Retailing and Central-Place Functions of Cities. The Order of a Good

A major function of cities and urban places is the distribution of finished goods and services. Examination of this function is critical to understanding the geography of cities throughout the world. How far would you travel to buy a quart of milk? On the other hand, how far might you travel in order to purchase a new car?

Why would you more likely be willing to go a hundred miles to buy a new car, but only a couple of blocks to buy milk? The answers to these and related questions form the basis of central-place theory. Central-place theory is a classical location theory intended to explain the local geography of retailing and distribution. Central-place models, from which the general theory derives, are also useful in explaining the size, spacing, and growth of cities.

Range and Threshold. The availability of particular goods and services is generally a reliable indicator of the size and importance of a city. A larger selection of goods and services is usually available to consumers in large cities relative to small ones.

Two key concepts link the size and importance of cities to the process of urban retailing. The range is the distance that a consumer is willing to travel in order to purchase a good or service. The thresholdis the number of customers needed to support the sale of the good or service.

Different goods and services are associated with different ranges. Everyday consumer items such as bread and soft drinks have small ranges. By contrast, automobiles, television sets, and other large and expensive items have large ranges. Automobile dealers emphasize the benefits to be reaped from traveling many miles to their showrooms. Dealers in rural areas advertise in nearby cities, proclaiming that a terrific deal on a new car is worth the extra travel time. Many customers are willing to travel up to several hundred miles for such a good deal on a new car.

The threshold of a good refers to the minimum level of effective demand that will allow a retail operation to stay in business. Basic consumer items, such as those sold at convenience stores, have low thresholds. Only a relatively small number of customers are needed in order to ensure the profitability of the enterprise.

By contrast, expensive automobiles require a ready market of large numbers of potential customers in order for the dealership to succeed. While people purchase basic consumer items daily or weekly, they purchase automobiles, television sets and other such items only infrequently. Thus, a larger population of potential buyers is needed to ensure that enough of these purchases will be made in order to maintain the business.

The Order of a Good. The concept of the order of a good links the concepts of threshold and range. Low-order goods are goods with low thresholds and low ranges. Examples include groceries, newspapers, soft drinks, candy, and other everyday items. High-order goods have high thresholds and high ranges. These include automobiles, stereos, television sets, jewelry, and furniture.

Of course, the distinction between low- and high-order goods is relative. Not all cars are of equal order; a used and battered jalopy would be a low-order item, whereas a Porsche or a Rolls Royce would be a high- order item. Everyday clothing like underwear, socks, T-shirts, and work clothes are low-order. High-fashion dresses, wedding gowns, and other expensive items of apparel represent garments of higher order.

Some goods have high thresholds of demand and relatively low ranges. These goods are neither high-order nor low-order goods. Retailers selling such goods can assure themselves of profit only by offering the goods or services at different locations at different times. Hence, goods with high thresholds and low ranges are called periodic goods.

In many countries, informal open-air markets are held at regular intervals. In these locations, high transportation costs and perishability keep ranges low. Itinerant traders travel from one market to another on a regular basis. In this way, they increase retail opportunities by increasing the number of customers within their range. Customers are aware when the traders are nearby and do business with them on these days.

In the developed countries, the concept of periodic marketing has been adapted to flea markets, auto shows, sports events and popular culture. Popular music performances, circuses, plays, and other cultural events are presented in scheduled tours. Even the most popular performers could not sell out the same arena night after night. Instead, they move from one city to another, drawing large crowds and high profits in each place (Figure10-5).

Figure 10-5 Concert Tours as Periodic Goods. Rock-and-roll performers schedule tours across the United States and throughout the world. In that way, they achieve a threshold population within the geographic constraints of the range for concertgoers

Similarly, major-league sporting events are periodic goods. Professional football teams hold only eight home games per season. If there were too many games, the number of fans per contest would fall while team operating expenses would rise, making the team's operation unprofitable.