THE CHANGING ROLE OF WHOLESALE MARKETS
The characteristics of wholesale markets have changed considerably over the last century. They continue to change as retailing changes in response to urban growth, the increasing role of supermarkets and to increased consumer spending capacity. These changes require responses in the way markets are organized and managed.
There is an enormous difference between the village squares or road intersections where weekly markets took place and the purpose-built wholesale markets which began to appear at the end of the last century in London, Paris and Barcelona. Marking even greater change has been the establishment of modern food supply centres where wholesaling activities for a range of food commodities, together with associated prepackaging, assembly and other food distribution activities, are concentrated in one complex.
Central markets have been established this century in many countries for the wholesale marketing of fruits and vegetables. In countries which are dependent on grains, legumes and pulses as staples, wholesale markets were established for these commodities. Sometimes markets have included separate or special facilities for the sale of fish, flowers, poultry, meat, dairy products, spices and animal fodder. In some of the modern food supply centres facilities are provided for a range of products which include fruits and vegetables, meat, fish, poultry, dairy products and flowers. Some supply centres have related warehouse-distribution facilities for other goods for supermarkets and major retail chains.
As markets have changed, so too have the methods of product handling and marketing. Mechanized handling, bulk bins, prepackaging and sophisticated credit systems are all part of most modern wholesale markets. The sales system where farmers sold directly to households changed to one where wholesalers acting as either commission agents or private-treaty merchants assembled the produce and sold to retailers and major institutional buyers. In some markets an auction-based transaction system was introduced and developed. With the growth of improved transport and storage systems has come a growth in brokerage sales. Brokers, often located inside central markets, may arrange sales with deliveries being made direct to storage operated by supermarket chains, often outside the central wholesale markets. Other wholesalers now specialize as marketing agents for large producers or groups of producers, arranging packaging, labelling, product brand, and promotion and sales on a contracted basis. Some wholesalers act as purchasing agents for large buyers including supermarket groups.
Along with changes in market roles, product mix and the type of wholesaling, there has often been a change in location. The traditional location of wholesale markets in inner-city areas in many cities is no longer appropriate. The need for larger facilities able to accommodate large transport vehicles and to avoid problems of traffic congestion, sanitation and noise pollution have forced many markets to shift to areas on the outskirts of cities.
While the traditional central wholesale market continues to play an important role in many countries, some have expanded to become terminal wholesale markets, such as those in major cities of the USA and Japan. In Latin America they have expanded to become Centrales de Abastos (CA, food centres). In France, Marches dÕintret national (MIN, Markets of national interest) and in Spain, Unidades Alimentarias (UA) have developed. These large food supply complexes are located on the outskirts of key cities, combining a fruit and vegetable wholesale market with facilities for other foods and flowers. In addition, they have facilities for processing, grading and packaging, and excellent communication facilities. The whole complex is usually managed as a single unit. Because of the high investments involved, most of these facilities have been built by a municipality, provincial or national government, or often a combination of all three. Some of the largest new market complexes (e.g. Thalad Market in Bangkok) have been built by private enterprise with government-backed finance or other support.
In developed economies there have been very few new markets constructed in recent years. In the United Kingdom it is now estimated that up to 75 percent of all traded fruit and vegetables bypass wholesale markets. However, some of the transactions for this produce are actually arranged by wholesalers based in wholesale markets. Produce is often delivered directly from farmers or field-based packing houses to supermarkets, which have developed their own merchandising/distribution complexes. Modern wholesale markets will continue to be required in developing countries, transition economies and a large number of developed economies in the foreseeable future. The extent to which they will survive in some developed countries will depend on their capacity to adapt to changes towards increased economic concentration in food retailing in the hands of a relatively small number of supermarket chains. Additionally, changes will be required to meet changes in land use in inner-city areas, a wider range of commodities available year round, the development of export and import businesses, and the growth of specialty retail shops, bulk handling and prepackaging for retail sale. A rapidly expanding restaurant demand, as more and more people eat out, and a growing awareness by consumers of what constitutes healthy food are also factors influencing demand for markets.
Markets today must meet specific requirements for a wide variety of market users, including farmers, cooperatives, packing houses, specialty and general retailers, supermarkets, secondary wholesalers, institutional buyers (e.g. the army), large restaurants, hotels and retail food outlets (e.g. food chains), importers and exporters, as well as transport operators, banks and other businesses.
Wholesale markets should be linked closely with farmers and markets throughout the country and with international markets. The capacity to supply parking facilities for vehicles, air and freight services, together with telephone, fax, and e-mail facilities, as well as timely market quantity and price information, is an essential part of ensuring the integration of a wholesale market with other markets.
Market managers need to recognize and understand the particular role their market is expected to play in the economy at any point in time. They must be aware of the changes taking place in the society (e.g. privatization of government enterprises) being served by the particular market and the likely impact of these changes on retail distribution and sales, and subsequently on wholesalers. As already indicated, this could require major changes such as a shift in location to more appropriate facilities, changes to the produce range traded, different approaches to wholesaling, product handling, transport, storage, packaging, and all aspects of sales and distribution. It may require changes to quality standards and their administration, to the way market quantities and prices are recorded and used, and to the support services required in the market.
DISCUSSION OF MATERIALS COVERED
Chapter 1
The political, legal and institutional aspects of wholesale markets are covered in Chapter 1. Political issues, which frame the decisions taken by the authorities concerned, are the backbone of the marketing system. Relevant issues are whether or not there will be government intervention in the supply of food, and whose will be the primary responsibility for the supply service, the allocation of competences among the various authorities, management and operation modalities, etc.
An issue of the highest interest is then presented: whether markets should be public or private and whether existing public markets should be privatized. Marketing policies, as far as wholesale markets are concerned, are then analyzed to clearly establish the difference between what public authorities should do and what private operators do in reality.
Among legal issues the following are examined: the legal and regulatory framework as regards the supply of food, the setting of competencies in this regard, the posssibility of a legal vacuum and the criteria which should regulate the provision of market services.
As regards the role of the institutions, three levels of administration are recognized: central, regional/provincial and municipal. Their respective share of responsibilities and the possible conflicts among the three levels are outlined. Which institution, and at which level, should take the initiative for the promotion, construction and utilization of the markets. Finally, the need to strengthen the institutions in this regard is dealt with.
Chapter 2
Critical issues for effective market management are presented in Chapter 2. A basic requirement in this respect is the introduction of innovations, and of economic and operational criteria. It is also necessary to clearly define responsibilities with regard to the ownership and management of physical facilities.
This chapter looks into various modalities for the management of markets and examines in some depth public, private, mixed and ad hoc companies, their statutes, staffing, technical means, etc. It also looks into the possibility of conflicts among authorities/institutions.
Chapter 3
The management of markets is dealt with in Chapter 3. Here a series of principles are set out which should guide the sound administration of a market and referring to the internal rules which regulate the daily life of a market. The operations of the market are reviewed, from start-up to its day-to-day functioning including commercial transactions, the issue of selling hours, control activities and maintenance. Contracts, authorizations, licenses and permits are considered, since they will determine the daily life of the market and its longer term future.
The profit and loss statement of a market corporation is of ever growing importance. Budgets which anticipate a loss cannot be permitted, and those simply in balance are ever less accepted. A sound policy of rates and income is a conditio sine qua non for the proper running of a market. The expenses account has also a great importance. Publicizing the operational results of the market is nowadays a necessity. At the same time, market corporations must provide information on a continuing basis on all aspects related to the supply of food to consumers.
Another relevant aspect is ensuring that consumers and buyers generally are represented in the governing bodies of the market corporation. This facilitates a smooth operation and the prevention of problems. Training of personnel should not be neglected, as it becomes more and more an important issue in food marketing. All of the issues mentioned must be duly included and quantified in the accounting and other records of the market corporation.
Lastly, for the effective functioning of the market, and to achieve and maintain market transparency, it is imperative that suitable mechanisms be set in place to monitor management and the application of rules governing commercial transactions.
Chapter 4
Basic information on wholesale markets around the world is given in Chapter 4. The experience of Spain is presented. In this country, starting in the sixties, there was a significant change in the design and management of the new Food Units (Unidades Alimentarias) promoted by the central government and local authorities. Elsewhere in Europe, the French, German, British and Italian experiences are reviewed, and from other continents the cases of Japan, Hong Kong, USA, Australia and Argentina are presented.
