Friday, March 09, 2012

Competition it ain't

The alleged competition watchdog, the ACCC,  has either been asleep at the wheel or has deliberately been  turning a blind eye over the past few years to the increasing domination of our retail sector by Wesfarmers (Coles) and Woolworths.

Research shows that 40% of the total $242 billion in retail sales last year went to the big two. They control more than 70% of our grocery spend.

It's not only supermarkets, they have an increasing stake in our alcohol shops and petrol stations, hardware outlets, office supplies.

They hide this increasing ownership by keeping the names the businesses had when the big two bought them. For example Wesfarmers has Coles, Bi-Lo, Liquorland, Vintage Cellars, Ist Choice liquor, Bunnings Warehouse, Target, K-Mart...

At the same time as killing off wider competition they're fighting each other for market dominance, which they're doing by simple discounting - standard Australian business practice as a replacement for marketing.

Lower prices are good for us, but it's only a short term win.

A lot of the lower prices come from their suppliers, not from the retailers themselves. That's unsustainable and as the big two increase their stranglehold on our retail sector the prices will creep up again.

Federal independent MP Nick Xenophon hit the nail on the head when he said: "These companies fake the appearance of competition by using all these different retail brands but ultimately the dollars go back to the same two companies. The current set-up ... gives the two supermarket giants unacceptable power over suppliers, because if you don't supply to Coles and Woolies on the terms the supermarkets want, suppliers can be effectively locked out of the market."

Added to that, they're reducing our choice dramatically by replacing more and more branded goods with their own house labels.

Analysts from Goldman Sachs estimate that Woolworths will replace about $4.5 billion worth of household brands sales with the supermarket's own labels, after they announced that they will double house brand sales in the next five years.

I'm sure it's too late because no-one is going to insist that the big two divest themselves of some of the companies they bought and no-one will stop their onward march to total market dominance in so many retail areas.

But there's a glimmer of hope that, just maybe, they will at least have to answer for their actions.

Various supppliers have complained to the ACCC about ''unconscionable conduct'' by Coles and Woolworths. The ACCC has received ''approaches from suppliers relating to allegations about the behaviour of the supermarkets''.

I suppose it may get them to back off a little from what suppliers say are bullying tactics. But such is their dominance of our retail economy, I have my doubts.

There's more in the Sydney Morning Herald   and the Brisbane Courier Mail

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