SUPERMARKET chains Woolworths and Coles appear to have increased their dominance of the grocery sector in the first three months of 2010, poaching market share from independent operators.
Woolworths & Coles are a $100 billion a year duopoly with a retail market share the envy of the developed world. Along with food they are now the largest single retailers of alcohol in Australia, and they have a major presence in the retail petrol segment.
Why is this so, we have an independent ombudsman looking over their shoulders...Samuelson I believe.

In Canada they legislated in laws to prevent predatory pricing by the larger mass merchants and it had the effect of bringing small business back to the shopping centers because they could compete on quality, service and price. Why are all our governments lacking when it comes to protecting small business against the corporate retailer. Kevs food watch and petrol watch did nothing except expend tax dollars while the corporates did not miss a single retail dollar.

Funny thing is, none of these huge retail giants would be where they are today, if not for the overwhelming support from the consumers.

Since their dominance, we have seen the demise of many a corner 'family owned' store, the local hardware, the local green groccer, the list goes on.

Woolworths are about to enter the hardware field to be in direct competition with coles (bunnings)

Once we have the 'big two', all others, they being the very few that still exist will simply be forced out like the rest.

Take a butcher shop. We run on around 14 - 18% wage to sales ratio. Supermarkets run on about 9%.

So this means for every $100,000 of meat sold in SM, they employ less staff to the approx value of $7,000. I suspect simmilar figure would apply to fresh foods as well.

Then, to add insult to injury, they rent thier retail shelf space to outside companies who in turn compete for such space. So in essence, they get paid to display the products they sell.

And, as you rightly point out, succesive governments have just sat back and watch this happen right under our very noses.

But, as I say, the power of the people is what has allowed this to happen.

Rehtub is right.

Actually there are two major forces tending to this outcome.

The first is the consumers. I remember when supermarkets first came in. Before that, you went to a little musty dim grocery store and some old dude in an apron used to serve you personally. He would get stuff off the high shelves, package it, weigh it.

People don't want that! They're standing there, thinking - I I'd rather spend the same money on something I want! Now they can get a lot more stuff for the same amount of money.

The second force is government. Think of all the different regulations that governments put on businesses: zoning, stamp duties, land tax, OHS, income tax, GST, FBT, minimum wages, compulsory super, compulsory licences, compulsory insurances, compulsory accounting, and on and on and on. Every one of these costs money which burdens smaller businesses disproportionately. They simply drive many small and marginal businesses to extinction, killing the dreams of their owners and the preferences of consumers at the same time, in favour of big business, big government and big unions.

Then people look on the big businesses that result, and say why doesn't the government do something?, as if government knew more about running businesses, than businesses.

The idea that it is the legitimate function of government to persecute efficient businesses, so as to promote more inefficient businesses is a daft throw-back to the dark ages. It would be more to the point to go through the statute books, and repeal any law that is contributing to the problem in the first place. Stop persecuting my preferred suppliers!

Posted by Peter Hume, Tuesday, 11 May 2010 4:02:52 AM
"you went to a little musty dim grocery store and some old dude in an apron used to serve you personally. He would get stuff off the high shelves, package it, weigh it".

Peter you are talking about retail 60 years ago; if you were longer lived you could regale us with stories where you hunted, killed, and slaughtered your own meat.

Posted by Peter Hume, Tuesday, 11 May 2010 4:02:52 AM
The idea that it is the legitimate function of government to persecute efficient businesses, so as to promote more inefficient businesses is a daft throw-back to the dark ages.

That is exactly what the governments’ job used to be. They would protect Australian made products with tariffs and small business with anti monopoly legislation.

Errrr.... really?

Peter Hume: "The idea that it is the legitimate function of government to persecute efficient businesses, so as to promote more inefficient businesses is a daft throw-back to the dark ages."

sonofgloin: "That is exactly what the governments’ job used to be."

First of all I wasn't sure that came out quite how you intended, sonofgloin. Except that you continued...

>>They would protect Australian made products with tariffs and small business with anti monopoly legislation.<<

The first part is absolutely correct. Fortunately successive governments have seen the error of their ways, and tariffs have been gradually reduced. One fine day, they may even be eliminated. (Pious hope).

But anti monopoly legislation was never intended to protect small business. It is the consumer, or user, who is supposed to be protected, given that a monopoly can price-gouge indiscriminately.

Sydney Airport is a classic example, where the owners hold the public to ransom on everything from luggage trolleys to parking, taxi companies on their visiting rights, retailers on their floor space and airlines for their gate usage. In that instance, political expediency overrode protection against monopoly pricing. As, sadly, it often does.

Supermarkets perform a legitimate function, and play a substantial role in keeping prices down, especially on the "weekly shopping". There is however a space in the market to cater for the more discerning, quality-driven shopper. Which is, interestingly, also being targetted by the major players - Woolworths' chain of Thomas Dux is a good example - but is also a space where small business can play.

>>In Canada they legislated in laws to prevent predatory pricing by the larger mass merchants and it had the effect of bringing small business back to the shopping centers because they could compete on quality, service and price.<<

I have no doubt that - should the duopoly price-gouge, and assuming also that it is politically expedient - we would do the same here in Australia.

But given that Woolworths and Coles are presently in a healthy competitive battle, that might not be needed for a while.

Pericles this from the Courier Mail...2009
Australians have among the fastest-rising food prices of major developed nations, with OECD data showing costs have shot up 40 per cent in a decade. The price rises have come a quarter faster than in Britain, twice as fast as in France and nearly three times the speed of German grocery price rises.
University of NSW associate professor Frank Zumbo said comparing costs over 10 years eliminated variables such as currency movements or transport costs and exposed the country's "cosy" supermarket duopoly as the main reason.
"It is our market concentration which explains why our grocery prices are rising faster," he said.

From another source,...2010
AUSTRALIA has the highest grocery inflation in the Western world and our powerful supermarket duopoly has a big role to play, experts warn. Commanding up to 80 per cent of the nation's $90 billion grocery market and a large percentage of the fuel market, Coles and Woolworths have little incentive to discount, the Australian Competition and Consumer Commission says.

Pericles, do you know what you say or is it opinion?