Author: European System of Central Banks. Monetary Policy Committee

Publisher:

Published: 2011

Total Pages: 143

ISBN-13: 9789289908214

The distributive trades sector, which is primarily accounted for by wholesale and retail trade, is not only economically important in its own right, but also relevant to monetary policy. Ultimately, it is retailers who set the actual prices of most consumer goods. They are the main interface between producers of consumer goods and consumers, with around half of private consumption accounted for by retail trade. The "value added" of this intermediation service can be substantial, as this accounts for, on average, about 25% of consumer prices. The purpose of this report is to analyse the structural features of the distributive trades sector and the developments within it, as well as how these may infl uence prices and price dynamics. Several aspects are relevant.^From a monetary policy point of view, increasing the degree of competition in the distributive trades sector may have effects not only on price levels, but also on price dynamics, via a reduction in mark-ups, an increase in price fl exibility and a greater and more rapid pass-through of changes in costs to prices. Structural developments, such as the increasing market penetration of hard discounters, online trade and private label brands, the role of buying groups and the relative bargaining power between producers and retailers are of great importance to consumers and price determination. In addition, these may have implications for the measurement of consumer prices and inflation.^More generally, the distributive trades sector plays an important role in determining cross-country differentials in productivity growth, both within and outside Europe: the sector has accounted for over one-third of the widening gap in aggregate productivity between the euro area and the United States since the mid-1990s. A specifi c contribution of this report is the use of a wide range of data sources, including a unique dataset on the location of over 100,000 individual grocery stores across most of the euro area, to investigate how to better measure the degree of competition and concentration in this sector, and to compare sector developments from a national, regional and local perspective.