Wednesday, January 11th, 2012 at
10:48 am
Whether it’s pinching suppliers or pricing shops out of commerce, small businesses are exasperated with the bully-boy devices of the big supermarkets. The owner of a food retailer has observed personally the destruction of his local high street in Norfolk because of a large supermarket. ‘Tesco basically sucked the life out of the town,’ he says.
In 2002, Tesco released its doors after a extended fight with local businesses and residents, and he declares that inside a week, his income jumped down by more than half, with many shops afterwards closing down. In addition to the autonomous bodies, these also incorporated the Co-op and Somerfield, which he had happily struggled with for years.
‘The impact of Tesco devastated the high street footfall. We managed to survive by moving a lot of our stock between our two shops and by having a fighting fund in place. And when the other shops closed down, we got some of our turnover back. We’ve also been very proactive in our criticism, and that also seemed to pick up the anti-Tesco vote,’ he announced.
But he is concerned about the prospect of the high street in Stalham, as Tesco plans to develop its store even further.
‘The size is far too big for the town already. Instead of complementing the high street, they have dwarfed it. They just go for the biggest size they possibly can, and if they get turned down in their planning applications they go for the next biggest. They’re not bothered about the high street, all they are interested in is profits.’
The owner of a school uniform shop has also been influenced by the powerful methods employed by the supermarkets, and says over the last four to five, years they have begun to wage a price war.
‘I do believe that people should have a choice, but supermarkets are not making their prices fair. It seems that school uniforms in supermarkets are being sold as loss-leaders. They are not making a profit, it’s just something they are using as a way of getting more customers through the door.’
Stephen Alambritis, chief spokesperson of the Federation of Small Businesses, concurs that supermarkets have a huge gain because of the method they can control their products.
‘Below-cost pricing is illegal in France. I don’t see why that’s not something we could have here. There are a number of MPs who are trying to get supermarkets to put the cost of alcohol up, where they are selling it at a loss. But this should be something to campaign for on all products.’
On the other hand, it is not just retailers who are affected by hostile pricing tactics. The chief of the food and agribusiness recovery group at Grant Thornton, says that supermarkets are able to keep their prices down at the cost of the supply chain.
He says: ‘I have seen a number of small businesses affected by unreasonable buyer behaviour on the part of the supermarkets. They often demand that contract terms be changed retrospectively and will cancel suppliers at short notice, or delist their items without warning. In some cases, these factors are a direct cause of business failures.’
Unrecorded contract conditions between supermarkets and suppliers are widespread, he adds. ‘It would be far easier to achieve a financial turnaround for companies in this sector if the key trade terms were known.
‘All too many businesses we deal with fall over the [supermarket] buyer’s whims, and don’t understand that a proportion of the products they will be supplying will actually be causing them a loss. For certain businesses, it would be better not to trade with them at all.’
He considers that the government has failed SMEs in this segment ‘It seems there’s a reluctance on the part of the Office of Fair Trading to do anything. I’d like to see a supermarket ombudsman, but that is something which appears to be painfully slow to implement,’ he adds.
The public affairs director of the Association of Convenience Stores concurs: ‘If SMEs are in a position where they are unable to compete, that’s bad news for the consumer because it means less choice. In a monopoly situation, supermarkets should be monitored – that’s why we need an ombudsman.’
A representative from Tesco said: ‘We depend on good and strong relationships with our suppliers, both large and small and we work hard to strike the right balance between getting the best possible price for consumers whilst ensuring that our supply base remains sustainable in the long term.
‘We remain to be convinced of the case for a supermarket ombudsman, as they are usually there to protect consumers. It is also difficult to see what additional benefits an ombudsman would have over the Office of Fair Trading, which currently provides effective independent scrutiny of the industry.’
The 74-strong assembly of MPs has asked scores of concerned groups, from Tesco to the Women’s Institute, on their idea of what a shopping trip in Britain in 10 years’ time might include. It plans to donate its result to Alan Johnson, the Secretary of State for Trade and Industry, in December.
It was the turn of small shopkeepers to contest their grounds against what has been called the “creeping centralisation” by retailers such as Tesco of the UK’s high streets, in the first of four trials. The big boys, who have determined the booming convenience stores segment provides easy proceeds, are suitable to put their side of the story next week, together with the British Retail Consortium and the British Chambers of Commerce.
David Rae, the chairman of the Association of Convenience Stores (ACS), painted a depiction of districts with their hearts pulled out if the Government continues to pay no heed to the troubles of local stores in favour of the Big Four (Tesco, Asda, J Sainsbury and Wm Morrison). “The Office of Fair Trading is content that competition means competition between the four major grocers in any one area,” he told the hearing.