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Consumer Power and other Guff

5.22.2005

I cant say im a big fan of his stuff anyway but cliff taylor's piece today in the SBP is a bit much even by such a madly marketing man. the background is the recent consumer report advocating the abolition of hte Grocery ORder banning below cost selling. Cliff is in favour because irish consumers get a bad deal because of it. however what he is addressing is only the symptom not the problem.
Cliff's main premise is that tesco and dunnes et al can give us much cheaper food and groceries if only we would allow them pass their hefty 16%+ discounts onto the consumers, which such saintly institutions would do in the name of competition and a good deal. this sounds like a heal all panacea to irish consumer ills. i dont believe it is. the first and most obvious hit is the small local stores which cannot compete. this point is plain as porter. there is no hope a local store could remain profitable while tesco undercuts them by 16% or more. the problem here is that the food could go the same way as petrol prices in the UK.
there they deregulated in what was a 'good deal' for the consumer, the competition opened up to tesco's purchasing power. tesco plummeted their petrol prices and put most locally franchised stations out of business. with the competition erased they duly raised prices to what they would normally be and sold to most of the market. nice if you can get it.
on a broader point i am trying to highlight the power these huge corps have to do damage to locally grown business. the man who ran the local shop may be forced to go cap in hand to a tesco store looking for work. its wonderful for our collective bourgeois pocket but in a wholistic view it is not the answer. competition can only be done on a level and fair playing field. this consideration informed the Order in the first place.
next to my point about how it is they secure such discounts. 16% is a whopping amount of money for a supplier to just give away. tesco are notorious for their aggressive purchasing polices. they demand such a high consistency in fresh produce that nearly 40% of whats grown can be discarded. that is in itself shocking. we are groomed to demand the picture perfect fruit and veg when we can countenance eating them. tesco haggle and harry for the cheapest possible price from local suppliers, who are independent and easily overpowered by the quantity of tesco's order. the discount is secured on the back of robbing a suppplier of his fair due. this is part one of a squeeze by tesco on producer and consumer. we are then sold the goods at cost price as below cost is illegal. tesco can thus pocket any difference ensuing. not to slight them you can replace tesco with any major brand store in this country. however no other store has pushed so hard or so much to secure in the UK a market share that counts as monopoly under EU Law. competition? What competition.
my final point is this simple logical one.
supermarkets are businesses.
a business is run for profit.
selling below cost is not profitable.
therefore other goods become more expensive while the below cost goods become enticing.
more profit is made by using below cost selling as a lure.
if this is not true then supermarket would be supporting abolition.
thus profit and greed are again at the center of policy decision. instead we must defend the rights of producers and consumers to fair treatment by big business. abolition is bad news for suppliers and it removes rock bottom in terms of cost cutting. its not perfect but there are alternatives available to government to promote good practice in reducing rip off culture (taxing super normal profit e.g. or limiting margins) the easy decision is to open up our arms to the beast and allow a monopoly to develop and cartel to form.
even if competition is the panacea and allowing the biggest dog in town to throw its weight around is not competition its bullying. remember we should be able to rely on government to defend our interests, we elect them after all. instead we need an independent statutory body. our TDs didnt feel up to the challenge of talking tough with big business.
consumer protection is another syptom of the social schizophreina i am seeing dialy. we are at once consumer nad worker/producer of wealth. as both sides of a single person we enjoy two very different sets of rights. consumers to all the best of big business enticement, producers to all the best of big business cost cutting. this dichotomy will relaign itself soon. not in some socialist revolution per se but in a more natural reconciliation of what it is to be human.
Red Rover

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  1. Anonymous Anonymous | 11:18 p.m. |  

    Have a read of what the group said. The groceries order is not a ban on below cost selling. It is a profit maintenance order. If it were a ban on predatory pricing I might agree with you. As it is not I agree with Cliff.
    Check out the list of vested interests arguing the order should be kept to get a perspective on who really benefits.

    http://www.irishconsumer.ie/report/forward/groceries.html

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