>>Jeremy Baker, senior lecturer in marketing, London Metropolitan University - the Office of Supermarket regulator is nigh
The supermarket industry is going to be very sorry that it ever got caught-up in the Safeway takeover. The immediate outcome is bad enough - the whole industry is being given another inspection by the Competition Commission. The food-buying pattern of each town will be publicly examined.
But the next step will be much worse. If government allows the creation of a permanent Big Four (and it will be permanent) then this group will be so powerful that government will have only one option. It will have to set up a permanent supervisory system.
At present, the supermarket industry thinks that it will go through a period of major disturbance followed by ‘back to normal’. Keep dreaming.
The danger is that there will never be a ‘back to normal’. The golden age of supermarkets will come to an end, the accidental result of Sir Ken Morrison’s move to take over Safeway followed by mania at the top of Asda and Sainsbury. The industry will have asked to be semi-nationalised. Supermarkets will become rather like the railways.
Central to this argument is the debate about the motivation of supermarkets. The Competition Commission believes the key is the local market. A shopper must have three or four choices, within reasonable shopping distance. Competition Commission scrutiny will lead to a re-jigged Big Four competing in every major town.
But what is it that really motivates supermarket people? The answer is the league table of national market share. For example, Sir Peter Davis is going to lose face if those four-week figures showing Asda to have taken the number two slot turn out to be the long-term picture. If, or when, this happens, Sir Peter will be reduced to skulking in the shadows, sitting at the table next to the kitchens, never again at the top table.
Last week’s 52-week market share percentages from TNS showed the following: Tesco 26.4, Sainsbury 17, Asda 16.4, Safeway 9.7, Morrisons 6 and Somerfield 5.5. Notice that each competitor has genuine reason to fear the rival just below it. Also, everyone has the credible ambition of beating the rival just ahead of it. The only exception, Tesco, can look to the European table.
Now imagine a Competition Commission inspired reorganisation. Market share will be
Tesco 26.4, Sainsbury 17, Asda 16.4, Morrisons 15.7 and Somerfield 5.5. Notice the chasm between the Big Four and Somerfield, the next player.
Rivals will never be able to jump the chasm. Add in the impossibility of gaining planning permission to create new supermarkets and the result is obvious. The Competition Commission will have created a Premier League that has no fear of relegation.
On the first day of the new system, it will be lovely for the supermarkets. There will be competition but only of a cosmetic nature - no one will get hurt because they can never be thrown out of the Big Four.
Unfortunately, the government will have to supervise the food industry in the same way as railway companies and the postal sector. Why? Mainly because the government will have given the Big Four a privileged position, so ‘Off Sup’ will be a fair bargain.
And, don’t forget, power corrupts. The supermarkets will develop the arrogance seen in other industries. Management won’t be able to stop itself becoming arrogant and loathsome. Then there will be a mass of public issues. Small farmers, big farmers, suppliers, salt, fears of obesity - what about the Third World? Every pressure group will sense blood.
Supermarket chiefs forget that today they are living in a golden age. They are widely admired. Gordon Brown dreams of a public sector half as good as the supermarkets.
Accidentally, Sir Ken Morrison’s actions will lead to the semi-nationalisation of supermarkets. Why are the other supermarkets following him?
The supermarket industry is going to be very sorry that it ever got caught-up in the Safeway takeover. The immediate outcome is bad enough - the whole industry is being given another inspection by the Competition Commission. The food-buying pattern of each town will be publicly examined.
But the next step will be much worse. If government allows the creation of a permanent Big Four (and it will be permanent) then this group will be so powerful that government will have only one option. It will have to set up a permanent supervisory system.
At present, the supermarket industry thinks that it will go through a period of major disturbance followed by ‘back to normal’. Keep dreaming.
The danger is that there will never be a ‘back to normal’. The golden age of supermarkets will come to an end, the accidental result of Sir Ken Morrison’s move to take over Safeway followed by mania at the top of Asda and Sainsbury. The industry will have asked to be semi-nationalised. Supermarkets will become rather like the railways.
Central to this argument is the debate about the motivation of supermarkets. The Competition Commission believes the key is the local market. A shopper must have three or four choices, within reasonable shopping distance. Competition Commission scrutiny will lead to a re-jigged Big Four competing in every major town.
But what is it that really motivates supermarket people? The answer is the league table of national market share. For example, Sir Peter Davis is going to lose face if those four-week figures showing Asda to have taken the number two slot turn out to be the long-term picture. If, or when, this happens, Sir Peter will be reduced to skulking in the shadows, sitting at the table next to the kitchens, never again at the top table.
Last week’s 52-week market share percentages from TNS showed the following: Tesco 26.4, Sainsbury 17, Asda 16.4, Safeway 9.7, Morrisons 6 and Somerfield 5.5. Notice that each competitor has genuine reason to fear the rival just below it. Also, everyone has the credible ambition of beating the rival just ahead of it. The only exception, Tesco, can look to the European table.
Now imagine a Competition Commission inspired reorganisation. Market share will be
Tesco 26.4, Sainsbury 17, Asda 16.4, Morrisons 15.7 and Somerfield 5.5. Notice the chasm between the Big Four and Somerfield, the next player.
Rivals will never be able to jump the chasm. Add in the impossibility of gaining planning permission to create new supermarkets and the result is obvious. The Competition Commission will have created a Premier League that has no fear of relegation.
On the first day of the new system, it will be lovely for the supermarkets. There will be competition but only of a cosmetic nature - no one will get hurt because they can never be thrown out of the Big Four.
Unfortunately, the government will have to supervise the food industry in the same way as railway companies and the postal sector. Why? Mainly because the government will have given the Big Four a privileged position, so ‘Off Sup’ will be a fair bargain.
And, don’t forget, power corrupts. The supermarkets will develop the arrogance seen in other industries. Management won’t be able to stop itself becoming arrogant and loathsome. Then there will be a mass of public issues. Small farmers, big farmers, suppliers, salt, fears of obesity - what about the Third World? Every pressure group will sense blood.
Supermarket chiefs forget that today they are living in a golden age. They are widely admired. Gordon Brown dreams of a public sector half as good as the supermarkets.
Accidentally, Sir Ken Morrison’s actions will lead to the semi-nationalisation of supermarkets. Why are the other supermarkets following him?
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