We’re paying higher prices, specials are confusing and loyalty schemes aren’t delivering overly significant rewards.
Those aren’t just the musings of a frustrated supermarket shopper - but are some of the findings in the Commerce Commission’s first annual grocery report, issued on Wednesday.
Rewards schemes were only giving a return of between 0.71 percent for Flybuys and 0.75 percent for Everyday Rewards.
Between 2007 and 2019, the average weekly spend on grocery food increased 7.3 percent every three years but the latest data showed a leap of 28.9 percent.
The commission’s report said supermarkets would point to their own rising costs as the reason for price rises.
But it said margins had continued to grow - all of the major supermarkets had experienced an increase in price-cost margins, which meant that retail prices were increasing faster than the cost of the goods.
The report said supermarkets “continue to achieve higher levels of profitability than we would expect in a workably competitive market”.
It was not likely that Costco would be able to expand to the point where it could become a serious third supermarket contender, it said.
The report said the Warehouse could be an option - its network of shops meant it was in a good position to encourage shoppers to split their shopping in many cases - but it had said it had no intention of raising the capital needed to compete.
The “five things” don’t work that well as a list, but they are:
- High prices aren’t in your head
- Competition is not bringing down margins, or prices
- Other competitors aren’t finding it easy
- Innovation, but is it what we want?
- Would fines make a difference?
Giving the benefit of the doubt, I would guess a population our size can only support a duopoly. I see this as a failure of government as we should recognise that we can’t have true competition for all market segments with a population of our size, so need to have regulations to prevent a duopoly forming.
I don’t know the answer. I don’t think I’ve seen any specific plans for how to address it, which makes me think it’s harder than it looks.
People says things like we should break up the companies, but what does that mean in practice?
I don’t buy the population size argument.
IMHO That we have independent grocers, butchers, fishmongers, etc is the proof.
Those small business are hanging on by the skin of their teeth though because the duopoly has super-saturated cities and towns with supermarkets. So much so, they have different bands to make it look like there’s fewer of each brand of supermarket.
They also abuse their dominant wholesale buyer power screwing down wholesale prices for suppliers.
So, customers are getting crap deals, suppliers are getting crap deals, and the supermarkets sit in the middle retailing and wholesaling internally to maximise profit.
Breaking the vertical (wholesale) integration would be the first step. It’s the same problem the power gen-tailers create. We want single payer leverage for things like pharmac, not for private enterprise (also see Fletchers).
The second would be a retail diaspora as such to reduce the density of a single retailer’s stores.
I get what you’re saying, but what are the specific laws you enact to break the vertical integration or reduce the density of a retailers stores?
When you buy the Woolworths Wheat Biscuits, you aren’t buying something they have produced. You’re buying the seconds of Weetbix from Sanitarium who have a contract with Woolworths to print their box design on it. It you say they aren’t allowed to do that, then Sanitarium will just put their own budget brand on it and sell it to Woolworths. It doesn’t change that the buying power of Woolworths is what makes it worth it to both parties.
For density, would you say you can’t have more than one store from a company within X km? How does that work for Mojo, Wellington’s starbucks equivalent who have dozens of stores in the CBD?
And how does that apply when New Worlds are all independently owned, run as a cooperative?
We’ve been here & done this before. Spark & Chorus exist because the government split Telecom. So i’d guess you split the production / distribution arms off both Woolworths & Foodstuff then require them to sell to anybody at the same terms. Then other retail outlets can purchase competitively and compete with the independently owned New Worlds or corporate owned Woolworths.
And if those two retail arms can get better terms from their former opposition then that could force the centralised aspects of those businesses to improve terms too. But also if the retail side can buy from anybody, then additional distribution / production companies would have additional customers to sell to as well.
All extremely hypothetical of course, and to a degree given the importance of supermarkets providing essential food services to humans I would expect any government moves to be fairly cautious and err on the status quo.
Of course, given how critical supermarkets are to the smooth functioning of our modern societies, maybe we shouldn’t leave them to the benefit of private capital and be run with a profiteering motive at all.
Ah sorry, I was mixing things up. Requiring production, distribution, and retail to be separate sounds like a good starting point.
I think you’re right, the government would step carefully, but I’d guess the only reason for this is because the supermarkets will try to sway public opinion. Move too slowly, and you’ll have a change of government that may reverse it all.
That definitely sounds like a mature society but I don’t think we are mature enough to head that way, considering the slide back towards companies running prisons and education.
Yeah its the integration of all of that which is really allowing the cartel to dominate both the buying and selling side of things which in effect has made them a monopsony. (I learnt about the term a year or so ago reading Cory Doctorow, the technical definition would be a single buyer, but given how in concert the two Supermarket chains act (like Petrol retailers!) it seems to fit: https://www.investopedia.com/terms/m/monopsony.asp)
I think this is what frustrates me most about the last Labour government, they effectively ceded power to the lobbies that back their opposition by not acting decisively enough to quickly embed their good ideas. There’s a reason NActional Fist have rammed through as much change as possible in their first year and its to get as much of the pain done well before the next election and to make it hard to reverse. Labour had a real mandate, and chose not to use it, this lot claim a mandate that barely exists and use it to its fullest.
Western Liberal Democracies are always in a pendulum of pseudo-revolution then reaction, but because the revolution side never goes far enough here (and you can see the same in the UK, USA etc) slowly we slide further and further to the right, particularly economically. Then eventually there’s less bulwark against populism and the risk of something far-right socially/culturally emerges too.