>>OFT stance threatens to devastate the independent sector
So now there’s not one, not two but three markets in grocery - one-stop, convenience and top-up. Jacksons, according to the Office of Fair Trading, caters mostly for a few emergency or impulse items. That makes it a top-up distress retailer, I assume. Or is that convenience?
If you’re confused, you’re not the only one. But actually, it doesn’t matter. For in its report into why it did not refer Sainsbury’s purchase of Jacksons to the Competition Commission, the OFT concludes that not only are the arguments insufficiently persuasive for it to deviate from the line the commission has previously taken, but it would take the same view even if it were one market.
Now I’m not one to back interference in business on the whole. In a market economy the strongest wins, and in this industry that translates to those retailers with the best consumer offer. Independents have for far too long failed to keep up with changing consumer needs.
But the issue is whether continuing consolidation will be a good thing in the long term. The UK’s big box retailers run world-class operations - and should be praised for doing so. But their business models are based on range rationalisation and screwing the best buying terms from suppliers which, in order to survive, have themselves had to rationalise their portfolios. The result? Lack of innovation, a plethora of me-too (and often uninspiring) products and formats and, ultimately, reduced consumer choice.
The OFT and, paradoxically, the Consumers’ Association welcome this. The former sees no evidence that independents are disadvantaged by the majors’ buying power and deep pockets. Sainsbury, it says, won’t increase buying power with the Jacksons acquisition.
Well, of course it won’t. This completely misses the point. It’s the suppliers to Jacksons that will lose out - as their terms are brought into line or they are dropped altogether. These suppliers need to make their margin somewhere. Is it any surprise that as the multiples’ power has increased so the gap between their prices and those of independents has widened?
The fact competition minister Gerry Sutcliffe is holding talks with the independent sector raises some hope. But if no action is taken the OFT will continue to view each case in isolation - and the sector will face death by a thousand cuts.
it’s death by 1,000 cuts
So now there’s not one, not two but three markets in grocery - one-stop, convenience and top-up. Jacksons, according to the Office of Fair Trading, caters mostly for a few emergency or impulse items. That makes it a top-up distress retailer, I assume. Or is that convenience?
If you’re confused, you’re not the only one. But actually, it doesn’t matter. For in its report into why it did not refer Sainsbury’s purchase of Jacksons to the Competition Commission, the OFT concludes that not only are the arguments insufficiently persuasive for it to deviate from the line the commission has previously taken, but it would take the same view even if it were one market.
Now I’m not one to back interference in business on the whole. In a market economy the strongest wins, and in this industry that translates to those retailers with the best consumer offer. Independents have for far too long failed to keep up with changing consumer needs.
But the issue is whether continuing consolidation will be a good thing in the long term. The UK’s big box retailers run world-class operations - and should be praised for doing so. But their business models are based on range rationalisation and screwing the best buying terms from suppliers which, in order to survive, have themselves had to rationalise their portfolios. The result? Lack of innovation, a plethora of me-too (and often uninspiring) products and formats and, ultimately, reduced consumer choice.
The OFT and, paradoxically, the Consumers’ Association welcome this. The former sees no evidence that independents are disadvantaged by the majors’ buying power and deep pockets. Sainsbury, it says, won’t increase buying power with the Jacksons acquisition.
Well, of course it won’t. This completely misses the point. It’s the suppliers to Jacksons that will lose out - as their terms are brought into line or they are dropped altogether. These suppliers need to make their margin somewhere. Is it any surprise that as the multiples’ power has increased so the gap between their prices and those of independents has widened?
The fact competition minister Gerry Sutcliffe is holding talks with the independent sector raises some hope. But if no action is taken the OFT will continue to view each case in isolation - and the sector will face death by a thousand cuts.
it’s death by 1,000 cuts
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