Consumer services and business services do not have the same distributions. Consumer services, discussed in this section, generally follow a regular pattern based on size of settlements, with larger settlements offering more consumer services than smaller ones. Key Issue 12.3 describes how business services cluster in specific settlements, creating a specialized pattern.
Key Issue 2: Where Are Consumer Services Distributed?
Central Place Theory The concept of central place theory helps to explain how the most profitable location can be identified. Central place theory, based on patterns observed in southern Germany, was first proposed by German geographer Walter Christaller in the 1930s. August Lösch in Germany and Brian Berry and others in the United States further developed the concept during the 1950s.
Market Area of a Service A central place is a market center for the exchange of goods and services by attracting people from the surrounding area. The term central place is so used because it is centrally located to maximize accessibility. Businesses in central places compete against each other to serve as markets for goods and services for the surrounding region.
The area surrounding a service from which customers are attracted is the market area or hinterland. To establish a market area, a circle is drawn around the node of a service on a map. The territory around the circle is its market area. Because most people prefer to get services from the nearest location, consumers near the center of the circle obtain services from local establishments. The closer to the periphery of the circle, the greater the percentage of consumers who will choose to obtain services from other nodes. People on the circumference of the market-area circle are equally likely to use the service or go elsewhere. To determine the market area of a service, geographers use the concepts of range and threshold.
Range of a Service The range is the maximum distance people are willing to travel to use a service. People are willing to go only a short distance for everyday consumer services, such as groceries and pharmacies. But they will travel longer distances for other services such as a concert or professional ball game. As a rule, people tend to go to the nearest available service. Therefore, the range of a service must be determined from the radius of a circle that is irregularly shaped rather than perfectly round. The irregularly shaped circle takes in the territory for which the proposed site is closer than competitors’ sites. Today the nearest available service is usually described in terms of driving time rather than linear distance.
Threshold of a Service The threshold of a service is the minimum number of people needed to support the service. Every enterprise has a minimum number of customers required to generate enough sales to be profitable. Once the range has been determined, a service provider must determine whether a location is suitable by counting the potential customers inside the irregularly shaped circle. Determining the number of expected consumers inside the range depends on the product. Convenience stores and fast-food restaurants appeal to nearly everyone, whereas other goods and services appeal primarily to certain consumer groups.
The Geometry of Market Areas In central place theory geographers draw hexagons around settlements to represent market areas. Unlike circles and squares, hexagons eliminate gaps between market areas.
Hierarchy of Consumer Services People want to expend as little time and effort as possible obtaining consumer services and therefore go to the nearest place that fulfills their needs. They will travel greater distances only if the price is much lower or if the item is unavailable locally.
Rank-Size Distribution In many developed countries, geographers observe that ranking settlements from largest to smallest (population) produces a regular pattern. This is called the rank-size rule, in which the country’s nth-largest settlement is 1/n the population of the largest settlement. The second-largest city is one-half the size of the largest, the fourth-largest city is one-fourth the size of the largest, and so on. When plotted on logarithmic paper, the rank-size distribution forms a fairly straight line. In the United States and a handful of other countries, the distribution of settlements closely follows the rank-size rule. If a country does not follow the rank-size rule, it may follow the primate city rule. A country’s largest city is called the primate city. If a country follows the primate city rule it means that the country’s largest settlement has more than twice as many people as the second-ranking settlement. The absence of rank-size distribution in many developing countries indicates that there is not enough wealth in the society to pay for a full variety of services. The absence of a rank-size distribution constitutes a hardship for people who must travel long distances to reach an urban settlement with shops and services such as hospitals.
Nesting of Services and Settlements According to central place theory, market areas across a developed country would be a series of hexagons of various sizes, unless interrupted by physical features such as mountains and bodies of water. There are four different levels of a market area: hamlet, village, town, and city. Larger settlements provide consumer services that have larger thresholds, ranges, and market areas. The nesting pattern can be illustrated with overlapping hexagons of different sizes. Hamlets with very small market areas are represented by the smallest contiguous hexagons. Larger hexagons represent the market areas of larger settlements and are overlaid on the smaller hexagons because consumers from smaller settlements shop for some goods and services in larger settlements. Only consumer services that have small thresholds and short ranges are found in hamlets or villages because too few people live in these areas to support many services. A large department store cannot survive in a hamlet or village because its threshold exceeds the population within range of the settlement. Towns and cities provide consumer services that have larger thresholds and ranges. A city has a much larger variety of services than a hamlet or village.
Market Area Analysis Geographers apply central place theory in market area analysis to assist service providers with opening and planning their facilities.
Profitability of a Location One corner of an intersection can be profitable and another corner of the same intersection unprofitable. Geographers use two components of central place theory—range and threshold to determine the whether or not a location would be profitable. The analysis includes the following steps: (1) define the market area (2) estimate the range (3) estimate the threshold, and (4) predict the market share.
Gravity Model The gravity model predicts that the optimal location of a service is directly related to the number of people in an area and inversely related to the distance people must travel to access it. The best location will be one that minimizes the distance that all potential customers must travel to reach the service. Generally, the greater number of people living in a place, the greater the number of potential customers. According to the gravity model, the further away the people are from a particular service, the less likely they are to use that service.
Periodic & Sharing Services Not all consumer services are provided in fixed locations.
Periodic Markets A periodic market is a collection of individual vendors who come together to offer goods and services in a location on specified days. A periodic market provides goods to residents of developing countries, as well as rural areas in developed countries, where sparse populations and low incomes produce purchasing power too low to support full-time retailing. Many vendors in periodic markets are mobile, driving their trucks from farm to market, back to the farm to restock, then to another market. Other vendors operate on a part-time basis, perhaps only a few times a year or produce only small amounts. The frequency of periodic markets varies by culture.
Sharing Services Independent contractors provide services such as Uber and Lyft ride sharing services and lodging sharing services such as Airbnb. The offering of these services has expanded rapidly in recent years.
12.2
Primate city Is the largest city in its country or region, disproportionately larger than any others in the urban hierarchy
Primate city rule A pattern of settlements in a country such that the largest settlement has more than twice as many people as the second-ranking settlement.
Rank-size rule The nth largest city in a given country will have 1/n of the population of the largest city in that country