Thursday, November 1, 2007

Supermarkets v the people?

The Competition Commission’s verdict that rather than posing a threat to humanity and the Great British way of life, and given the opportunity to compete with each other on a level playing field, supermarkets can in fact be A Good Thing has been met with a puzzled reaction by the media this morning, and an angry reaction by smaller retailers and environmental and community groups.

The well-worn argument is that the general public, who love their local retailers more than capitalism itself, are being denied real competition on their Main Streets because big nasty supermarkets come along, sell cheap groceries and clothes (god forbid!) sometimes in an unfair way by marketing loss-leader products, and unjustifiably drive the little guy out of his local business.

On the key point, the Commission and today’s critics agree. It’s not healthy or fair to have a market in which 75 percent of the market share is held by just three companies, or towns like Dundee, Perth and Inverness which have over 50 percent of the market controlled by Tesco alone. But while the unlikely alliance of the Federation of Small Business and Friends of the Earth believe that this situation can only be resolved by restricting the market and favouring small/local businesses, the Commission want to free the market to provide increased choice for consumers. Time will tell who is right.

But there are two points that spring to mind for me about this.

Firstly, it’s not simply the predatory and restrictive business practices of the big supermarket chains which are having an adverse impact on small retailers on their own. There are wider changes in our society and within our communities also do not spell good news for this sector. More and more of us are working longer hours, further away from home, coupled with a greater proportion of women in the workforce mean that the small local shop, open from nine to five with a limited range of goods available is a less attractive and convenient option for modern families in particular. Society is not to blame for supermarkets buying up land to prevent their competitors expanding into a particular sales territory, but these changes mean that traditional small business cannot exist in its previous form.

But supermarkets are popular. That’s why they are successful businesses and why Tesco’s share price reached new highs yesterday. People choose to go there to shop for a range of reasons including convenience, price and quality.

When Tesco was planning to build a new store in Banff in the Northeast of Scotland a couple of years ago there was some localised uproar. Protests by local people, petitions and lobbying of local politicians prevailed. The store was to be built over existing playing fields, in a beautiful established park, next to a historic building and serious art gallery, so Tesco had offered to build an all-weather football pitch at the other side of the town as compensation. The local MSP, Stewart Stevenson, maintained a neutral stance over the issue, so decided to use his access to the local voters’ roll to organise a referendum on the issue. The turnout was around 60-70 percent, higher than that for the local parliamentary election.

And the result?

The locals voted in favour of the new Store by two-to-one.

There are pros and cons to the domination of big supermarkets in our communities. But we need a combination of major factors to change,, both within the retail environment and in society at large, if we are to make everyone in this debate happy over time.