Belfast Telegraph

Retail giants should give consumers a better deal

By Donald C McFetridge

In fact, seldom a day goes past without another headline alerting us to the fact that food prices have risen — yet again — or that the price of oil is being blamed for the escalating cost of food production. But, the fact is: we must eat, we must feed our children, and we must use by-products of oil in order to travel to and from work and for other necessary household journeys.

Yet, unsurprisingly, the supermarkets still appear to be making greater and greater profits. Seldom do we see a profits warning from any of the principal supermarket groups. In fact, on the contrary: we hear report after report about how they have outperformed their previous trading period in terms of like-for-like sales and of how they have impressed the City, their shareholders and the Boards who invariably control them.

In the meantime, the Big Four supermarket groups are keen to point out, of course, that they are trying their best to give consumers the best deal around.

They, point blank, refuse to accept any responsibility for the higher food prices which shoppers are being asked to pay. For example, according to recent robust research, the price of basmati rice has risen by 120% and the price of lamb has risen by 32% during the past 12 months.

Instead, they blame the intermediaries in the supply chain for the constantly widening difference in price from farm gate to supermarket shelf. They claim, for instance, that — after food has been produced or grown — there are additional costs of transportation and the escalating price of fuel to be considered.

In addition to this, they stress that there are hidden costs in terms of packaging, advertising, marketing, storage and refrigeration. However, they do not appear to be absorbing any of these costs: instead they pass them directly on to cash-strapped consumers struggling to make ends meet as we approach the end of 2008 with little sign of any hope on the horizon.

There appears to be no light at the end of the tunnel at the present time; in fact, an optimistic few suggest that the only light visible is that of oncoming delivery trucks rapidly running out of fuel, out of control as they hurtle towards already downtrodden consumers with more than enough worries on their shoulders as we brace ourselves in order to face another bleak winter of discontent.

The bottom line is all about profit and loss accounts, spreadsheets and balance sheets. It doesn’t really appear to matter to supermarkets how consumers deal with the increasing cost of living

So, what could the supermarkets do about this situation? Could, or should, they try to cut consumers a better deal? The answer to both these questions is surely: Yes, they could and they certainly should. But, how exactly could this all be administered?

Well, for a start they could follow the example of Bradford-based Morrisons (who came, saw but never conquered the Northern Irish market) and introduce cheaper product lines to meet the needs and expectations of today’s credit-crunch-ridden, cash-conscious consumers.

Secondly, they could try to cut — in fact, slash — prices on everyday household essentials such as bread, butter, milk, cheese, eggs, pasta and rice (to name but a few). This, however, is unlikely to happen. Only one national supermarket group recently sold ten everyday items at 50p per item — but only for a very limited period of time.

Supermarkets need to take a much more strategic, longer-term view in respect of this type of price promotion in order to try to retain today’s increasingly promiscuous consumers who are all too ready to switch allegiance to the German deep discounters, eg Lidl.

Consumers are fickle, promiscuous in fact, and the Big Four had better look out — the warning signs are already on the walls.

Thirdly, they should carefully examine — and correct— their pricing policies locally, nationally and internationally.

Recently, unleaded petrol was being sold by one leading supermarket group in Northern Ireland at two different petrol filling stations approximately 15 miles apart at different prices.

Whatever happened to uniformity, consistency and transparency in terms of maintaining (at least) a local uniform pricing policy, let alone a national one?

Of course, it’s not just the supermarkets that do this. For example, it is cheaper to buy a Big Mac at McDonalds at Charing Cross Station than it is in McDonalds outlets throughout Northern Ireland.

Arguably, Northern Irish consumers appear to be paying a higher price simply by residing in this geographic region; the Irish Sea is to blame yet again.

An important factor to remember is this: Supermarkets are not charitable institutions. The bottom line is all about profit and loss accounts, spreadsheets and balance sheets. They aim to make a profit — at all costs — and it doesn’t really appear to matter to them how hard-pressed consumers deal with the increasing cost of living.

Finally, worth noting is another sinister fear — for suppliers. If the supermarkets do decide to do something positive for Northern Ireland consumers, it’s more than likely that the victims or casualties will not be consumers. It will instead be the suppliers who are likely to be squeezed for tighter and tighter margins.

The supermarkets will most certainly be the winners; consumers and suppliers, however, could very well turn out to be the hapless victims as we hurtle towards the end of 2008 and beyond.

CAVEAT EMPTOR — let the buyer beware!

Donald C McFetridge is head of Retail Studies at the University of Ulster.

Belfast Telegraph


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