Groceries Order, should it be changed or scrapped. [Merged]

gandalf

According to this on RTE the Oireachtas committee has recommended that no changes be made to the Groceries Act, specifically with regard to below cost selling and the cap on the size of stores.

If as they say at the end of the article groceries alone cost 5-15% more here than in NI and Ireland is home to high cost of living with Dublin the 24th most expensive city in the world should the Government not be pulling out all stops to make sure the consumer gets as competitive a deal as they can for their Euro spend in the shops.

Is it right in this day and age that small stores are given protection like this. At this stage I am undecided but verring towards scapping the order altogether and allowing the market decide, then again I don't want indigenous small businesses being forced out of business.....

No change to Groceries Order says cttee

23 March 2005 20:12

The Oireachtas Joint Committee on Enterprise and Small Business has recommended that there should be no changes to the Groceries Order, which bans below-cost-selling.

In a report on the groceries sector, published this afternoon, the committee also stated that the cap on the size of supermarkets should be retained.

The Chairman of the Joint Committee, Donie Cassidy, said changes to the cap could result in the country's towns becoming wildernesses as supermarkets are relocated to the outskirts of towns.

The committee recommended that any future changes to the cap should not be made by ministerial order but through new legislation passed by the Oireachtas.

Overall the committee found that the price of groceries is between 5-15% dearer in the Republic than in Northern Ireland and Britain.

This was blamed on the high cost of overheads such as insurance, wages and waste disposal.

The Muppet

I would scrap the ban on below cost selling too. I don't believe it protects the smaller retailers all that much becaues the multinational would be paying less for their stock than said retailers and so even if they sell at cost they will always be cheaper than the small guy. I don't think price is the main consideration in todays society and I,m not sure that removing the ban would aversly affect these smaller retailers..

Captain Trips

I would rather below cost selling remain illegal - it would Walmart-ise Ireland and destroy competition which already is limited enough with Tesco.

Below cost selling would put massive burden on local producers to cut costs and QUALITY and even more so would encourage even more trade puirchasing from outside EU.

To allow "the market to decide" would be social suicide. The market simply wants us to give it our money. If that means everyone out of a job and getting welfare and using welfare to pay for goods then that's what the market wants.

What would happen to the dairy and bread producers, etc., ? Do we *need* to save another 5c on a loaf of bread? No we don't but Tesco would love to if it meant grabbing another 10% market share to boost stock price short-term to investors no matter what the economic fallout in the medium-long term.

The Muppet:

Quote: I don't believe it protects the smaller retailers all that much becaues the multinational would be paying less for their stock than said retailers and so even if they sell at cost they will always be cheaper than the small guy.

So we should allow them carte blanche to open the flood gates and drive all small retailers to bankruptcy so "just because"???? Just because bigger companies are making more money and able to negotiate better contracts we should simply allow smaller retailers to die out??

This isn't America - thank Christ. Limits on exploiting cost margins of small outfits by big players are restricted and rightly so. We need the competition that exists here (limited as it is) and not the monopoly situation of the incorrectly labelled "free market".

Captain Trips

gandalf wrote:

If as they say at the end of the article groceries alone cost 5-15% more here than in NI and Ireland is home to high cost of living with Dublin the 24th most expensive city in the world should the Government not be pulling out all stops to make sure the consumer gets as competitive a deal as they can for their Euro spend in the shops.

You know, I'll gladly pay the extra 10c on a pint of milk. What I object to is having to pay massive fees for insurance and service charges. The consumer is getting screwed on those and not on fricking 7c for an orange in Centra instead of Superquinn.

The Muppet

Captain Trips wrote:

So we should allow them carte blanche to open the flood gates and drive all small retailers to bankruptcy so "just because"???? Just because bigger companies are making more money and able to negotiate better contracts we should simply allow smaller retailers to die out??

This isn't America - thank Christ. Limits on exploiting cost margins of small outfits by big players are restricted and rightly so. We need the competition that exists here (limited as it is) and not the monopoly situation of the incorrectly labelled "free market".

You missed my point. I dont beleive removing the ban would have that effect . Supermarkets can already undercut the small retailers so if price was the only factor in the equation these small retailers would be gone already.

Stabshauptmann

I'd say our current setup is 60-70% supermarkets and then small retailers. Scrapping the Groceries Act would increase the market share of Supermarks.

The Muppet doesnt believe this would happen. His reasoning is because they can alreeady undercut small retailers. Yes, and thats why they have a larger market share, if they could undercut them even more then they would gain more market share.

The question is, is this neccisarily a bad thing. One set of reasoning is that the likes of Tesco will eventually establish a monopoly and thats not good for consumers. Would Tesco do this? YES. They charge more in their Irish shops than they do in the UK. They charge however much they think they can get. They are a business, an ethical and responsible one IMO but still a business.

Large supermarkets are more efficent, if they supplied 100% of the countries retailing needs there would be less ppl employed in that industry. IMO that would be a bad thing. Others differ, they see it as an "encouraging enviroment for inovation" when ppl are unemployed. I just dont agree.

Slutmonkey57b

Hmmm. Interesting question. The problem with the groceries-pricing issue, it that there is so much distortion of the true nature of the cost price is sometimes unfathomable.

eg: In England, the dairy industry is being killed off by below-cost buying from the big supermarkets. How can tesco force the farmers to sell the milk at cost or below cost? The british farming industry is probably one of the most efficient and modern in europe, and has low costs as it is. The reason? Simple - Common Agricultural Policy rules mean that Britain is not allowed to produce as much milk as it consumes (regardless of capacity) - while money is drawn out of britian to subsidise Irish and French dairies, which can then undercut their more efficient british counterparts. So the supermarkets can use the subsidisation of foreign imports to threaten the farmers that they will import all their milk, leaving the british dairy farmer with no buyers at all.

So, really, how much is a pint of milk? Loaf of bread? Small beer. But the groceries act does prevent the supermarkets from being the ones who dictate price controls, which is a good thing. Suppliers will be squeezed while savings are not passed on to the consumer.

All in all, the farce of the Irish banking and Insurance sectors makes the groceries problem pale into insignificance. Whether any Irish government has the stones to tackle the problem given the number of high-paying, high tax jobs that the insurance and banking conglomerates bring in (even if they don't like paying taxes themselves) is another matter.

Hobbes

Below cost selling is a bad thing. If it was allowed you would see the larger chains putting pretty much everything else out of business.

SkepticOne

I would stick with the ban. In reality all Tescos would do is lower a few prices at the expense of others. These lower prices would then be used in advertising to entice shoppers but would be giving a misleading impression to customers of value in general. No business sells below cost across all products for obvious reasons.

In normal circumstances, I would be in favour of letting consumers decide, but the situation at the moment is that a small number of supermarket chains dominate the market. The only competition (if any) in many areas will be between this one supermarket outlet and a couple of small local shops. Supermarkets can then use the manipulation of prices to drive away this last bit of competetition. Beating the competition by being generally good value is one thing, but beating the competition by creating a false impression of value through selective temporary lowering of prices is another.

Villain

I'd be in favour of the ban remaining, coming from a rural area I like to see the small shops survive, I'd glady pay an extra 10% to be able to go into the local shop and have a conversation while purchasing my items.

Tesco's and the like have enough of the market IMO.

Slutmonkey57b

I'd gladly pay an extra 10% to avoid a conversation tbh.

I have a conversation at the check out every time I go to Tesco.
The same check out people are there all the time.
They ask me hows everybody etc etc

Villain

Well in carlow it's like pulling teeth trying to get a word out of them, and it's being so busy lately I've ended up using the self service tills.

I just think it would be a bad thing to see the small grocerie shops closing down while the likes of Tesco and Superquinn cream a fortune.

Ah maybe I'm just too much of a Cultchie.

Gurgle

Does anybody (in their right mind) actually do their grocery shopping in a corner shop ?

I certainly don't. Weekly shopping is done in supermarkets as they are much cheaper already, even with the ban on below cost selling. I only go to the corner shop when I just need a couple of things. No matter how much cheaper a supermarket gets, I'm not going to go queue for 20 minutes to save 37c on a pound of sossages.

So, imho, it would not make the slightest difference to the small shops, but it could influence which of the supermarkets gets the business.

Its not going to drive anybody bankrupt, thats just the usual crap thats churned out by the SFA at every opportunity. There is no competition between the supermarket and the corner shop.

Villain

Gurgle wrote:

Does anybody (in their right mind) actually do their grocery shopping in a corner shop ?

I certainly don't. Weekly shopping is done in supermarkets as they are much cheaper already, even with the ban on below cost selling. I only go to the corner shop when I just need a couple of things. No matter how much cheaper a supermarket gets, I'm not going to go queue for 20 minutes to save 37c on a pound of sossages.

So, imho, it would not make the slightest difference to the small shops, but it could influence which of the supermarkets gets the business.

Its not going to drive anybody bankrupt, thats just the usual crap thats churned out by the SFA at every opportunity. There is no competition between the supermarket and the corner shop.

Gurgle, in Tullow there is 2 small supermarkerts, a super value (only recently became super value) and a Londis, now while both these shops are more expensive then tesco and superquinn in Carlow town a lot of the people of tullow do their weekly shopping here and a lot others buy a couple of regular purchases, e.g. bread, milk etc.

Then you have the local corner shops where people also buy newspapers etc. Now I think if this ban was lifted more and more people would travel to carlow to shop, which would mean job losses in tullow and more traffic on the road.

Hobbes

Gurgle wrote:

So, imho, it would not make the slightest difference to the small shops, but it could influence which of the supermarkets gets the business.

It is more far reaching then just supermarkets. For example do a search about walmart in this forum and the pickles. They basically managed to sell so far below cost that it actually damaged the suppliers. They couldn't even sell what they had for a profit. It put loads of people out of business and required the companies to outsource thier vegtable sales from other countries.

bonkey

Wasn't the ban on below-cost selling as much to protect the consumer as the small retailer in the first place?

Consider the "Wal-Mart model":

- Enter Market
- Drive competition out of business with low-price / below-cost selling
- Raise Prices
- PROFIT!

jc

Villain

bonkey wrote:

Consider the "Wal-Mart model":

- Enter Market
- Drive competition out of business with low-price / below-cost selling
- Raise Prices
- PROFIT!

Exactly, short term loss for a long term gain.

A Dub in Glasgo

I presume that is Wal Mart in the USA model. The Wal Mart model in the UK is to offer good quality goods at excellent prices coupled with excellent customer service.

There are probably a lot more supermarket chains over here in the UK. ASDA and Morrisons are probably the cheapest. As you can tell, I do the majority of my grocery shopping in ASDA with some also picked up in Morrisons.

I cannot belive how expensive groceries are in Ireland.

Blub2k4

A Dub in Glasgo wrote:

I presume that is Wal Mart in the USA model. The Wal Mart model in the UK is to offer good quality goods at excellent prices coupled with excellent customer service.

There are probably a lot more supermarket chains over here in the UK. ASDA and Morrisons are probably the cheapest. As you can tell, I do the majority of my grocery shopping in ASDA with some also picked up in Morrisons.

I cannot belive how expensive groceries are in Ireland.

This model is only possible with a lot of illegal immigrants picking your fruit and veg, people cant have it every way. ASDA is owned by Walmart, same model.

BuffyBot

I presume that is Wal Mart in the USA model. The Wal Mart model in the UK is to offer good quality goods at excellent prices coupled with excellent customer service.

What you're seeing there (customer service) is only window dressing. They use the exact same methods as their owners to achieve your "good quality goods at excellent prices"

Blub2k4

BuffyBot wrote:

What you're seeing there (customer service) is only window dressing. They use the exact same methods as their owners to achieve your "good quality goods at excellent prices"

In the USA it's mexican "wetbacks" but essentially the same thing.

Slutmonkey57b

I think if below cost selling actually worked in the customer's favour there wouldn't have been such a problem with it that caused the Act to be introduced. Short term, a repeal of the act would lead to some lower prices. Once one or two major outlets (Dunnes and Tesco) have driven the competition out of business, or bought them out, then a nice duopoly or monopoly will surface, prices will shoot through the roof again, and there will be no competition of any kind. Eg: Any time a commodity's price rises on the open market due to some upheaval, the price gets raised "due to extraordinary circumstances". Does the price ever get lowered again once the commoditites market rebalances? Does it ****.

Below cost selling doesn't produce valuable competition, it merely reduces the race to "who's got the deepest pockets?" And we know who that is - Tesco.

Gurgle

Slutmonkey57b wrote:

Once one or two major outlets (Dunnes and Tesco) have driven the competition out of business, or bought them out, then a nice duopoly or monopoly will surface, prices will shoot through the roof again, and there will be no competition of any kind.

I just can't see it.
Even if they did drop prices to below cost on a few items, how much of a difference would it actually make to your grocery bill, compared to the likes of superquinn or supervalue ?

If it even came out to 10%, how many people will go miles out of their way to save a few € per week ?

If there was such fierce competition in the sector, they would already be running at a minimal profit margin. They're not, there is practically no difference in the price of any given product between e.g. supervalue, superquinn, dunnes and tescos.

As it is, they compete on services, opening hours, loyalty rewards, but not on prices.

Slutmonkey57b

Think about how most sales work. Obsolete stock that is about to be written off on the balance sheet is dusted off in the warehouse and sold at "amazing" 50% discounts. This brings in customers who also spend money on equally "amazing" 10% discounts on current stocks that have been marked up by 20% in the previous month. The success of Aldi and Lidl shows that the appearance of value is a powerful motivator to bring in customers. Currently there is a nice system (like in every other industry in the state) where everybody ends up charging suspiciously similar prices for things. In a market where below-cost selling is allowed, a major retailer will pick out a selection of "staples" to sell at 1c each, in a series of blitz sales. This brings customers into the store who will continue their weekly shop in the store. The object of the excercise is to work out not just how much the sale is going to cost you, but how much damage you're going to do to the opposition's cashflow at the same time.

Eg: Beans are on wholesale at 20c a tin.
Tesco can use its block buying power to get those beans at 15c.
Super Valu is paying 20c
Superquinn is paying 17c.

Tesco can afford to sell beans at 1c for one month solid
Super Valu can afford to cut its price to 17c for two weeks
Superquinn can afford to cut its price to 15c for one week

Even if the two competitors sell at below cost, they are only coming down closer to Tesco's original cost price. Tesco can still afford to match their prices, and not make a loss at all, while its competitors haemmorage cash. The only question is not "will Tesco drive the other two into the ground" but "how long will they take about it"?

SkepticOne

Gurgle wrote:

As it is, they compete on services, opening hours, loyalty rewards, but not on prices.

They do compete on prices, but the below-cost ban forces them to do it in a sustainable across the board way by keeping their own costs down and negotiating good deals with suppliers. They can't selectively lower some prices for a temporary period. Even if they don't go as far as killing the competition, they can still rely on the fact that shoppers won't just buy the discounted items but will also buy the normal ones. The discounted items would really be more of an advertising device.

MorningStar

There is talk of removing the price control that has existed since 1987 on certain household goods.
At first hearing this it sounds good but then thinking about it it could be bad.

If the big chains price the small corner shops out of the market the facility won't exist anymore. If you want milk you will need to drive every time.

Once the price war is over the big shops will put their prices back up.

Tescos coming into Ireland has not really just given us competion. The selction in a Tesco store is my opinion is definitly less than that of Quinnsworth. (Go in and try to buy a frozzen pizza in Tesco it either a Goodfellas or Tesco's own no other option). They have also reduced the Irish products on their shelves causing the closure of long established businesses.

There are also the arguments that I just want cheaper prices should just win.

The price control is on a limited number of standard items such as bread, milk sugar etc... If anybody has full list it would be good.

kasintahan

I don't really see how it can benifit the consumer.

If the supermarket sells below cost then they will have to recoup the cost from somewhere (ie. they will HAVE to charge well above cost on other items).

Selling at just above cost + overheads is called competing and they can do that right now.

I'm no economist thought so I'd like to hear they arguments.

Villain

http://www.boards.ie/vbulletin/showthread.php?t=238244

MorningStar

oops missed that. Mods plesaes delete

Meh

MorningStar wrote:

If the big chains price the small corner shops out of the market the facility won't exist anymore. If you want milk you will need to drive every time.

Small corner shops don't compete on price anyway, they compete on convenience. A liter of milk in my local Londis already costs 50% more than in a supermarket (65c vs. ~€1), and they clearly haven't been priced out of the market yet.