We need action not excuses from the supermarket duopoly
With struggling Aussie families paying consistently more for their food and groceries than other developed countries we need to take a long hard look at what’s causing the problem.
First, compare Australia to other OECD countries and there is one fact that jumps out. Australia has one of the most highly concentrated grocery sectors in the developed world.
Just two players – Coles and Woolworths – control 87% of supermarkets over 2000 square metres. They are increasing their share of fresh food, liquor, petrol and now hardware. Their tentacles spread to mobile phones, banking services and electronics. They own enough poker machines to put Las Vegas Casinos to shame.
Compare the highly concentrated supermarket sector with those overseas. Significantly, New Zealand also has a highly concentrated market with just 2 players (one of which is a Woolworths-owned company) dominating the supermarket sector. Well, surprise, surprise, New Zealand also has some of the highest levels of food inflation in the developed world.
Now let’s look at Canada, the United Kingdom, the United States, France, and Italy just to name a few. All of these countries consistently have much lower food inflation than Australia and New Zealand. Unlike us, however, all these countries have a much greater diversity of supermarket players that keeps prices lower. It’s simple. The more price competitive players you have in a market, the lower the retail prices paid by consumers.
Naturally, we get the same old excuses from the supermarket giants. First, they blame the drought. Well, given that they are importing more and more food and grocery products from overseas, they are increasingly drought-proof. Also, just ask any farmer or supplier whether or not the giants have been screwing them down on price.
More excuses are offered for the higher prices. We’re told that “global factors” are to blame. Commodity prices are priced internationally, we’re told. Yes, that’s right, but since other countries in the OECD are also paying international prices for commodities, any international rises are already factored into the food inflation numbers of these OECD countries. So strike two as far as excuses go.
Then we get told that workers’ earnings have gone up. Let’s leave aside that we may be working longer hours, let’s not forget that more of those earnings are going to pay for higher grocery prices. Aussie families would be getting more in their pockets if grocery prices were not rising as fast as they are.
Speaking of earnings, go have a look, for example, at Woolworths’ Annual Reports. These reveal that the earnings of their top executives have been rising very generously in recent years. Yes, Woolworths has been increasing their profit margins, but grocery prices have also be been rising during that time. So as grocery prices continue to rise so do the pay packets of the top executives. Strike three!
What needs to happen?
Well, we certainly need full price transparency from the duopolists.
This is particularly critical following the recent handing down of the Senate Inquiry Report into the GROCERYchoice failure. That Report reveals that the Federal Government and Minister Craig Emerson must now go to plan B to give consumers full transparency on grocery prices.
Consumers need information on grocery prices that is up-to-date and accurate. Consumers also need to know grocery prices at all their local major supermarkets in order to find their cheapest local supermarket. GROCERYchoice failed on all fronts. The pricing information on the GROCERYchoice website was meaningless, out of date and misleading.
Consumers need full transparency on prices and the Federal Government’s GROCERYchoice website failed to deliver that much needed full transparency.
Full pricing information on all grocery items could easily be provided by Coles and Woolworths via their own website as all their grocery prices are stored electronically. Coles and Woolworths currently do not give customers full “real time” transparency on prices, but they could if they chose to do so.
Coles knows the prices of all their products at each of their supermarkets. So does Woolworths. Consumers could easily be given that information by Coles and Woolworths via the Chains’ own websites as part of their customer service.
Coles and Woolworths have sophisticated information systems to keep track of every product they sell. They have the technology to provide customers with timely and up to date pricing information on all their products at all their supermarkets.
So, if Coles and Woolworths were as serious as they claim they are about customer service they would launch their own websites giving consumers “real time” pricing information for every product in every store. Customers wanting to do so could then go online to check prices for themselves at any time.
Real time pricing information would empower consumers by providing full transparency on grocery prices enabling them to make informed decisions. The airlines give consumers real time information everyday on every seat on every flight, so Coles and Woolworths can also give consumers real time prices. Coles and Woolworths have that information every time they scan a product at the checkout and they should make it available to consumers.
If Coles and Woolworths fail to provide customers with real time pricing information, then the Federal Government should move to require Coles and Woolworths to do so. This could involve the Federal Government legislating to require that supermarkets of a size greater than 2000 square metres make publicly available a website containing real time pricing information on all products sold in those supermarkets.
But, full price transparency is not enough. With Australia having some of the weakest competition laws in the world, the Federal Government needs to act urgently to repair our competition laws. With a plan of action ready to go, all that the Federal Government and Minister Emerson need to do is act.
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