Distribution, convenience, and market institutions

grocery-shopping

Convenience means ease to obtain or reach. Substantial amounts of resources are being used to produce convenience to consumers. From the National Accounts Data Base at the United Nations, the expenditure in a typical country on retailing and wholesaling is close to 22% of GDP, irrespective of country wealth, ease of doing business, proxies for consumer travel costs, or proxies for the modernity of the national retail system.

The production of convenience adds value. Using data from the National Accounts at the UN, the figure below outlines the distribution (across nations) of the (log) ratio between the value added from retailing and manufacturing.  The mode at zero shows the density of the distribution where ‘making products’ and ‘making products available’ add about the same amount of value.

My interest in convenience is based in part on the idea that using the market to buy products takes effort on behalf of the consumer and that the production of convenience can be viewed as a transfer of consumer cost of purchasing to firm cost of selling. More specifically, I am interested in how competitive forces divide the total cost of using the market into a firm cost of selling and a residual consumer effort of buying.

Convenience also means ease of use. I am currently working on projects that investigate how time availability impacts variety and the nature of consumption goods bought by consumers.

Value added by retailing vs. manufacturing

log_ratio

NOTE –  Panel (A): all nations in the UN National Accounts; Panel (B): nations with above median GDP. The value added by retailing in most wealthy countries is close to the value added by manufacturing.  Source: “The Provision of Convenience and Variety by the Market,” RAND Journal of Economics, 2015, 46:3 (Fall), 480-498