskilled
and blue—collar workers. On the other hand, many of the high-
income districts have small areas and medium pOpulation indexes ,
but the income and car ownership indexes have distorted
the ranking. In order to avoid such a bias.a modified
composite index must be calculated which takes into account

the relative size Of each district.

275

Modified Composite Index

 

Since one can conceive of market opportunity over
space, it is obvious that if two districts have different
sizes and, for example, equal composite indexes, the
smaller district will have a higher market opportunity
density and will rank better in relation to the larger
district. Accordingly, for our purposes we will define
the modified composite index as the relative measure of
market opportunity which is Obtained when the composite
market opportunity index Of each district is divided by
the district area index.9 This definition is expressed in

the following formula:

Cc
Cim = if ' (5.9)
1
where
im = modified composite index;
CC = composite index per district; and
Ai = area index.

Based on equation (5.9) Table flSshows the modified index
in column (4) and the ranking in column (5). For ease of
illustration, figures and rankings from.'rab1e 26 were

plotted on the city's district map.

276

TABLE 26.--s. Paulo--48 Districts--Market Opportunity

Modified Composite Index.

 

 

(l) (2) (3) (4)
District Composite Area Modified
NO. Index % Area Index Index Rank
1 215. 0.15 7.2 2.98 13°
2 151.6 0.50 25.0 6.31 31°
3 168.5 0.50 24.0 7.02 34°
4 236.1 0.32 15.4 15.33 45°
5 256.7 0.30 14.4 17.82 46°
6 294.6 0.46 22.1 13.33 44°
7 141.5 0.30 14.4 9.82 40°
8 113.6 0.35 16.8 6.76 33°
9 183.8 0.65 31.2 5.89 29°
10 385.4 1.20 47.6 6.70 32°
11 193.4 0.45 21.6 8.95 383
12 168.4 0.33 15.8 10.65 420
13 375.8 1.11 53.3 7.05 350
14 437.7 0.89 42.7 10.23 41
15 265.9 0.26 12.5 21.27 48°
16 285.1 0.32 15.4 18.51 47°
17 79.5 0.30 14.4 5.52 27°
18 159.7 0.86 41.3 3.86 20°
19 248.1 1.35 64.8 3.82 19°
20 625.4 3.10 148.8 4.28 24°
21 174.2 1.04 49.9 3.49 16°
22 720.9 3.80 182.4 3.95 21°
23 496.2 1.95 93.6 5.30 26°
24 687.7 2.55 122.4 5.6; 28°
25 283.7 0.95 45.6 6.22 30°
26 399.3 0.67 32.1 12.42 43°
27 250.0 0.60 28.8 8.68 37°
28 102.6 0.57 27.3 3.75 17°
29 464.6 1.05 50.4 9.21 39°
30 114.2 0.30 14.4 7.93 36°
31 211.1 0.85 40.8 5.17 25°
32 506.3 4.10 196.8 2.57 11:
33 715.6 10.58 507.8 1.40 4
34 107.0 1.10 52.8 2.02 8:
35 296.1 1.40 167.2 1.77 7

TABLE ZL—-Continued.

277

 

 

(l) (2) (3) (4)
District Composite Area Modified
NO. Index % Area Index Index Rank
36 273.6 2.55 122.4 2.23 10°
37 422.8 2.60 124.8 3.38 14°
38 477.7 3.40 163.2 2.92 12:
39 396.3 6.40 307.2 1.25 30
40 519.2 2.60 124.8 4.16 23
41 144.4 0.75 36.0 4.01 22°
42 49.3 0.30 14.4 3.42 15:
43 834.7 11.25 540.0 1.54 60
44 103.5 1.00 48.0 2.15 90
45 159.8 2.80 134.4 1.18 2
46 257.2 1.41 67.7 3.79 18:
47 163.6 2.31 110.9 1.47 50
48 293.7 18.00 864.0 0.34 1
842 km2

 

and Map Coding.

TABLE 27.--Modified Composite Indexes Quartile Distribution

 

 

Quartile Index Rank Lowest Highest Range Map Code
lst. 1° to 12° 0.34 2.92 2.58 8
2nd. 13° tO 24° 2.98 4.28 1.30 8
3rd. 25° to 36° 5.17 7.93 2.76 T
4th. 37° to 48° 8.68 21.27 12.59 Q

 

When the modified composite indexes were plotted, a
very interesting and meaningful set Of patterns related to
market opportunity began to emerge. Although these

characteristics are observable on the map, it seems worth-

while tO discuss some of them.

1) '1'!) l

278

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280

(1) After the density factor was corrected by
application of the modified composite indexe, the external
(peripheral) district which earlier ranked first dropped
to among the lowest 12 positions. The 12 districts lowest
ranked in market opportunity all are outlying, with large
areas and a high population index, but a low income index.
When market opportunity is analyzed relative to physical
space, the peripheral districts lose their generally high
ranking.

(2) Another basic observation can be made in
relation to higher ranking districts: they cluster together
in a definite sector shape in the southwestern region of
the city. The only exception to this phenomenon is district
28 (Vila Madalena), which is an enclave of lower-middle
class housing among high-income districts, as can be seen
in Figure 17.

(3) Interestingly enough, application of the
modified index made districts within intraquartile rankings
cluster in a definite pattern throughout the area. These
patterns seem to offer empirical evidence of the section
theory and to contradict Burgess's concentric zone concept;
the cluster shape approximates sectorial forms and not

concentric subregional forms.

281

(4) Districts ranked in the third quartile form
three clusters in north, northeast, and southeast S. Paulo;
these are areas of mixedlunuiuse for industry and working
class residences. Most households here belong in the
upper-lower class or blue-collar brackets.

(5) Finally, a close look at the commercial land-
use map in chapter 3 indicates that a major proportion of
trade activities are located around the CBD, mostly in
districts classified in the third and fourth quartiles.
Since a major proportion of the wholesale trade is
located in districts 2,3,8, and 9, most retail trade is
heavily concentrated in the CBD and in the commercial axes
in the third and fourth quartile districts. This pattern
creates traffic congestion and inconvenience for rush
hour shopping, and serves to support our argument for

decentralization of retailing at specialized locations.

FOOTNOTES: CHAPTER V

1Alderson, Marketing Behavior, pp. 355-357.
2

 

Markin, Retailing Management, p. 99.

 

3Instituto Brasileiro Geografia e Estatistica,
"Aspectos do.Municipio de 8. Paulo," (unpublished material,
1968). This study defines the urban area as that served
by public utilities services such as power, water, and
public transportation.

4The master map of S. Paulo's districts was pre-
pared from one originally published by Geomapas, S. Paulo,
Brasil, and was reduced from a scale of 1:20,000 to a
scale of 1:165,000, which is more adequate for the present
work.

5SGU--standard geographic unit--will be
discussed and explained later.

6PUB, vol. 2, p. 216.

7Qonjuntura Economica, 25, no. 8 (1971), 42.

8For a discussion on the use of dispersion measures
see Morris Hamburg, Statistical Analysis for Decision-
Making (New York: Harcourt Brace, 1970).

9The area index is derived in the same manner as
population, income, and car ownership indexes, and is
expressed by the following formula:

 

A1 = N x A%
where
Ai = area index;
N = number of districts; and
A% = percentage of area distribution per district.

282

 

CHAPTER VI

A NORMATIVE MODEL FOR SHOPPING

CENTER LOCATION

IntroduCtion

 

3'. 1‘ KA-

24!. '7.

Thus far, we have analyzed retailing development
and the consequent evolution of the shopping center in

Brazil. These develOpments have been related to basic

rwmrm nrJI.

theories and concepts which are both helpful in under-
standing such developments and which provide standards
for judging performance of those shopping centers
actually in existence. Analysis has indicated that
existing shopping centers in the GSPMA have suffered
somewhat in their planning as judged relative to the
conceptual foundations elaborated. Thus, to make this
dissertation more constructive it is helpful to formulate
a preliminary normative model which can be used to aid
in shopping center planning. Such is the subject matter
of this chapter.

In accordance with the conceptual framework
analyzed previously, the modeling process will relate

costs and revenues to potential in order to provide

283

284

normative guidelines for investment decisions. The
model below conceives of shOpping centers as complex
institutional entities in constant interaction with and
interdependent upon their immediate environment, namely,

their trade areas.

Basic Criteria

 

When centers locate in a trade area they incur
costs; by the same token they draw revenues from the
existing market Opportunity within the trade area's
boundaries. Market Opportunity, the size of the shOpping
center, and the competition within the trade area will
define the revenues which the center will be able to
generate. On the other hand, building and retailing
costs are the resources which must be allocated in
order to generate these revenues. It is implicit in
the evaluative process of shopping center location that
the investment will be undertaken only if revenues
(outputs) exceed costs (inputs).

However, the decision-making process in the
specific case of shopping centers is not simple because
of the large number of variables which affect the
system and because of two entities involved in the

venture, namely, the investor and the retailer. The

285

investor, who may be a real estate developer, an invest-
ment company, or a landowner, is concerned with the
rental revenues which the center must generate in order
to return his investment according to criteria which will
be examined later. The retailer seeks a sales volume
sufficient to recover the cost of goods, operational
expenses, rental cost, and, hopefully, to allow for
some profit margin.

The structural relationships of the system indi-

cate that both investors' and retailers' Objectives are

gmwxamQWOQMl -"l‘!

dependent on the sales volume generated by the center.
They also are interrelated because the investors' returns
ultimately are dependent upon storekeepers' rental paying
capability. In a great majority of rental contracts
these interrelationships go even further since rentals
frequently are charged as a percentage of sales volume.
Rentals in the model which will be proposed here will
be considered as an output of the investor and an input
of the retailer.

Let us examine how these two participants define
their financial and Operational Objectives in a shopping
center venture, and what parameters guide their decision

criteria.

286

Investor's opjectives

 

A shopping center investor usually will allocate
his resources to a project which,in the long run,is capable
of generating rental revenues large enough to return his
investment. Because these rentals are not received at

once, and because of risks and uncertainties related to

F
their flow, they must be discounted at their present value
by evaluation criteria such as internal rate of return i
or net present value approaches. .
Generally a shopping center investment decision I
L
may be expressed by the following formula: '
n
——_——_1 R >I
, 1'1 t— I (6.1)
i=1 (1 + d)
where
I = shopping center investment;
R = annual rental earnings projected for the next

m years;
d = discount rate; and

n = the last year for which R is estimated, or

t
the length of the planning horizon.

In evaluating a particular alternative,the investor

compares the resulting present value of the rental stream

287

over n years to the present value of the investment required
to develop the center. If the condition stated in equation
(6.1) is achieved, the project is desirable. In other words,
acceptability is determined by whether or not the difference
between the discounted stream of rentals and the invest-
ment is equal to or greater than zero.1 The investor's
inputs are the amounts used in the center's development

and construction; his outputs are the rentals.

Investor's Capital
Cost and Revenues

 

 

The next step is to describe,for analytical pur-
poses,the composition and characteristics of a shopping
center's investments and revenues.

Costs.--The investment is the major capital cost

and can be expressed by the following formula:

I = LC + BC + PC + DC, (6.2)
where
I = investment;
LC = land site cost;
BC = building cost;
PC = parking lot cost; and
D = development costs.

288

Land cost, Lc’ is a very important factor since it
is,to some extent,out of the investor's control. The land
has a market price which must be paid by the investor if
he wantstx>acquireeaspecific site, or,if he owns the site,
it is implicit that its value represents an opportunity cost
to him. Furthermore, clearly a land site has a market value
which remains fixed whatever the size of the center to be
constructed within its boundaries.

The building cost, Bc’ and parking lot cost, PC,
are in some measure controllable by the investor since he
may decide upon the size of the building and parking lot
areas. However, it is necessary to recall that Chapter 2
indicated that a building's physical dimensions and its
parking lot must be in proper balance with the site's area.

Development costs, Dcpare all costs and non-
recoverable expenses invested in the center's planning and
develOpment until it begins to operate; these include
marketing research fees, project costs, leasing obtaining
fees, and so forth.

Revenues.--The investor's revenues are definedlfor

 

the purposes of this mode1,as the proceeds generated by
the center's rentals through various means, including
tenant basic agreements. These agreements usually are of

two types:

 

289

(1) Fixed Rental Income. Minimum rent is paid by

 

each tenant; generally it is a fixed percentage
of the building area costs and land value.

(2) Variable Rental Income. Rent may vary as a

 

percentage of sales.
The revenues derived from rentals are not received
by the center's investor immediately, but throughout the F
center's economic life. Because of this long-range opera-

tional horizon, cash flow must be reduced to its present 4

.‘AT-

value through some conventional procedures, usually the 1

 

\E-Td .

present value method or the internal rate of return method.
The first method involves discounting the expected
net income stream by the company's cost of capital, which
yields the present value of the income stream.2 The present
value of the shopping center's net income stream must be
compared with the investment required to develop the
center up to its point of Opening. These costs involve
land acquisition, construction, and all other organizational
expenses. If the present value of the rental or income
stream exceeds the investment, the center investor will
earn a rate of return on his investment larger than his
cost of capital.3
The internal rate of return for an investment is
the discount rate that equates the present value of the
expected cash outflows with the present value of the expected

inflows.4 When this method is used to evaluate a shopping

290

center project, the internal rate of return must exceed

the required rate which the investor expects the

center to earn. For example, if the required rate of
return is 10 percent and the application of this method
indicates a 15 percent internal rate of return, the project
is acceptable.

In general, the present value and internal rate of
return methods lead to the same acceptance or rejection
decision.5 When there is no concern for alternative
investments, and when reinvestment rates are not under
consideration, either method may be used. The present value
method will be preferred here because it avoids the
difficulties of finding the internal rate Of return by means
of the so—called trial and error iterative process.

Investor's Acceptance
Criterion

 

 

The previous discussion permits us to define the
acceptance criterion for a shopping center investment. From

equation (6.2) we know that
I '2 LC + BC + PC + DC. (6'2)

0n the right side of this equation are the capital costs
to be invested in a shopping center project and which,for
financial purposes,must be considered as outflows.

The rentals of the center, on the other hand, must
be considered inflows and may be expressed,in accord with

the previous analysis, by the following formula:

291

= .3
Rt Rf + RV, (6 .)
where
Rt = total rental;
Rf = fixed rental; and
Rv = variable rental.

Since Rf generally is calculated as a percentage of the
center's final cost, and Rv is,in most cases,a percentage

of the center's sales, R may be better expressed in the

t

following manner:

Rt = 11 + A's, (6.4)
where

Rt = total rental;

I = investment;

S = shopping center sales per year;

A = percentage rate; and

A' = percentage rate.
Thus,

AI = Rf = fixed rental;

1's = Rv = variable rental.

Taking into consideration that the investor must
be interested in the present value of the total rental

stream discounted at a certain rate, R' the acceptance

t!

criterion may be expressed as follows:

292

R't: II (605)
where

R't = total rental stream present value and

I = investment.

Assuming constant rental values over a period of n years,
R't may be calculated by the following expression:

(6.6)

since

Rt = II + A's (by 6.4)

and
I = LC + BC + PC + DC (by 6.2).

The investor acceptance criterion can be formulated

by the following mathematical expression:
n _
1 R > I. (6.7)
i=1 (1+6)n

Substituting R by its expression given in equation (6.4)

t
and I by the right side of equation (6.2) we have

n I
1 x (AI + A S) 3 LC + BC + PC + DC.(6.8)

i=1 (1+6)n

293

Equation (6.8) is the analytical expansion and also the
mathematical expression of the investor's acceptance
criterion.

It is worthwhile to mention that this formula may
be interpreted verbally in the following manner: a shopping
center investor will accept a project proposal when the
present value of this rental stream, given by the dis—
counted value of the center's fixed and variable rental
stream, is larger or at least equal to the investment
required (which is composed of land acquisition costs,

construction costs, and development expenditures).

Retailer's Objectives

 

A retail store is a profit-oriented organization
whose implicit goals are revenue-seeking activities and
profit maximization. ,From the conceptual analysis made
in chapter 2 and from the discussion of trade area
theories, it is easy to perceive the extreme importance
of locational patterns for retailing activities.

For these reasons a storekeeper will decide to
move into a shopping center only if the sales volume in
this location is sufficiently large to recover his costs
and leave some margin for rental expenses. It also is
clear that his net earnings must be larger than in an
alternative or independent location outside the center.
Furthermore, sales volume as the basic revenue generator

is extremely important, and rental values are a major

 

294

component of the retailer's total cost. As noted before,

rental costs are considered retailers' inputs into the

operational system, whereas sales are defined as outputs.
The retailer's financial analysis and profit

evaluation criterion may be defined in simple terms:

S - C9 = Gm , (6.9)
and
where
S = sales;
Cg = cost of goods sold;
Gm = gross margin;
Ep = expenses; and

P = profit.
It is easy to perceive that when
s=c +13 (6.11)

the retailer is at his breakeven point. By the same token,
when S>Cg + Ep there is a profit,and when S<Cg + Ep there
is a loss. By definition,the breakeven point is that point
or stage in the retailer's operation where sales equates
total costs, or the sum of the cost of goods sold plus

expenses.

295

Retailer's Cost and Revenues

 

Let us now examine the major characteristics of
retailers' costs and revenues. Since this is a broad sub-
ject, we will restrict the analytical scheme to the interests
of our normative model.

Sggp§.--We have said that costs must be considered
as inputs of several different kinds which must be applied
to running a retailer's Operation. In order to derive
financial information for modeling purposes,we shall treat
costs in accordance with the following typology: (a) fixed
costs; (b) variable costs; and (c) mixed costs. The first
can be defined as costs which, for a given period of time
or for a relevant range of activity, remain constant;
the second are costs which,by their nature,vary in direct
proportion to changes in the activities to which they are
related. Mixed costs are those which contain both fixed
and variable elements, for example, the shopping center's
total rental is composed of a fixed element, generally a
percentage of the total investment, and a variable element,
generally a percentage of sales.

The retailer's cost behavior may be viewed as

 

Nature Costs

Fixed - Salaries, Overhead, Advertising, etc.
Variable - Cost of goods sold

Mixed - Rental (Fixed Element + Variable

Element)

296

Revenues.--For the purposes of the present analysis,

 

retailers' revenues will be defined as the total cash flow
generated by net sales volume at retail prices. The revenues
are considered outputs of the retailer's operation and will
be indicated by the letter S, as mentioned earlier in this
chapter.

Retailer's Cost and
Revenue Analysis

 

 

The retailer's decision whether or not to locate
in a shopping center is made by quantitative techniques
which are focused on the determination of revenue, cost,
and profit relationships. In genera1,the most commonly
used analytical tool is the so-called break-even analysis,
which provides mathematical and graphic solutions for
volume-cost-profit problems. It indicates the point where
revenues equate costs and may be expressed either in terms
of units or dollars. In our model this analysis will be
applied to determine the minimum amount of sales which the
retailer needs to break even.6 Such a condition may be

expressed by the equation

S.

Fe + Vc + Me, (6.12)
where

S' = sales needed to break even;

PC = fixed costs;

Vc = variable costs; and

Mo = mixed costs.

297

To solve equation (6.12) for 8' it is necessary to break
down Mc into its fixed and variable elements and to deter-
mine the contribution margin ratio that is the excess of
S over Vc. Such an amount may be expressed on a total
basis or as a ratio.7
Applying simple algebraic transformations,it is
easy to find the break-even point (BEP) in terms of dollars
sales as follows:

Let S' = sales in dollars needed to break even,

then

\r ‘utuifiSW—J—WW

S'=Fc+Vc+Mc. (6.12)

Since Me has a fixed and variable component, equation (6.12)

can be rewritten as

S' = PC + Mcf + (Vc + Mcv), (6.13)

where

Mcf fixed element of Mo, such as fixed rent, and

Mcv = variable elements of Mc, such as variable
rent.

Because Vc and Mcv are percentages of sales,

equation (6.13) may be expressed as

S' = PC + Mcf + aS', (6.14)
where
Vc + Mcv = 08', and
a = variable cost coefficient <1.

298

Then the contribution margin coefficient is simply

calculated by the expression

8' - aS' = 08' (a + n = l). (6.15)

Substituting for equation (6.14) and solving for S' we have

8' = Fe + Mcf + 08',
S' - 08' = Fe + Mcf, and
88' = PC + Mcf,

and solving for S' we have

8' = FC ; Mcf’ (6.16)

where
n = contribution margin ratio.
Noting that Mcf is the fixed element of the rental
expenses we may express (7.16) in a different and more

meaningful way:

5' = Fc + Rf ' (6.17)
where
Rf = fixed rental from (6.3).

Equation (6.17) reflects the minimum sales volume
which is needed by the retailer to break even; it must be
interpreted as the lowest level of revenue output which
will allow him to recover fixed and variable costs as well

as the total rental costs which are due to the shopping

4.1-.35-...-
lfl -

h.-

W410

299

center investor. Another advantage of this equation is that
it integrates into the calculation both elements of the
mixed costs,fixed and variable rental.

The acceptance criterion Of a retailer, then, is
that he will lease space at a shopping center if,and only
ifpthe center's trade area can provide a minimum sales volume
sufficient to recover his operational costs and the extra
amount needed to face fixed and variable rental expenses.
Obviously,a profit margin must be added, but will not modify
the mathematical reasoning, since a target profit figure
may be added to the numerator of (6.17) and the new target

sales volume in dollars can be calculated immediately.8

Investor and Retailer: Joint Objectives

 

We now can evaluate the joint objectives of the
two entities involved in a shopping center venture. In
an ultimate and definite sense,both depend upon the market
opportunity, since it is from this that revenue streams
originate. The retailer's minimum sales must be sufficient
to cover his retailing costs, his share of the center's
fixed and variable rental expenses, and a certain target
profit margin. The shopping center investor, on the other
hand, seeks a rental stream whose present value will at
least equal his investment. The relationship between the
two is obvious, but the minimum sales volume required by

the retailer is larger since his rental expenses are rental

300

income to the investor. In conclusion, the shopping center
investor must introduce an incremental sales volume allowance
into his calculations to provide for the retailer's target

profit objective.

Shopping Center Sales Potential

 

These various decision criteria emphasize that
one of the most important variables in the model are sales,
against which investment and retailing costs must be com-
pared. We need to begin the modeling with the determina-
tion of the sales potential for a shopping center. It is
necessary to state that sales potential is a function of
the trade area market opportunity;9 it is defined as the
total sales volume that can be sold to household units
within the trade area's geographic boundaries during a
defined time period (one year). This definition assumes

ceteris paribus conditions and does not account for

 

competition and other factors which will be analyzed
later

The analytical and conceptual framework developed
in chapter 2 allows us to express shopping sales potential

as

Sp = [H-I- rn] + T, (6.18)

where

 

301

U)
H

total sales for the shopping center per year;

P
H = number of households in the trade area;
I = household disposable income per year;
rn = percentage of I spent in retailing purchases;
and
T = transient sales, or those sales made to persons

living outside the trade area or to households
located outside this area.10

A closer examination of equation (6.18) will show
that it is unrealistic because it assumes a constant market
share for the shopping center all over its trade area.

Since this assumption conflicts with the conceptual analysis

developed previously, (6.18) must be rewritten as follows:

= + + .. +
Let Sp Spl sz .. Spn'
and
Spi = (Hl-Ii°ri) m.,
where
Spl’ Sp2' ..., Spn = sales for the shopping done in
subtrade area i (per year);
H , H ,..., H = number of households in subtrade
l 2 n .
area 1;
11’ 12,..., In = household disposable income per
year at subtrade area i;
r1, r2,..., rn = percentage of I spent in retailing
purchases in subtrade area i; and
ml, m2,..., mn = shopping center market share a

subtrade area i.

 

302

Therefore,
n
sp =[.§ (Hi-Ii°ri)°mi] + T. (6.19)
1—1
The evaluation of a shopping center's sales potential,

if calculated by the use of (6.19), is much more meaningful

and precise. It is sensitive to variations in market

 

penetration in each of the subtrade areas and also accounts 3
for time and distance, which are the causal factors for 5
different market shares in diverse subtrade areas. 3
The data and the spatial behavior constructs for i

v'

conducting such an evaluation must be collected through

field research which apply measurement models such as those
suggested by David Huff, Homer Hoyt, and William Applebaum.ll
The trade area configurationgyfl_geographic delineation must
use geometric figures such as circles, and hexagonal or
square grids, with the necessary corrections and allowances
for man-made or natural barriers.

The final figures for sales potential represent a
first approximation of the shopping center's sales
opportunity and must be used by the investor and retailer
as the central construct for evaluating their decision
criteria. In conclusionIpotential sales figures which
cannot provide sufficient volume to fulfill the conditions
established in equation (6.8) and equation (6.17)

represent an explicit criterion for rejection by both the

investor and the retailer. This statement is correct

303

since neither the present value criterion will be fulfilled
for the investor, nor the break even objective achieved

by the retailer.

Competitive Uncertainty

 

Up to this point the modeling process has been
conducted under the unrealistic assumption of certainty, a
and little attention has been given to competitive aspects. '-1
Risk and uncertainty now will be introduced into the model E

to test its capability and increase its decision strength. L

 

Decision Tree Analysis

 

In order to evaluate the competitive environment
under uncertainty conditions a decision tree diagram will
be used to explain how the shopping center investor must
correct the net present value of rental stream under these
conditions. The shopping center investor may place alter-
natives and probabilistic events on the branches of the
decision tree diagram, which represents paths of sequential
occurrences and their outcomes.

According to Robert Buzzel and others, a decision
tree will indicate to the decision maker the essential

elements of any problem.12

 

 

 

304

1. What are the options? (Acts)
2. What are the relevant uncertainties? (Events)
3. What are the possible outcomes? (Consequences)
4. What is important to the decision maker? (Criteria)
Let us assume for modeling purposes that a shopping
center is being planned and that the first decision to be
made is regarding its size. For the sake of simplicity, let
us restrict the decision to two alternatives:
and

Al build a center with area a

1’

A2 = build a center with area a2.
Let us say, also, that the following sequential and

probabilistic events may occur:

E1 = 2 - demand in the trade area;
H = high demand,

M = medium demand, and

L = low demand.

E2 = g_- competition in the trade area;
competitor enters the trade area; and

N = competitor does not enter the trade area.

E3 = QL_- competition location;

T1 = competitor locates in the primary trade area,

T2 = competitor locates in the secondary trade area,
and

T = competitor locates in the tertiary trade area.

305

E = CS -competition size;

0
*3
H
II

competitor builds a larger center,
CE = competitor builds an equal size center, and

CP = competitor builds a smaller size center.

E = SM -competition store mix;

 

SL = competitor has a more complete store mix,
SE = competitor has an equal store mix, and

SP

competitor has a less complete store mix.

These events and their relative impact on the pro—
jected shopping center preferably should be analyzed,
determined, and evaluated by means of research and detailed
studies regarding the outlook and the economic conditions
of the region under scrutiny. In the event of impossi-
bility or impracticability of arriving at such estimates
empirically, the analyst is forced to use subjective
estimates. It is important that the quality and accuracy
of these data will have a direct relationship to the
eventual results and validity of the analytical framework,
which will be discussed in detail below.

The next step in the decision-making process is
to display various acts and events in a diagram; this
step will give the decision maker an integral and clear
view of all possible sequences of events which may follow
an act or a set of acts. Thus, each path through the tree

represents a possible sequence to which is associated a

13

final monetary outcome (consequence). In our model these

 

-.
:4
‘.
i
E

306

outcomes are the present value of the rental streams for
each path of sequential events. They must be derived from
management studies about the results of each of the alter-
native acts and the possible sequential paths. The pre-
sent value of each path is placed in the right extremity
of each sequential path. In the tree diagram, Figure 18,
these data illustrate the procedure explained above.

The last step is to apply probabilistic estimators
to each of the possible events. Since these events are
sequential in relation to their path, but are mutually
exclusive and are collectively exhaustive relative to
their outcome chances, they will be assigned the following

probabilities:
O<p (A.)<l.00,
— 1—

where

p(Ai) is each event's chance.

This procedure is illustrated in Figure 18, which incorporates
all the information of the previous illustration plus the
probabilistic parameters; this completes the requirements
for an analysis under risk conditions.

The optimal sequence of decisions is determined

by a process known as roll back,14 which is a process of

 

backward probability induction achieved by working the
tree diagram from right to left. The final result of this
method indicates the expected value of each alternative

given the various sets of sequential events; the expected

 

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308

value of the branch tip times the probability of its
occurrence.15 This procedure is illustrated in Figure 19.
The probabilities of each event and their impact
on the present value of the rental stream can be generated
by empirical observation of analogous situations or by the
Bayesian inference, which accepts as inputs not only
observed data,but also the (investor's) subjective

16 The second method's advantage is in allow-

probabilities.
ing the use of probabilities based on subjective judgment
formed before the evidence is available to the decision

maker. This approach is also known as preposterior

 

analysis and is considered an essential tool for decision

making under uncertain conditions.

Probabilistic Decision Criterion

 

From our discussion it seems clear that the applica-
tion of competitive constraints and their probabilities
reduces the present values which were calculated under the
unrealistic assumption of certainty. Therefore, use of the
tree diagram indicates that the investor will accept the

shopping center project only if the expected value

 

of the present value of the rental stream's optimal

 

decision branch exceeds or at least equalizes the present

 

value defined for investment purposes in equation (7.5).

‘—Ir-u.'.-. ‘
'n
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'1 n' ..I' .7.
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310

This condition can be outlined in the following
manner. Let us recall that the investor acceptance criteria

in (6.5) is

R't_>_I, (6.5)
where
R't = present value of annual rental streams, and
I = investment.

Since the probabilistic investment acceptance
criterion stated that the expected value of R't must be
equal to or exceed its value under conditions of certainty,

we can write

R'tpiR'tZI, (6.20)
where
R't = expected value of annual rental stream's
p present value,
R't = present value of annual rental stream, and
I = investment.
Since
I I I >
R tle t and R t_I,
then
' .21
R thI‘ (6 )

Taking into consideration that the investor must
introduce an incremental allowance for the retailer's profit

margin, (6.21) must be rewritten in the following manner:

311

R'tp + PtZI' (6.22)
where
R'tp = expected value of rental stream's present
value,
Pt = target profit, and
I = investment.

The target profit's incremental allowance also must be
calculated under uncertainty conditions using the same

sequential events utilized to derive R' Therefore,1etting

tp‘

P't equal the expected value of the target profit, the

inequality (6.22) may be expressed in the following way:

R'tp + P'til' (6.23)

where

R't = expected value of rental stream's present
p value, and

P't = expected value of target profit's present
value.

This formula is the final result of our model and
may be expressed verbally: a shopping center investor
will accept a project if and only if the sum of the expected
value of the rental stream's present value plus the
expected value of the retailer's target profit's present
value is larger than the investment required to develop

the center up to the beginning of its operations.

312

Land Site Costs

 

Since retailing has a close relationship with its
contiguous environment, any normative model for retailing
location must consider the effects of environmental variables.
Among these variables,the most important is the land site,
for several reasons. (1) As a generic statement,we may
say that land always has been a critical determinant of
the locational patterns of economic activity. (2) Since
the location of retailing institutions is fixed and always
involves a long-run decision, the cost of a land site must
be considered a long-run contractual cost for the entities
involved in retailing. (3) Because site location and
market opportunity have a definite and mutual relationship,
and recalling that land site is a cost,whereas sales
revenues are a function of the market opportunity, it follows
that the acquisition costs of the land site must be an
initial and central consideration to the shopping center
investor. (4) Since urban land supply is fixed and its
prises are a function of relative advantages within the
area, it is possible to say that the shopping center in-
vestor must evaluate the cost of the land site in relation
to the minimum sales revenues required by the investment
criteria discussed previously. (5) Finally, by virtue of
the operational and physical characteristics of shOpping
centers, it is necessary to maintain a ratio between the

building area and the land site. This constraint

313

means that on a given land site the dimensions of the center
must be considered the dependent variable.

This discussion leads us to conclude that only
certain sites are available and adequate for locating shop-
ping centers; the relative position of these sites within
the trade area affects their prices and their drawing power;
each site has a given size and cost which are noncontrollable
by the investor; and the architectural and operational
characteristics of shopping centers preclude building areas
from exceeding certain proportional upper limits of the land

. 17
Site area.

Site Decision Criterion

 

According to the previous analysis,it is possible
to affirm that the totality of a shopping center's rental
streams are a function of its trade area sales opportunity
and of its specific site conditions (location, competition,
Size of the site, and so forth).

Furthermore, having in mind that sales revenues
and land costs were variables used to define the investor's
and the retailer's acceptance criteria,18 and taking into
consideration that land cost and potential are exogenuous
and noncontrollable variables, it becomes obvious that all
these must be evaluated first in the shopping center

investment decision process.

314

Because the price of land sites is a given and is
out of the investor's control, it is reasonable to term
this variable a major constraint. The acceptance or
rejection criteria to which it is subject can be expressed
by the following normative statements.

(1) Given a market opportunity, the investor will
choose a site whose position, size, and acquisition cost

will permit the achievement of an expected value of rental

streams, plus the retailer's target profit's present value,

larger or at least equal to his investment.

(2) Given a site for which there are known para-
meters such as position, size, and acquisition cost, the
investor will accept the investment only if the
trade area's market opportunity provides a minimum thres-
hold which will permit him to achieve an expected value
of rental streams, plus retailer's target profit's present
value, larger or at least equal to his investment.

It is interesting that both criteria take market
opportunity and land site constraints into consideration.
The basic difference between them lies in the fact that
the first begins with an evaluation of the prospective
revenue potential and proceeds on to the cost needed
to generate the shopping center's returns. The second
begins with the analysis of the cost and proceeds to
the evaluation of the revenues which must be derived

from the market opportunity. Both approaches

5'

«L! 2"}.

 

315

are correct and consistent with this model's framework.
Their alternative application and the selection of one of
them will depend on the data available to the decision maker
and also whether or not a specific site is under considera-

tion.

Model Evaluation

 

.423

The model developed in this chapter is comprehensive,
generic, and systemic. Furthermore, it draws upon quanti-

tative and qualitative tools of analysis, since its modeling

139nm,

 

process uses principles of cost and revenue analysis, 3;
financial policies, and statistics. The model begins with
the determination of the system's components and interactions,
then defines the objectives and criteria of each component
entity.

In the first set of equations and inequalities,the
analysis was conducted without consideration of risk and
competition, but application of the decision tree diagram
incorporated uncertainty parameters and the analytical
framework gained broader dimensions.

Finally, two other major constructs were integrated
into the model: sales potential and the exogeneous, non-
controllable factors linked with land site cost, size, and
availability. Both constructs are of extreme importance
since they represent the so-called environmental variables
which,by and large,are at the core of marketing and retail-

ing theory.

316

Application Guideline

 

Despite the fact that the model was developed in a

logical sequence, it seems worthwhile to suggest a brief

guideline for its application. To do so, the analyst must

assume the perspective of the shopping center investor and

proceed through the following sequence of steps:

10.

ll.

Determine market opportunity;

Evaluate land site constraints;

Determine cost parameters and relationships;
Determine revenues as related to potential;

Apply investor decision criterion;

Apply retailer decision criterion;

Aggregate investor and retailer criteria;
Evaluate cost and revenues as related to potential
within the constraints established by the
investor and retailer criteria;

If the results do not meet the requirements of
5,6,7, and 8, reject the project, halt,or

select another alternative;

If the results meet the criteria of 5,6,7, and

8, proceed on to step 11 to introduce competitive
and probabilistic corrections;

Apply the probabilistic constructs of the model

to allow for uncertainty adjustments; and

317

12. Select the best path of the decision tree
diagram and verify if it still meet the condi-
tions established in 5,6,7, and 8; that is, an
expected value of rental streams, plus target
profit's expected present value, must be larger
or at least equal to the shopping center's
required investment.

The sequence of steps above also may be depicted
by means of a logical flow diagram, which enhances the
meaning and the preCiSion of the steps suggested here.
Another advantage of this schematic presentation is that
it allows for the application of feed back loops,"what
if"statements, and intermediate loops at certain points

of the logical decision flow' (see Figure 20).

318

 

Start

 

 

 

Select another trade area

 

 

 

or another land site.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   
 

 

 

 

 

 

 

 

 

 

 

 

   
 
   

 

 

 

 

 

l.) Determine market opportunity f(P. 1. Car)
2.) Evaluate land site constraints (availability, cost, size)
3.) Determine cost parameters (Lc,Bc,P¢.DC and F ,Mc;,Mc,M¢v)
4.) Determine revenues related to potential (Sp)
5.) Apply investor decision criterion (Rityl)
6.) Apply retailer decision criterion (5'8 Fc+§a
3'
W
7.) Aggregate investor- retailer criteria (R't +Ptzl)
8.) No Criteria satisfied? No
Yes
W
9.) Apply decision to introduce competitive and probabilistic
corrections
10.) Select decision tree best path (R;P max,and P; max)
11.) .é—No Criteria 5,5 and 7 still met? No
Yfif
l2.) Accept the shopping center project
13.) End

 

 

 

 

Figure 20.

Normative Model- Flow Diagram

 

FOOTNOTES: CHAPTER VI

1Equation (6.1) assumes that the rentals are
constant over the n years of the planning horizon. For
different annual rentals the expression takes the follow-
ing form:

 

where

R1, R2"°"Rn are different annual rentals.

2Philip Kotler, Marketinnganagement Analysis, Plan-
ning and Control, 2d ed. (Englewood Cliffs, N.J.: Prentice-
Hall, 1972), p. 399.

 

3For a complete analysis of investment decision making
see Harold Bierman and Seymour Smidt, The Capital Budgeting
Decision (New York: The McMillan Company, 1960).

4James C. Van Horne, Financial Management and Policy,
2d ed. (Englewood Cliffs, N.J.: Prentice-Hall, 197llpp. 55.

51bid., p. 61.

6The unit break-even form cannot be applied because
it is not possible to define standard unit of output for
different kinds of retailers.

7The contribution margin is expressed as

S' - Vc

Cmt
or

Cmr = S' - v8' = r8,

319

 

E VLW
a

320

where
Cmt = total contribution margin;
Cmr = contribution margin ratio;
Vc = variable cost expressed as percentage of S;

r8' = Cmr = contribution margin ratio expressed as
a percentage of S; and

v and r = coefficients (v<l and r<l).

8In this case (6.18) can be expressed in the
following form:

Fe + Rf + Pt
n

St =

 

where

Pt target profit.

9See the concepts of trade area and market opportunity
discussed in Chapters 2 and 5,

10Ross W. Ritland, "New Methods of Estimating and
Forecasting Retail Sales," Journal of Retailing 39, no. 3
(Fall 1963» 1-9.

11These models and concepts were reviewed and
discussed in detail in Chapter 2.

12Robert Buzzel, Donald Cox, and Rex Brown,
Marketing Research and Information Systems--Text and Cases
(New York: McGraw-Hill, 1969), P. 566.

13Ibid., p. 567.

14See Robert SchlaiferpAnalyses of Decisions under
Uncertainty (New York: McGraw-HiII, 1969).

15

 

Van Horne, Financial Management, p. 149.

 

16Buzzel, Marketing, p. 585.

 

321

17These relationships may be expressed by the

following generic formula:

WLA+TF§BTFLA=LA
where:

LA = land site area;

F = number of floor levels;

R = proportion of parking area to building area;
-——l————-LA = ground floor area; and

(FR + L)

FR

parking area.

(FR + 1) LA

An application of this formula to the most conventional
types of shopping center design indicates the relationships
summarized in the following scheme.

Shopping Center Schematics (areas relationship in percentages).

 

(1) (2) (3) (4) (5) (6)

 

 

G .
Floor Ratio Building Area round Floor Parking Area Landsite
Area Area
1 FR L or,
N . F1 5 : 3 BA a F -——-—— - - —————— 4 + = 6
( o oors) ( ) ( ) ((PR+1)]LA GFA 7?}:ITLA PA (FR+1)LA ( l (5) ( )
1:1 50% 50% 50% 100%
F _ 1 2:1 33% 33% 67% 100%
3:1 25% 25% 75% 100%
4:1 20% 20% 80% 100%
1:1 67% 33% 67% 100%
F . 2 2:1 40% 20% 80% 100%
3:1 28% 14% 86% 100%
4:1 22% 11% 89% 100%
1:1 5% 251 75% 100%
F = 3 2:1 43% 14% 86% 100°
3:1 30% 10% 90% 100:
4:1 23% 7% 93% 100%

 

322

For illustrative purposes assume an application under the
following parameters:

La = 4 acres or 16,000 m2;
F = 3 floors; and
R = 3:1 thus R = 3.
Then
BA = 0.3 x LA = 0.3 x 16,000 = 4,800 m2,
GFA = 0.1 x LA = 0.1 x 16,000 = 1,600 m2, and

PA = 0.9 x LA = 0.9 x 16,000 = 14,400 m2,

since GFA x 3 = BA or 1600 x 3 = 4,800 m2 and

14,400 _ 3 .

4,800 — l' or 3.1.
The basic relationships among building area, parking area,
and land site area are achieved.

18See the mathematical expression of investor
decision criterion (6.8) and the same position relative
to the retailer (6.17).

: flit,

CHAPTER VII
SUMMARY AND CONCLUSIONS

Introduction

This dissertation is a conceptual and integrative
study of shopping centers. Its main purpose is to provide,
by means of synthesis and a multidisciplinary approach,
basic gudelines for the development of shopping centers
in the GSPMA.

Such an endeavor is legitimate foranzleast four
reasons. First, the shopping center industry is just
beginning to emerge in Brazil. A conceptual and normative
study on the subject, if used by developers and shopping
center investors, may prove useful in providing norms
and measurements in relation to locational as well as
investment criteria. Second, the first shopping center
experiences in the GSPMA, which have been analysed in
this dissertation, fall short of the best use of applied
retailing technology, principally concerning location
choice and convenient use of the land Site. Any contri-
bution toward improvements in these areas must be regarded

as useful from an economic and social perspective.

323

324

Third, the retailing systemisaacrucial component
of the urban structure. The more complex the city's
fabric, the more relevant will be the role of retailing
in fulfilling urban dwellers' basic needs and wants.
Because of its rapid growth and the late emergence of its
automobile industry, S. Paulo today has chaotic traffic
conditions and outdated retailing location patterns. The
crisis in urban transit is caused by several factors,
such as poor urban design, lack of an efficient mass transit
system, and the extreme centralization of the retailing
system. There seems to be an apparent need for a reloca-
tion of retailing institutions at decentralized areas;
the use of modern design features such as the shopping
center will contribute effectively to reducing congestion
in many central areas of the city.

Finally, if shopping centers are to improve the
quality of urban life in the GSPMA, they must be located
not only outside congested areas, but also as close as
possible to the better market opportunity districts. This
is particularly true since,aside from the convenience
factor,a shopping center must be a profitable operation
for its investors and tenants. With this perspective in
mind,a preliminary study of S. Paulo's forty-eight districts'
market opportunity was developed,along with a normative
model for evaluating shopping centers' investment decision
criteria. Both analytical tools may be used in the

selection and evaluation of shopping center sites.

‘E . . a -
'4' g
I

325

The Analytical Approach

 

Since the marketing literature includes very few
recent integrative studies on shopping centers, an ambitious
but comprehensive analytical framework was conceived in
order to accomplish this dissertation's objectives. From
an overall perspective, the present work has interdisciplinary
characteristics,and it may represent an effort toward the
synthesis of many unrelated contributions to shopping center
theory.

The analysis began with the study of retailing
theory, with particular emphasis on the retailing system,
its objectives, its functions, and activities. The next
step focused on the concepts and theories,which have
attempted to explain change and evolution in retailing
institutional patterns and locational characteristics.

From this analysis,two major themes were delineated: the
trend toward decentralization,and the evolutionary pattern
toward specialization of retailing institutions. Both
conditions are conducive to the emergence of shopping
centers, which were analyzed in detail from several
perspectives. Since the Brazilian experience is still
recent and limited, the study was focused on U.S.
institutions, which provided parameters for operational

analysis.

 

326

Our attention then was oriented the examination
of retailing in Brazil as well as to the establishment of
comparative criteria between U.S. and Brazilian retail-
ing. At this point it was emphasized that there is little,
if any, cause and effect relationship between similar
events and developments in both systems. On the other
hand, it was noted that similarities in both countries
may be due to the occurrence of similar economic factors
such as industrialization, urbanization, increase in auto-
mobile ownership, and mass production of durable goods.
A study of the evolutionary dimensions of the Brazilian
retailing system and its differences from,and time lag
relationship to,its U.S. counterpart completed the
conceptual and descriptive part of the dissertation.
Because of retailing's intimate relation with
the urban structure and its links with the Spatial
characteristics of buyer behavior, the next step examinedfiwas
the interrelationship between retailing and urban systems.
Much attention was given to the theories which explain
urban growth and changes in cities' structures. Special
emphasis was placed on the interrelationship between
the location of retailing and the structural changes of
the urban system, and the ecological characteristics of
these phenomena were discussed in order to point out the
relevant impact of retailing location on the quality of

urban life. It also was mentioned that retailing activities

“ea—m» ‘

327

are closely related to the movement of people and goods

over urban space. Consequently, in modern cities,extreme
concentration and centralization of retailing causes traffic
congestion and reduces the convenience factor, problems
which the application of retailing technology could

minimize or avoid.

 

The Greater S. Paulo Metrgpolitan Area F}
'1

The concepts and analytical constructs discussed

previously were used to examine and evaluate S. Paulo's

 

retailing system and urban structure. An introduction

N c
{r ' a +4.

to Brazil's retailing system was presented in order to
study its evolutionary characteristics, its specific
dimensions, and its evolutionary patterns. Afterward,

the discussion was focused on S. Paulo's retailing

system and its interrelationship with the city's urban
structure. The descriptive analysis indicated the relative
progress of retailing practices and institutions in this
area of Brazil as well as the problems which retailing

is facing and is generating in this region. The poly-
nuclear structure of the city and the extreme concentration
of trade activities in the CBD and along the radial routes
has created traffic congestion and rapid blight in some

trade areas.

328

The first observable ecological adjustment was

the decentralization of retailing into unplanned commercial

clusters along the major commercial axes. This solution

was limited. The emergence of the automobile industry

in the late fifties heightened traffic congestion in the

area. In addition, traffic flows toward the CBD also were

affected since customer parking along the commercial routes ,

reduced the space available for transient traffic. 3.,
The emergence of the first shopping center,

Iguatemi, in 1964, was a promising sign, since this type

‘22:! 9d!- ‘

of institutional arrangement is the most compatible with
the size and structure of the GSPMA. However, to date,
there are only two other centers in S. Paulo, which
indicates a very slow growth rate. Furthermore, the
evaluation of these new centers made in chapter 4 indicated
that they did not incorporate concepts of modern retailing;
their physical facilities and locations revealed deficiencies
which were evident in the surveys conducted in both centers.
The general conclusion is that these centers are not
effectively serving their purposes because of poor traffic
flow at their locations and flaws in their architectural
design.

These conditions made explicit the need for better

retailing operation in the city of S. Paulo and for an

 

329

extended application of retailing technology in the loca-
tion and design of future shopping centers. These conditions
legitimize the nature and objectives of this dissertation.
Due to the lack of secondary data related to the
dissertation's specific objective, it was necessary to
prepare primary data from existing information derived
from other studies in the GSPMA. These data mainly were
concentrated on a description of S. Paulo's urban structure
and on the preparation of a market Opportunity index for

all of the city's forty-eight districts.

Market Opportunity Analysis

 

A market opportunity analysis was conducted to
evaluate the relative demand potential in the forty-eight
districts of S. Paulo. It was achieved by the elaboration
of composite indexes from each district. The factors used
in the preparation of these indexes were population,
income, and car ownership. Since the data available were
reported by districts with different geographic areas,
in order to get a true picture of market opportunity,the
first set of indexes were modified relative to the area
of each district. Such a procedure gave a clear identifi-

cation of the location of demand opportunity over space.

330

Both sets of indexes were classified by quartile
intervals. Some very interesting changes in the ranking
positions of the city's districts were revealed, when area
was introduced, which turned out to be extremely con-
sistent with the actual distribution of demand within
S. Paulo. The modified composite index is the first
input into the normative model for shopping center loca-

tion and investment in the city.

Normative Model

 

The conceptual framework developed in the earlier
chapters stressed the fact that shopping centers have a
close relationship with their surrounding areas. There-
fore, the decision concerning investment and location must
take into consideration costs and revenues as related to
potential. Consequently, a normative model for the shopping
center investment decision process was developed. This
model used as its major constructs market opportunity in
the shopping center's projected trade area, land site
acquisition costs, and the basic objectives of the partici-
pants in the project--the investor and the retailer.

In order to make the normative model as realistic
as possible, several tools and analytical techniques from
other disciplines were used in the modeling process.

Among these were cost accounting concepts, investment

 

331

techniques such as present value, and breakeven analysis.
The application of these tools resulted in a comprehensive
model which incorporates,simultaneously,the effect of
different types of costs as well as the time dimension,
both of which are extremely relevant in long-run invest-
ment decisions such as shopping centers.

Since retailing operates under uncertainty condi-
tions, probabilistic dimensions were introduced into the
model through the use of a tree diagram and application
of sequential probabilities.

Finally, an operational framework for use of the
model was suggested. It consists of a logical flow diagram
which indicates the sequence and an overall guideline
for applying the model in specific conditions. One of the
model's major strengths is its ability to combine several
analytical techniques which have been applied separately
in other areas of business administration.

It should be mentioned that land acquisition cost
was treated as a relevant variable because of the low

degree of control which the investor has upon it.

Need for Future Research

 

Future studies in this area should be oriented to
the expansion and deeper analysis of six particular points.
(1) Market opportunity indexes for smaller geographic areas,
such as census tracts or residential neighborhoods should

be elaborated. (2) Modified composite indexes should be

332

prepared which use a larger number of descriptors such

as retailing competition, household ownership, profession,
education, number of home appliances per household, and so
forth. (3) A study linking urban land and trade area
theoretical concepts would be useful in assessing trends
and pinpointingfhture retailing locational patterns in the
GSPMA. (4) An evaluation should be made of the retailing
system's effects on the quality of urban life. It should
take into consideration the benefits and convenience

which may be derived from specialized retailing facilities
at decentralized locations. (5) The concepts and normative
framework of this dissertation should be applied to develop
public policies related to retailing location. The

result could provide better locational patterns in growing
communities, towns, and cities. (6) Finally, detailed
studies should suggest shopping center planning techniques
and architectural designs adapted to Brazilian environ-

mental conditions.

Expansion of the Normative Model

The modeling process used in chapter 6 was
oriented toward the utilization of a limited number of
variables and constructs in order to enhance the linkages
among the system's component variables and also to pinpoint
their operational and conceptual relationships. Such an

approach permitted us to create a model which is simple

 

 

333

in its internal structure; consistent with the objectives
and goals of the shopping center participants; and of
universal application because it reflects the operational
characteristics of controlled retailing institutions.
Furthermore, this model and its association with market
Opportunity analysis made it possible to relate cost and
revenues to potential. Such a feature can be considered
an original contribution of this dissertation in the

area of retailing management.’

If future research and effort will be applied to
expanding this model,some additional refinements may be
incorporated into its initial framework. Among these
improvements,the following may be mentioned. (1) Retailing
costs can be presented in a more detailed form, which
would permit a finer evaluation of the retailer's requisite
operational inputs. (2) The expected value of the rental
streams may be corrected by means of a growth coefficient
which would indicate increases in the rental values in
future operational periods. (3) A larger number of proba-
bilistic and related events may be introduced into the
decision tree diagram in order to evaluate the impact of
variables other than those already mentioned. (4) The
investment decision making process could be subjected to
other quantitative techniques such as heuristic programs
or sensitivity analysis. Such analytical tools certainly
would improve the results of any proposed shopping center
project conducted within the scheme elaborated in this

dissertation.

334

Conclusions

 

The large scope of this dissertation, its multi-
disciplinary approach,and the use of new analytical tools
in its elaboration, creates the opportunity for future
research in this area.

Hopefully, the concepts elaborated here may serve
as a starting point for other scholarship,not only in
Brazil,but elsewhere. Other countries may be able to use
and adapt the outstanding features of U.S. retailing
technology to their own environments. The field of
retailing is ripe for the application of marketing
theory as well as for the utilization of interdisciplinary
contributions. Its challenge never ends, and the prospects
for new and high level academic studies is and always will

be present.

BIBLIOGRAPHY

 

335

 

BIBLIOGRAPHY: CHAPTER I

Books

Baranoff, Seymour. "Retailing as an Operating System."
Theory in Marketing. Edited by Wroe Alderson,
Reavis Cox, and Stanley Shapiro. Homewood, 111.:
Irwin, 1964.

 

Berry, Brian. Geography of Market Centers and Retail Dis—
tribution. Englewood Cliffs, N. J.: Prentice-Hall,
1967.

 

 

Community Builders Handbook. Washington, D. C.: Urban
Land Institute, 1968.

 

Gist, Ronald. Marketing and Society. New York: Holt,
Rinehart, and Winston, 1971.

 

Lima, Alberto de O. Shopping Centers-~U.S.A. vs Brazil.
Rio De Janeiro: Fundacao Getulio Vargas, 1971.

 

Markin, Rom J. Jr. Retailing Management: A Systems
Approach. New York: MacMillan Company, 1971.

 

Meehan, Eugene J. Explanation in Social Science—-A System
Paradigm. homewood, 111.: Dorsey Press, 1968.

 

Meissner, Frank. "Planned ShOpping Centers." Management
Perspectives in Retailing. Edited by Ronald R.
Gist. New York: John Wiley and Sons, 1967.

 

 

Rigby, Paul E. Conceptual Foundations of Business Research.
New York: John Wiley and Sons, Inc., 1965.

 

Periodicals

 

Knoke, William. "Supermercados no Brazil." Revista de
Administracao de Empresas, 3, no. 9 (October-
December, 1963), 9l.

 

 

Smith, Paul E. "Prescription for a Successful Shopping
Center." MSU Business Topics, 14 (Autumn 1966); 17-

 

336

 

337

Reports

Grupo Executivo do Grande S. Paulo. Ge ram. 5. Paulo:
Governo do Estado, de 5. Paulo, 1967.

Metro do Sao Paulo. Sistema Integrado de Transporte
Rapido Coletivo em Sao Paulo. Vol. 1. S. Paulo:
Companhia do Metropolitano de 5. Paulo, 1968. P. 39.

 

 

Unpublished Material

 

Hamburger, Polia Lerner. "A Estrutura de Distribuicao
(II)." (Mimeographed.)

‘flfli'mmmwuv

338

BIBLIOGRAPHY: CHAPTER II

Books

Alderson, Wroe. Dynamic MarketingfiBehavior. Homewood,
Ill.: Irwin, 1965.

 

. Marketing Behavior and Executive Action.
Homewood, 111.: Irwin, 1957.

 

. "The Analytical Framework of Marketing."
Marketing Classics. Edited by Ben M. Enis and
Keith K. Cox. Boston: Allyn and Bacon, 1969.

 

Baker, Geoffrey and Funaro, Bruno. Shopping Center:
Design and Operation. New York: Rinehold Pub-
IiShing Company, l§§l.

 

 

Bartels, Robert. The Development of Marketing Thought.
Homewood, 111.: Irwin, 1962.

Blumenfeld, Hans. "Criteria for Judging the Quality of
the Urban Environment." The Quality of Urban Life.
Edited by Henry J. Schmandt and Warner Bloomberg.
Beverly Hills, Calif.: Sage, 1969, Vol. 3.

 

Brand, Edward. Modern Supermarket Operation. New York:
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Breese, Gerald. Urbanization in Newly Deve10ping Countries.
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Burgess, Ernest and MacKenzie, Roderick D. The Cit .
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Chiara, Joseph de and Koppelman, Lee. Plan Design Criteria.
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Community Builders Handbook. Washington, D. C.: Urban
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Engel, James F.; Kollat, David T.; and Blackwell, Roger D.
Consumer Behavior. New York: Holt, Reinhart, and
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Eyrich, Gerald and Wentz, Walter. Marketing Theory and
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“'-M-u .—

339

Feinberg, Samuel. What Makes ShOpping_Centers Tick. New
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Forrester, Jay. Urban Dynamics. Cambridge, Mass.: The
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Gruen, Victor and Smith, Larry. Shopping Towns--U.S.A.--
The Planning of Shopping Centers. New York:
Reinhold Corp., 1960.

 

 

Gist, Ronald. Marketing and Society: A Conceptual Intro—
duction. New York: Holt, Rinehart, and Winston,

I971.

 

. Retailing--Concepts and Decisions. New York:
Wiley, 1968.

 

Goldstucker, Jac. "Trading Areas." Science in Marketing.
Edited by George Schwartz. New York: John Wiley
and Sons, Inc., 1965.

 

Hoover, Edgar M. "The Evolving Form of the Metropolis."
Issues in Urban Economics. Edited by Harvey S.
Perloff and Lowdon Wingo, Jr. Baltimore: Johns
Hopkins Press, 1968.

 

Hurd, Richard M. Principles of Cipy Land Use. New York:
The Record and Guide, 1903.

 

 

Jonassen, Christensen T. Downtown Versus Suburban Shoppipg.
Columbus, Ohio: Bureau of Business Research, Ohio

State University Press, 1955.

Jones, Colin S. Regional Shopping Centers: Their Location,
Planning and Desigp. London: Business Books, 1969.

 

Kelley, Eugene. Locatinngontrolled Regional Shppping
Centers. Saugatuck, Connecticut: Eno Foundation
for Highway Traffic Control, 1956.

Kotler, Philip. Marketingppecision Making: A Model Build-
ing Approach. New York: Holt, Rinehart, and
Winston, 1971-

 

Lalonde, Bernard. "The Logistics of Retail Location."
The Social Responsibilities of Marketing. Edited
By William D. Stevens. Chicago: American Marketing
Association, 1961.

Lamford, Eric E. "The Evolving System of Cities in the USA."
Issues in Urban Economics. Edited by Harvey S.
Perloff and Lowdon Wingo, Jr. Baltimore: John
Hopkins Press, 1968.

 

340

McNair, Malcolm. "Significant Trends in the Postwar Free
Period." Competitive Distribution in a Free High-
Level Economy and Its Implications for the
University. Edited by A. B. Smith. Pittsburgh:
University of Pittsburgh Press, 1958.

 

. "Improving the Dynamics of Retailing in an
Expanding Economy." Exploration in Retailing.

Edited by Stanley C. Hollander. East Lansing, Mich.:
Bureau of Business and Economic Research, Michigan
State University Press, 1959.

 

 

Meissner, Frank. "Planned ShOpping Centers." Management
Perspectives in Retailing. Edited by Ronald E.
Gist. New York: Wiley, 1967.

 

 

Mumford, Lewis. The City in History. New York: Harcourt,
1961.

 

Mulvihill, Donald F. and Mulvihill, Ruth C. Geography of

Marketing_Growth. New York: Van Nostrand Reinhold,
1970.

 

 

Nelson, Richard L. The Selection of Retailing Location.
New York: F. W. Dodge Corps., 1958.

 

Reilly, William J. The Law of Retailing Gravitation. New
York: William J. Reilly, 1931.

 

Revzan, David A. Perspectives for Research in Marketing:
Seven Essays. Berkeley: Institute of Business and
Economic Research, University of California Press,
1965.

 

 

Schwartz, George. Development of Marketing Theory. Chicago:
South Western, 1963.

 

Smith, Paul E. Shopping Centers Planning and Management.
Chicago: National Retail Dry Goods Association,
1956.

 

Staudt, Thomas A. and Taylor, Donald A. A Managerial Intro-
duction to Marketing. 2d ed. Englewood Cliffs,
N.J.: Prentice-Hall, 1970.

 

 

Sturdivant, Frederick D. Managerial Analysis in Marketipg.
Glenview, 111.: Scott, Foresman, 1970.

 

Thomlinson, Ralph. Urban Structure--The Social and Spatial
Character of Cities. New York: Random House, 1970.

 

 

Weber, Max. The City. New York: The Free Press, 1958.

 

341

Periodicals

 

Applebaum, William and Cohen, Saul. "The Dynamics of Store
Trade Areas and Market Equilibrium." Annals of the
Association of American Geographers, 51_YMarEh,
1961), 73-101.

 

. "Store Trading Areas in a Changing Market."
Journal of Retailing, XXXVII (Fall, 1961), l4-25.

. "Methods for Determining Store Trade Areas,
Market Penetration and Potential Sales." Journal
of Marketing Research, III (May, 1966), 127-141.

V

. "Guidelines for a Store Location Strategy Study."
Journal of Marketing, 30, no. 4 (October, 1966),
U-4So

Ascher, Charles S. "What Are the Cities For?" Annals for r~
the American Academy of Political and Social Science,
CCLXII (1945), 3.

 

 

Beem, Eugene R. "Retailing in the 1980's." Marketing
Insights, 18 (November, 1968), 20-24.

 

Bliss, Perry. "Schumpeter: The Big Disturbance in
Retailing." Social Forces, 37 (October 1960): 76-

 

Bucklin, Louis P. "Retail Strategy and the Classification
of Consumer Goods." Journal of Marketing, 27, no. I

 

Clark, Collin. "Urban POpulation Densities." Journal of
the Royal Statistical Society, Series A, 114*(1951),

 

Cohen, Samuel S. and Applebaum, William. "Evaluating Store
Sites and Determining Store Rents." Economic
Geogrgphy, LI (January, 1960), 1-35.

 

 

 

Converse, Paul D. "New Laws of Retailing Gravitation."
Journal of Marketing, 14, no. 3 (October, 1949),
379-384.

Cox, Reavis. "Consumer Convenience and the Retail Structure
of Cities." Journal of Marketing, 24 (April, 1959),
355-362.

Doody, Alton F. and Davidson, William R. "Next Revolution
in Retailing." Harvard Business Review, 44 (May-
June 1967), 4-16.

 

342

 

Dressmann, A. C. R. "Patterns of Evolution in Retailing."
Journal of Retailing, 44, no. 1 (Spring, 1968),
64-810

Drucker, Peter F. "Marketing and Economic Development."

Journal of Marketing, 22 (January, 1958), 252.

 

"EuropeS New Shopping Centers." Business Abroad, October,
1968, pp. 22-28.

 

Fisk, George. "The Replanning of Center City Shopping
Districts." Journal of Retailing, 35, no. 2
(Summer, 1959), 80-84}

 

Gottman, Jean. "MegaIOpolis or the Urbanization of the
Northeastern Seaboard." Economic Geography, XXXIII
(July, 1957), 189-200.

 

Harris, Chauncy D. and Ullman, Edward L. "The Nature of
the Cities." Annals of the American Academy of
Political and Social Science, CCLXII (November,
1945), 7-17.

 

 

Hellsworth, Dart T. "Changing Trends in Regional Shopping
Centers." Journal of Retailing, 34, no. 4 (Winter,
1958), 177—I84.

 

Hinderman, Charles H. "Impact of Shopping Centers in
Downtown Cincinnati." Journal of Retailing, 34,
no. 4 (1958), 185-188.

 

Hollander, Stanley. "The Wheel of Retailing." Journal of
Marketing, 25, no. 1 (July, 1960), 37-42.

 

 

Holton, Richard. "Marketing Structure and Economic Develop-
ment." The Quarterly Journal of Economics, 67
(August, 1953), 361.

 

Huff, David L. "Defining and Estimating a Trading Area."
Journal of Marketipg, XXVIII (July, 1964), 27-28.

 

Lewis, Richard J. and Erickson, Leo. "Marketing Functions
and Marketing Systems: A Synthesis." Journal of
Marketing, July, 1969, pp. 10-19.

 

 

Lalonde, Bernard. "New Frontiers in Retailing Location."
Current Business Topics, 1963, p. 8.

 

Mertes, John E. "The Shopping Center--A New Trend in
Retailing." Journal of Marketing, 13 (January,
1949), 372—378.

 

343

Mertes, John E. "Structure Theory for Site Analysis."
Journal of Retailing, 40, no. 2 (Summer, 1964),
r9-30 o

 

"Definition of Marketing Terms." National Marketing Review,
I (Fall 1935), 166.

 

Nystrom, Paul H. "Downtown Shopping Revival." Journal of

 

 

Schwartz, George. "Laws of Retail Gravitation: An
Appraisal." University of Washington Business
Review, XXII (October, 1966), 60—71.

 

Smith, Paul E. and Kelley, Eugene J. "Competing Retail
Systems: The Shopping Center and the Central
Business District." Journal of Retailing, 34
(Spring 1960), 11-18.

 

Stedman, Gordon. "The Rise of Shopping Centers." Journal
of Retailing, 31 (Spring, 1955), 11-26.

 

. "Impact of ShOpping Center Locally and Downtown."
Journal of Retailipg, 32 (Spring, 1956), 25-39.

 

Stonier, Charles E. "Off-Street Parking to Attract Down-
town Shoppers." Journal of Retailing, 36 (Fall,
1960), 145-149.

 

Thorelli, Hans B. "Ecology in Marketing." Southern Journal
of Business, 2 (October, 1967), 19-25.

 

 

Weiss, Ernest. "What Will Retailing Be Line in 1975?"
Advertising Age, 37 (March 7, 1966), 119-122.

 

Reports

American Marketing Association. Marketing Definitions:
A Glossary of Marketing Terms. Chicago: AMA, 1960.

 

 

Berry, Brian J. Commercial Structure and Commercial Blight.
Research Paper no. 95. Chicago: Department of
Geography, University of Chicago, 1965.

 

Gross, Walter. "Retailing in the Seventies: A Projection
of Current Trends." Baylor Business Studies,
February-March-April, 1969, pp. 19-31.

 

Hoyt, Homer. The Structure and Growth of Residential
Neighborhoods in American Cities. Washifigton, D. C.:
U.S., FOHOAO' 1939.

 

 

344

Kaylin, S. 0., ed. Executives Edition. Chain Store Age,
April, 1966, p. E8.

Larson, G. E. and Poteat, M. N. "Selling in the United
States Market." Domestic Commerce Series, No. 29
(New Series). Washington, D. C.: U. S. Department
of Commerce, Government Printing Office, 1951.

Lazer, William. CELS-80: Consumers Environment and Life
Styles of the 1980's. Benton Harbor, Michigan:
Whirlpool Corpoation, 1971.

 

 

"Parking Requirements for Shopping Centers." Technical
Bulletin No. 53. Washington, D. C.: Urban Land
Institute, 1964.

 

Monggraphs

 

Cox, Eli P. and Erickson, Leo G. Retail Decentralization.
Bureau of Business and Economic Research. East
Lansing, Michigan: Michigan State University, 1967.

Lalonde, Bernard. Differentials in Super Market Drawing
Power. Marketing andiTransportation Paper, No.ill.
Bureau of Business and Economic Research. East
Lansing, Michigan: Michigan State University, 1962.

Simmons, James. The Changing Pattern of Retail Location,

Chica 0. Research Paper No. 92. ChiCago:
University of Chicago Press, 1964.

Proceedingg

 

Doody, Alton F. "Historical Pattern of Marketing Innova-
tions." Emerging Concepts in Marketing. Edited
by William Deeker. Proceedings of the Winter Con-
ference of AMA. Chicago: AMA, December, 1962.
Pp. 245-256.

Duncan, Delbert J. "Responses of Selected Retail Institu-
tions to Their Changing Environment." Marketing
and Economic Development. Edited by Peter Bennet.
Chicago: American Marketing Association, 1965.

Eisenpreis, Alfred. "An Evaluation of Current Store
Location Research." New Directions in Marketing.
Edited by Frederick Webeter. Chicago: Amefican
Marketing Association, 1965.

__- ur— 4

 

 

 

34S

Huff, David L. "A Probabilistic Analysis of Consumer Space
Behavior." Emerging Concepts in Marketing. Edited
by William S. Decker. Chicago: American Marketing
Association, 1963.

Lalonde, Bernard "The Logistics of Retail Location."
The Social Responsibilities of Marketing. Edited
by William D. Stevens. Chicago: American Marketing
Association, 1964.

Plotkin, Manuel D. "The Use of Credit Accounts and Computers
in Determining Store Trading Areas." New Directions
in Marketing. Edited by Frederick E. Webster.
Chicago: American Marketing Association, 1965.

 

Rostow, Walt W. "The Concepts of a National Market and Its
Economies--Growth Implications." Proceedings of
the Fall Conference of the American Marketing
AssociatIOn. Chicago: AMA, 1965.

 

Unpublished Materials

Emmet, Persis R. "Deve10pment and Location of ShOpping
Centers in the San Francisco Bay Area, California."
Unpublished Ph.D. dissertation, Stanford University,

1961.

McGarrity, Richard A. "An Application of Space Transforma-
tion in Evaluating the Urban Location Pattern of a
Multi-Unit Retail Firm." Unpublished Ph.D. disser-
tation, Northwestern University, 1969.

Sallins, Daniel. "Household Location Patterns in Selected
American Metropolitan Areas." Unpublished Ph.D.
dissertation, Syracuse University, 1970.

 

346

BIBLIOGRAPHY: CHAPTER III

Books

Dalrymple, Douglas J. and Thompson, Donald L. Retailing:
An Economic View. New York: The Free Press, 1969.

 

 

Davidson, William R. and Doody, Alton. Retailing Management.
New York: Ronald Press, 1966.

 

Furtado, Celso. The Economic Growth of Brazil--A Survey
from Colonial to Modern Times. Berkeley, Calif.:
University of California Press, 1968.

 

 

. Obstacles to Development in Latin America.
Garden City, New York: Doubleday, 1969.

 

Harris, Walter. "Urban Quality in the Context of the
Developing Society." Quality of Urban Life. Vol. 3.
Edited by Henry Schmandt and Warner Bloomberg.
Beverly Hills, California: Sage, 1969.

 

Hicks, John R. Essays in World Economies. Oxford:
Clarenon Press, I959.

 

Langenbauch, Jurgen R. A Estruturacao do Grande Sao Paulo.
Rio de Janeiro, 1971.

 

Linton, Ralf. The Study of Man. New York: Appleton,
Century, and Crofts, 1936.

 

Nystrom, Paul H. The Economies of Retailing. New York:
Ronald Press, 1934.

 

Polyani, Karl. The Great Transformation. Boston, Mass.:
Beacon Press, 1957.

 

Rogers, Everett M. and Shoemaker, Floyd. Communication of
Innovations: A Cross-Cultural Approach. New York:
The Free Press, 1971.

 

 

Schwartz, George. Science in Marketing. New York: John
Willey, 1964.

 

 

347

Periodicals

 

Bennet, Peter D. "Retailing Revolution in Chile." Journal
of Marketing, 33 (July, 1966), 45.

 

Cundiff, Edward. "Concepts in Comparative Retailing."
Journal of Marketing, 28, no. 1 (January, 1965),
59-63.

 

Douglas, Susan P. "Patterns and Parallels of Marketing
Structures." MSU Business Topics, 19

(February), 54-58.

 

Erickson, Leo G. "Analyzing Brazilian Consumer Markets."
MSU Business Topics, 2 (Fall 1963), 726-736.

Hollander, Stanley. "The International Storekeeper."
MSU Business Tppics, 17 (Spring, 1969), 13—23.

 

Lima, Alberto Filho. "Shopping Center como Novos Sistemos
de Operacao Varejista." Revista de Administracao
de Empressas, 9, no. 2 (April-June, 1969), 37-49.

 

 

 

Miller, Willard F. "Some Market Structure Considerations
in Economic DevelOpment." Journal of Farm Economies,
41

Moyer, Reed. "The Structure of Markets in Developing
Economies." MSU Business TOpics, 12

Taylor, Donald A. "Retailing in Brazil." Journal of

 

Marketing, 24, no. 3 (July, 1959), 54-58.

 

NeWSpapers

 

O Estado de Sao Paulo. 6 August, 1965.

 

. 6 October, 1971.
. 28 November, 1971.

Jornal do Jumbo. September, 1971.

 

Supermercado Moderno. July, 1971.

 

Proceedings

 

Taylor, Donald. "Marketing in Brazil." Marketing and
Economic Deve10pment. Edited by Peter D. Bennet.
Chicago: American Marketing Association, 1965.

 

 

 

348

Reports

Instituto Brasileiro de Geographia e Estatistica. VII Rec-
enseamento Geral. Rio de Janeiro, 1970.

 

Prefeitura Municipal de Sao Paulo. Plano Urbanistico
Basico. Vols. 1, 2, and 4. Sao Paulo,'1968.

 

349

BIBLIOGRAPHY: CHAPTER V

Books

Alderson, Wroe. Marketing Behavior and Executive Action.
Homewood, 111.: Irwin, 1957.

Hamburg, Morris. Statistical Analysis for Decision Making.
New York: Harcourt Brace, 1970.

Markin, Rom. Retailing Managgment: A Systems Approach.
New Yofk: MacMilIan Co., 1971.

Periodicals

 

Conjuntura Economica. 25, no. 8 (171).

Unpublished Materials

Instituto Brasileiro do Geographia e Estatistica.
"ASpecto do Municipio de Sao Paulo." 1968.

350

BIBLIOGRAPHY: CHAPTER VI

Books

Bierman, Harold and Smidt, Seymour. The Capital Budgeting
Decision. New York: The MacMilIan Co., 1960.

 

Buzzel, Robert; Cox, Donald; and Brown, Rex. Marketing, .‘Is
Research and Information Systems-~Text and’Cases.
New York: McGraw-Hill, 1968.

 

 

Kotler, Philip. Marketing Management AnalysisLyPlanning
and Control. 2d ed. Englewood Cliffs, N. J.:
Prentice-Hall, 1971.

 

 

Schlaifer, Robert. Analyses of Decisions Under Uncertainty.
New York: McGraw-Hill, 1969. . w—

 

 

Van Horne, James C. Financial Management and Policy. 2d ed.
Englewood Cliffs, N.J.: Prentice-Hali, 1971.

 

Periodicals

 

Ritland, Ross W. "New Methods of Estimating and Forecasting
Retail Sales." Journal of Retailing, 39, no. 3
(Fall, 1963), 1-9.

 

   
   

   
 

  
  

       
   

        

     

 

    

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