Where Turkey Beats the United States

Why did humble Turkey move ahead of the mighty United States in automating its retail operations?

February 19, 2003

Why did humble Turkey move ahead of the mighty United States in automating its retail operations?

In the United States, high tech is more than just a prestigious sector or a high-profile offshoot of the military-industrial complex. For the U.S. economy, high tech is a necessity.

Given high wages in U.S. manufacturing, labor-saving technology is the only way American companies can stay competitive with the rest of the world — and maintain global economic leadership.

Yet, if you come to a typical U.S. supermarket, you'll still see a rather low-tech scene.

Supermarket employees still go around the aisles, changing prices by hand by replacing pieces of cardboard in small aluminum holders. Actually, little has changed since the time of F.W. Woolworth, who founded his five & dime empire in Greensboro, N.C. in the 19th century.

Mr. Woolworth subsequently gained fame and fortune by placing sale items in huge bins with a hand-painted price.

In fact, the most high-tech thing about the process is a TV commercial run by the world's largest retail chain, Wal-Mart — in which a smiling face automatically slashes prices. But, in reality, even at those humongous Wal-Mart stores, sales staff still change prices the old-fashioned way — by hand.

Not so in Turkey. There, many stores have electronic screens to display prices, which are changed automatically by computer.

Wouldn't you expect it to be the other way around? After all, Turkey is still a relatively low tech country, at least when compared to the United States.

That contrast in the use of sophisticated technology is likely to be on display shortly, when the Pentagon uses Turkish bases to attack Iraq.

The greatest difference is that American wages are considerably higher than those in Turkey. Even if they get the minimum wage, American U.S. sales clerks still make over $10,000 per year.

In Turkey, average GDP per person amounts to less than $7,000 — and low-skilled sales help no doubt make a lot less. Wouldn't it therefore make more sense for U.S. chains, not Turkish stores, to have electronic displays rather than employ all those expensive clerks?

The reason for this striking difference is simple —inflation. Consumer prices in the United States have been rising by about 2% a year.

When store managers want to change prices, they don't need fancy IT systems. They can take their time — and just send their clerks out to the floor.

In Turkey, however, inflation has been much higher. Prices rose by around 30% in 2002, and Turkey still has one of the highest inflation rates in the world. Moreover, the Turkish lira has disintegrated, and is now worth a cool 1.6 million per one U.S. dollar.

Even a cheap item can run into millions of liras — and its price changes every couple of days. It's simply too complicated to do so by hand.

Thus, the dark cloud of inflation can clearly have a silver lining — at least, Turkey has moved well ahead of the mighty United States in automating crucial aspects of its retail businesses.