Are supermarkets too powerful?

Most UK food suppliers think supermarkets have too much power. Does this matter?

A survey from accountancy firm Grant Thornton reveals that 80% of supply firms expect more suppliers to go bust, with half blaming supermarkets.

And 25% of suppliers have had an order cancelled or greatly reduced by supermarkets without compensation, according to the report.

But the British Retail Consortium says competition and rising prices are also causing hardship among suppliers.

Should supermarkets do more to support suppliers? Is it the shopper's fault for demanding cheaper food? Are you a food supplier? Do you work for a supermarket? Where do you shop?

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Reply 1

Peter North

You better watch out TESCO doesnt read this

Reply 2

dd1989

Supermarkets are great, the high street isn't, and I really do believe it's a simple as that.

Go into Tesco, and as long as you aren't a clothing-brand-snob then you can chuck in a pair of jeans with your food, a new microwave and a DVD player, all for far less £££ than in the various seperate shops you might find within town centres.

Out of town stores also have the advantage of being less constricted by space, which means tons of free parking and room for expansion - the last thing people want is to park the car only to find they have to spend 2 quid on a parking ticket in order to spend money within a town, which makes no sense what so ever; local councils need to encourage people back into town centres if they expect small shops to survive.

The bottom line is, the consumer market is no longer driven by high quality, but rather the price of the goods, and the availability of them.

Reply 3

wizard710

Don't get me wrong, supermarkets are great but when Tesco want to build a Tesco local shop 10 minutes walk from a tesco extra. That is when a supermarket is too powerful

Reply 4

sparkler

^sigh...

edit: replying to dd1989

Reply 5

Peter North

Notice how everyone is referring to TESCO :P

Reply 6

Catsmeat

dd1989

To use the old axiom, 'you get what you pay for'. Whilst you correctly observe a trend of cheap, consumer goods flooding the market, you also have to consider the 'shopper of conscience' mentality which is proving to have real clout. Whilst some people are happy to buy a £5 pair of jeans without thought, others may want to question why they are so cheap.

dd1989

Out of town stores also have the advantage of being less constricted by space, which means tons of free parking and room for expansion - the last thing people want is to park the car only to find they have to spend 2 quid on a parking ticket in order to spend money within a town, which makes no sense what so ever; local councils need to encourage people back into town centres if they expect small shops to survive.

I agree with you that councils have to encourage people back into town centres, but out of town hypermarkets, retail parks and supermarkets do not help this in any way.

dd1989

The bottom line is, the consumer market is no longer driven by high quality, but rather the price of the goods, and the availability of them.

I disagree; it is entirely relative to where you look. My local area is marked my a large amount of independent, non-chain stores thriving alongside supermarkets.

The supermarket debate often feeds into one of modern society; that if demand exists it will be catered for, following that supermarkets exist because people rely on them. Certainly it is unfair of me to suggest that everybody should shop in local, independent stores and farmers markets, because that is costly in terms of both money as well as time. However, if more people moved away from the convenience of supermarkets and had a more discerning eye, it would follow that it would be more advantageous to shop locally.

Whilst we are seeing supermarkets grow, and to answer the question of this debate we are seeing their power grow, there is a Damaclean sword dangling over their heads; if the consumer decides that they do not need supermarkets, then they will fail. The longer supermarkets abuse suppliers, crush local retail movements and tread upon the green-belt, then the stronger the voice of opposition will grow. It's almost a built in safeguard against monopoly.

Reply 7

Airel

They are more powerful than you can possibly imagine.

Reply 8

lodzinski

dd1989 - Oh dear.

Supermarkets are too powerful. FAR too powerful. they screw over suppliers and damage peoples livelihoods, with zero consideration. They perpetuate the downfall of local, specialist shops, and increase the already great homogenisation of our towns, and what is sold. Supermarkets control what you eat. no, really. They select the varieties of fruit and veg sold, where they come from and how they are grown. Elsanta. ever heard of it? its a strawberry - the leading variety of strawberry sold in our supermarkets. why? Not because it tastes good, but because it is robust and lasts for a long time, and doesn't bruise easily in transit.
I noticed earlier this week that tesco had some polish blueberries in stock (I only went in for a few beers, but happened upon these blueberries) recalling the fantastic taste of the blueberries I had eaten in Poland Upon sampling said fruit, they were crap. sour and with a poor texture. these were nothing like what I had eaten in Poland - the same is true across europe - spain is another great example - they don't eat what we eat - they consider the varieties selected by our supermarkets inferior and poor tasting, and wouldn't dream of buying them, but the supermarkets in the UK tell us what to eat. Jeans for £4? well, they are produced by near slave labour, using cotton subsidised by governments and methods that are not the kindest on the environment. - oh and they fit badly and the wash is ugly looking and fades at warp speed.
I only really consider shopping at waitrose or sainsbury as far as supermarkets go, although the latter is still not my favourite place on earth. In fact, I feel that Aldi or Lidl are better than tesco.

The status quo will not last forever. Once supermarkets start colluding (it is already happening to some extent) price competition will stop, and paying through the nose for the crap that we have gotten used to from years of going to tesco will start. there is a division starting to open up in british retail - the cheap and the good. On one end we have the growing 'value' market inhabited by tesco, primark, et al, who pile it high and sell it cheap with little consideration of quality or externalities.
On the other hand there are independent stores, Waitrose, niche online shops etc who focus on quality and the ethical nature of their goods.
Its not all about price (unless you are 'economic man' In which case, FW Taylor I apologise for saying you were talking our of your arse) - I am quite happy to pay £100 for a pair of jeans or £35 for a t-shirt because they are good quality. I have never bought an item of clothing from a supermarket, and I don't intend to start doing so.

Supermarkets are too powerful, and if we continue to feed them, they will bite us on the arse.

Reply 9

Consie

Elsanta. ever heard of it? its a strawberry - the leading variety of strawberry sold in our supermarkets. why? Not because it tastes good, but because it is robust and lasts for a long time, and doesn't bruise easily in transit.

Who give a ****? As long as it looks and tastes vaguely like one, i dont care. I can see what you saying in regard to quality food, but most people eat food to be fed day to day, not to have their taste buds dazzled with sublte and rich tastes. The good thing about the oligopolistic competition is the economies of scale places like Tesco get and thus allows for lower prices. Theres enough regulation to stop collusion, so that means the oligopoly is competative enough to prevent anyone getting slack. The current set up is pretty good from a price point of view. Ive never seen the appeal in run down old local grocers anyway, charging me 56p for a bloody normal sized snickers.

Reply 10

Forté

lodzinski, you do realise that they'll never actually collude...

Reply 11

gooseymcgoose

i'm sick of hearing sob stories on the news about some broke dairy farmer who is going to have to close his farm soon because the supermarkets are paying him below cost for his milk. he's being paid below cost because he's inefficient compared to bigger farms located in more appropriate places. the rest of the workforce has to be flexible and able to deal with the forces of global change - nobody else expects to be subsidised to work a job that they're relatively inefficient at - but farmers expect some divine right to a certain lifestyle? it's sheer immaturity.

Reply 12

Consie

indeed, but its the balancing act between going for efficientcy and maintaining at least some self sufficientcy in regard to farming. Its sort of like energy in that respect (although the more self sufficient the better seems to be the current trend with energy).

Reply 13

Sephirona

Tesco is like the head mafia of the supermarket chains.

Reply 14

gooseymcgoose

why do we want self sufficiency? it's not the 1950s anymore. europe isn't going to go to war.

Reply 15

Consie

what if all of frances cows get mad cow disease or something though or America has a ****e harvest.

Reply 16

lodzinski

I would say producing food in an island nation is a pretty strategic industry. And consie, if you want to eat **** food, wear cherokee t-****s and one type of jeans and be exactly like everyone else, go ahead! But I would like some sense of choice in the matter - The power of the supermarkets is such that they can screw over any given retailer at any time by say, selling the new harry potter book at a loss of several pounds. The supermarkets are efficient, but its not all about efficiency. Theoretically a communist production model with perfect homogenaity is pretty efficient, but It doesn't mean its the best for the consumer. and forte - prey tell, why will they 'never actually collude?'

This thread makes it pretty damn obvious who lives in the cities and who doesn't.

Reply 17

gooseymcgoose

I can see the intuition behind a national strategy to be self sufficient on an island nation - but first of all, all land masses are islands, some are just bigger than others. Secondly, oceans and distance are now negligible. The water between us and France is swimmable. Tens of thousands of people make the journey everday, by sea, rail or air. Geographical barriers are negligible in the world of multinationals.

The idea that we'd all be eating rubbish food and wearing cherokee tshirts is unfair too. If there's demand for elite goods then it will be supplied by other firms - at the cost of sourcing it. Imagine there's only two goods in the world, Tesco chicken sandwiches, and Elite deli sandwiches, assuming convexity of preferences, economic theory suggests that both markets will exist and that the price of elite deli sandwiches will no more expensive with tesco chicken sandwiches available as without. The presence of TESCO chicken sandwiches can only benefit consumers.

Reply 18

lodzinski

That model is true, but it doesn't take into account the massive imbalance of power between Tesco and other firms - Tesco has enough monopoly power to be a monopsyny (sp) when it comes to buying from suppliers, so abuses this imbalance of power - the same is true when it comes to loss leaders - predatory pricing to drive other firms out of the market - a clear anti-competitive practice designed to enhance long run profits.

Reply 19

gooseymcgoose

People always cite the fact that suppliers are paid below cost as evidence of monopsony power - in the long run a firm won't produce below cost (it will just shut down) which suggests there are firms out there able to produce at the price tesco are paying.