Wednesday, February 15, 2006

Dodgy report of the week award

Goes to the all-party group on Small Shops. Who are the all-party group on small shops, you ask? The Grauniad thinks they're an influential cross-party group of MPs. But they're a group with no formal power who:

[Have their] secretarial support for the group... provided by a lobbyist paid for by the Independent Retailers Confederation, which wants to curb the dominance of large supermarket groups.

The report is ridiculously easy to disagree with so that's what I'm going to do. The Grauniad reports that small shops have been closing rapidly:

The report says that between 1965 and 1990, 15% of small rural settlements experienced the closure of their last general store or food shop. Between 1991 and 1997, 4,000 food shops closed in rural areas.

This is because they were completely outclassed. They didn't sell the range of products in supermarkets, their products cost significantly more and were often close to the use-by-date(because no one would buy their single can of beans for months on end). Consumers have voted with their feet and good for them. But perhaps the closure of these small shops is a bad thing because:

Minority communities will also lose out, the report suggests. "The Muslim population of Britain have to rely on small shops to purchase halal meat, which is an essential practice in their religion."

This is entirely wrong. Halal shops will survive because they are selling niche products and have a market. As will petrol forecourts who are selling to the same customers as supermarkets but in a different context (you don't go to Esso for your weekly shop) . As will small shops where they are selling to a concentration of the elderly, the less affluent and others without transport. Where there are insufficient of the unmobile to support a small shop then councils and supermarkets are already working together to provide free bus services to out-of-town supermarkets and will continue to do so. Elderly people bussed to an out-of-town superstore are good customers - they are forced to shop in that supermarket (unless a competitor provides a competing bus service) and they frequent the cafe whilst waiting for the bus back.

This isn't to say the supermarket sector is all good - it's dominated by 4 chains: Tesco, Asda, Sainsbury's and Morrisons:

[the report] gives examples of local "monopolies" such as Inverness, where Tesco dominates the market with a 51% share and in Twickenham, where it has 47%. "In such areas voting with their purse is not a viable option, due to the lack of alternative offers."

Yep, it's a monopoly. A monopoly is a bad thing and a reason to regulate to prevent monopolies. It's NOT a reason to preserve uncompetitive small shops - in rural areas, the small village shop IS a monopoly and this made it as bad as Tesco in its day. So what to do? The report made several recommendations:
  1. A moratorium on further mergers and takeovers
  2. Creation of a retail regulator
  3. Comprehensive codes of practice across the retail sector
  4. Closure of the loophole that allows retailers to channel CD sales through Jersey to escape VAT
I don't know enough about 3 and 4 to comment. Number 1 is relatively sensible although I'd encourage new entrants into the supermarket sector to increase competition. Number 2 is utterly silly which is why the Grauniad notebook decided to wax lyrical about it for a while. It claims that the idea of a 'shops tsar' (just the name says it all):

... is radical stuff: indeed, so radical that the chance of it being adopted as government policy must be slim... Nobody seriously quibbles with the idea that our electricity, water and train companies should be regulated. It is not just that the supply of train lines or water pipes is naturally limited; it is that these businesses affect all of us.

If the government doesn't adopt this idea, it's not because it's too radical... it's because it's too silly. Food shops do affect all of us but so do clothing retailers (what's more fundamental to human dignity and warmth than clothing) and the suppliers of electrical goods (everyone needs an oven). No one's suggesting we regulate them. The supermarket sector stinks at the moment like a kipper past its best-before date. But corporate practice in lots of sectors stinks - read the corporate chapters in Who Runs this Place? That's an argument for careful, considered and unobtrusive corporate regulation, not one for creating more tsars than pre-communist Russia.


  • At 4:25 pm , Blogger Tristan said...

    I agree.
    I can see this government going for a 'shop tsar' because it gives them more control over a public service they never managed to get control of through nationalisation.

    An example of a small shop which is doing well is the small green grocers right next to Sainsbury's in Chiswick. The fruit and veg there is significantly cheaper and often better quality (they also pick out obviously bad fruit when serving you). Being next to Sainsbury's you can also do your big shop there and then get your fruit and veg at the green grocers.

    The closing of the VAT loophole for CDs is protectionism and should be resisted. CDs are overpriced, are you surprised people order from the channel islands when its cheaper (even with postage).
    Of course, that hasn't stopped small Fopp stores from offering CDs at reasonable prices and other small stores undercutting HMV etc.


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