Tag Archives: department store

Transportation and economies of scale in retailing

The automobile may be blamed for the evolution of big-box retailers, but the effect of improvements to intraurban transportation on retailing began much earlier. This can be seen clearly with the development of the department store in the latter part of the nineteenth century.

In the walking city of the early nineteenth century, most urban residents could only move around on foot. This necessarily limited the distances they could travel and the amounts of goods they could carry. Stores tended to be small and rather limited.

Transportation improvements–horsecars, cable cars, electric streetcars, and more–dramatically increased mobility in urban areas. Cities greatly expanded as residents took advantage of the greater ease of travel. Going to the developing central business districts several miles away became feasible.

A larger number of potential customers could travel to a store located in the downtown area, creating a greater market. This allowed the emergence of the modern department store carrying a far larger range of goods with greater selections. More volume provided greater economies of scale to the store in the sale of its merchandise. But these were also economies of scale from the perspective of their customers, who benefited from the convenience, wider selection, and lower prices.

Coming to shop at the department stores via public transportation did have one limitation, however. Customers purchasing large numbers of items or very large items could find it difficult or impossible to carry their purchases back home with them. The stores recognized this problem and offered delivery of merchandise purchased in the various departments of the store.

This evolution depended solely on the transportation improvements made in the late nineteenth century. It had nothing to do with the automobile. Indeed, at least some department stores continued to assume that significant numbers of their customers would come to their downtown stores using public transportation at least into the 1950s. When growing up and shopping at the large downtown department stores in Milwaukee during that decade, the stores were continuing to offer their delivery services. Of course now, the assumption more often is that customers will be arriving by automobile and can take all but the largest items home themselves.