30 Apr 2008


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Business as usual for the big supermarkets

Competition Commission

supply chain

independent

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There will be few tears in the boardrooms of the Big Four after today's final report from the Competition Commission, says Ken Parsons, chief executive of the Rural Shops Alliance.

Ken Parsons

The Competition Commission's long-awaited report on the grocery market holds few surprises. There will be few tears in the boardrooms of the Big Four supermarket chains – the Commission has decided that what we need for the 21st Century is more supermarkets and to juggle the fascias around a bit.

However, whilst the commission was deliberating, there has been a crucial shift in the way the world works. The rocketing cost of the food on grocery shelves and the £5 per gallon cost of petrol makes its findings very dated already.

Tthis report was a major opportunity to curb the power of the large supermarket chains and to allow smaller shops to compete on a level playing field.

Instead, the commission is allowing the likes of Tesco to use their raw market power to continue their unfair buying terms. The consequence in the long term will be a lot of local communities facing the closure of their much-valued independent local shop.

The Competition Commission itself shows the gulf between the prices that the Big Four obtain and that provided by suppliers to smaller wholesalers and symbol groups – the gap is a massive 16%. (See table 5.1, page 91 of the report).

Clearly part of this difference is down to the economies of larger order sizes, but the commission then tries to attribute the rest to an unconvincing set of factors, such as larger firms training their buyers better.

This really cannot be allowed to pass. It is raw negotiating power, pure and simple. The commission then proceeds to say that these differences in supplier prices do not significantly affect competition.

These differences do matter. Customers see small shops in both rural and urban locations as having high prices, the owners try to keep prices low at the expense of profitability and hence they under invest in their businesses and end up taking less than the national minimum wage for their own labours.

It is an unsustainable model. These shops are very important indeed to those members of the community without cars. They can live with fair competition but not the current situation.

A major opportunity has been missed. Local communities up and down the country will become the poorer when their local shopkeeper finally concedes defeat and closes, not because he is inefficient, but because the Competition Commission has failed to understand the significance of its own figures.

We have a situation where the Big Four are being allowed their head. There will be an ombudsman to try to protect suppliers. Who is there to look after the independent retailer?

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