6. Retail

Self-service supermarkets appeared in the United States in the 1920s but were slow to catch on in Europe, where shoppers preferred personal counter service. Jack Cohen, the founder of Britain's leading supermarket chain Tesco, only opened his first self-service supermarket in 1956. It was the advent of the car that permitted the growth of out of town shopping where enormous purpose-built supermarkets and hypermarkets can be constructed free from the expense of town centre real estate and rents.

The downside of this is that the growth of out of town shopping has caused a hollowing out of many town centres. In some towns and cities, old shops stand empty. However, in prosperous towns specialist retailers in areas such as up-market gifts, fashion boutiques and shops selling fine food and wine have filled the gap left by the major stores. Conversely in the UK, the larger supermarket chains have been re-entering the in-town retail environment with a chain of small city supermarkets.

In many economies, retail has become more profitable than manufacturing consumer goods but competition is fierce. Heavy discount stores such as the German-owned Aldi challenge the large established chains on price. While generally much smaller than their large competitors, they offer very competitive prices by only stocking own name brands.

Businesses are also seeking ways of keeping customers by improving service, speeding up check out with self-check out technology, and the offer of incentives such as loyalty cards and points. Supermarkets often sell loss leaders (products at cost price in the hope that customers who come onto their premises will make other purchases).

But how do supermarkets find loss leaders? One way is to sell goods at little more than cost price so that the actual profit they make is small. Another way is to exploit a grey market situation. Supermarkets buy luxury goods from cheaper markets abroad and resell them at much lower prices than in boutiques and up-market department stores. The brand owners who try to fix and protect a high retail price are also dissatisfied. The conflict may grow to cases being heard in court.

Stores and supermarkets use psychology to make us buy. Special offers are placed at the end of aisles where there is high traffic.

Sight - eye level is buy level. Studies show that eye level for shoppers is just below the direct position of their eyes. This is where you will find the goods with the biggest profit margins.

Triangular balance - when we look at a group of goods, we tend to focus on the ones at the centre of the triangle. That's why the biggest items with the biggest profit margins are placed in the centre of the picture.

Lighting - different coloured lighting is used in different parts of stores. After experimenting with low energy bulbs, clothes retailers quickly abandoned them as it made blue clothes look too green. Soft lighting is used for lingerie.

Smell - the smell of baked bread helps increase sales.

Sound - Musician increase sales. Sales of French wine increased when French music was played; the following day German folk music led to increased sales of German wine.

Touch - customers like to touch and feel goods, particularly clothes. Neat piles put shoppers off buying by suggesting that nobody is buying the items. Shoppers prefer to pick their way through untidy piles.