Vive la différence in the local market

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A walk on Menton’s marché municipal reveals how the conclusions regarding differences in productivity among countries, can be both obvious and meaningless.

It is a pleasant excursion to pick up some produce in Menton’s marché municipal and browse the FT over an espresso in the place Clemenceau. It was there that I read Robert Gordon’s article (FT, August 20) on the need to reduce the productivity gap between American and European retailers.

The little newsagent sells not only the FT and the usual run of French newspapers but also The Wall Street Journal, Il Sole, El Pais and Die Zeit. There is certainly scope there for rationalisation and economies of scale. And the productivity of that espresso! So much coffee, so much energy, for such a small output of liquid.

And then there is the marché municipal itself, a striking but not beautiful 1902 building of 10,000 square feet. It contains about 50 stalls, all selling fresh foodstuffs. There are competing fruit, vegetable and cheese shops and at this time of year tourists are photographing the mouth-watering displays. The queue at the bread stall always spills out on to the street because many breads are sold by weight. There is a specialist potato place, where the vendor will advise you what is in season and which variety is most suitable for a boulangère.

The market is a tourist attraction; but it is not primarily a tourist attraction. Most shoppers are local residents. There will still be a queue to buy bread in November, and there will be a different range of potatoes. There are similar markets all over France.

French retailing is constrained by regulations on land use, opening hours and even the products that may be sold. France was one of the first countries to develop out-of-town stores and some of the companies that pioneered these developments, such as Carrefour, are innovative retailers in a global marketplace. Since then, there has been intensive lobbying by smaller merchants. It is almost impossible today to create new shopping centres on greenfield sites. But these self-serving arguments have been successful not because their proponents made donations to political action committees but because many French people are sympathetic to the cause. They fear the marché municipal might disappear.

I doubt if there is much justification for these fears. There are three supermarkets within a quarter of a mile of the market, which stock the same categories of goods, mostly of lower quality and at lower prices. On the outskirts of town is a much larger store with extensive parking. A 20-minute drive will take you to a Carrefour with more than 100,000 square feet of retail space and a US-style mall. In the face of this competition, the marché municipal and another daily market a mile away seem to be doing fine. All the stalls are taken and there are usually some informal booths outside where local people sell home-grown fruit and vegetables.

An economist, it is said, knows the price of everything and the value of nothing. But this is unfair; most economists would agree that value depends not only on price but also on quality – and that the quality of retailing is enhanced by a range of outlets and by diversity of product range, congenial surroundings and knowledgeable salespeople.

Nevertheless, such analysis is not what economists do. Productivity data show that the gap between Britain and the US is particularly large in financial services and in retailing. But these are industries in which output is poorly measured and British companies are successful in international competition. So we should look at what lies behind the figures before we draw conclusions.

National accounts measure not retail output but the volume of retailed goods. A dollar of sales is treated similarly whether it is made in Bloomingdales or Wal-Mart, in an haute couture salon or the marché municipal. Higher productivity simply means less retail input per dollar of sales, so the conclusion that French productivity is lower is both obvious and meaningless. We take visitors to the marché because it is fun. I suspect that if you tried to photograph the displays in a Wal-Mart store you would be asked to leave, but that the problem is not often encountered.

When will Americans realise that if the rest of the world is not like the US, that is not necessarily a problem – either for us or for them?

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