Monday, June 12, 2006

Groceries and a Brain Transplant

Recently I read this editorial in the Weekend Herald concerning the competition between Groceries and supermarket stores, and how a new competitor in the chain is going to create a win win situation for the consumers. As we all know, grocery stores are privately owned companies, with little (apart from GST) or no interference from government.
At present they are presenting the public with better quality produce, greater variety and better service than we have EVER had before! Even the editor at the NZ Herald admits it! If this is so damn obvious, then please somebody explain to me how this business differs from lets say the HEALTH SYSTEM or the EDUCATION SYSTEM! I believe if the system works so well for GROCERIES, which are also a necessity of life, then it would work equally as well to the Health system. Below is a brief exerpt from the Herald editorial. The full version can be read here.
On the face of it, the grocery supermarket business in New Zealand would seem to have about six thriving competitors. In fact, we have had two: the Foodtown, Woolworths and Countdown chains are owned by Woolworths Australia while New World, Pak'N Save and Four Square stores belong to the New Zealand co-operative Foodstuffs. It takes only two to wage a keen competition, even when the contest is between an Australasian Goliath with annual revenues around $32 billion and a domestic David with a turnover of $6 billion. Foodstuffs still claims 57 per cent of the local market. Nevertheless, the entry of a third player, The Warehouse, which opens its first "hypermarket" in the new Sylvia Park shopping centre, will be welcomed by consumers. The Warehouse's move into groceries has already shaken up the existing players, as evidenced by Foodstuffs' announcement yesterday of a bid for 10 per cent of The Warehouse shares. The remorseless globalisation of the grocery business is being felt by all supermarket suppliers and all other retailers of consumer goods. The plight of suppliers was highlighted in this country last week with Woolworths' demand for double the discount (to at least 10 per cent) it has been getting from suppliers. The company appears to be bringing New Zealand trading terms into line with its Australian rates. Customers will share the benefit, though, if Woolworths passes on some of the extra discount. The bulk buying power of supermarkets has been an undeniable boon to general living standards even if it threatens the livelihoods of other retailers. Pharmacies, liquor stores and petrol stations have felt it, yet the humble suburban wine shop has shown that all need not be lost to economies of scale. Good wine shops have survived successive waves of price competition, first from deregulated liquor outlets and more recently from supermarket wine sales. Good wine shops can compete on service, which in their case means being able to recommend a genuinely good, reasonably priced wine of the kind the customer is seeking. More areas of retailing may be forced to improve customer servicing if they are to compete with supermarket prices. If they do, the consumer stands to win both ways.


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