Have supermarkets become too big to the extent that they are damaging competition? BY ela1210 The growth of supermarkets does however have some benefits for competition. Firstly, due to the uniformity of products, prices are easily comparable across stores for consumers. This means they can compare pricing strategies of dfferent supermarkets and see which has the most competitive pricing, therefore get the best deal available to them, increasing competition and allowing consumers to make a more Informed choice when buying.
Prices of commodities do not fluctuate a lot ecause of this, as competitors must malntaln constant prices, therefore consumers do not have to worry about the price of necessary Items changing suddenly. Global commodity prices are therefore determined by the market, rather than by the retailers such as the large supermarkets.
For example the number of dairy farms In Brltaln fell by more than 40% between 1995 and 2005, but It Is clear that supermarkets are not to blame for this as the price of milk Is set mainly by demand and as a result of this, the remaining farms incomes and herd sizes have increased as well as their profitability improving greatly. Supermarkets today use online selling methods to reach a wider market, also increasing competition which is possible due to their size as well. Selling via the internet improves the quality of service a consumer receives from a company, especially as they are competing for business with rival supermarkets.
Online selling also makes shopping easier for consumers, benefiting competition. This competition means supermarkets are constantly motivated to stay innovative and provide a good service, as to ensure they do not lose customers to rival companies. The large supermarkets are consequently able to offer ore efficient services to consumers in response to needs they have identified while trying to be competitive. For example offering prepared vegetables, this saves busy consumers time and in turn makes them become more appealing.
Alongside this, as supermarkets operate on such a large scale, they are advantaged by many economies of scale such as bulk buying stock, mass marketing campaigns and transport methods, lowering their costs. The big supermarkets can then pass these savings on to consumers through reducing the price of products and increasing competition within the market. This would benefit competition through avoiding artificially high prices for products which are widely sold. Through implementing and demanding more economies of scale, producers and suppliers will have to become more competitive, and as a result will Improve the quality of their produce.
Therefore It cannot be said that supermarkets are soley damaging for competition as there as some advantages of their size for consumers as well as producers, which Is Increasing competition. 2) Have supermarkets become too big to the extent that they are damaging competition? It Is argued that supermarkets have become too big to the extent that hey are damaging competition as there are only a handful of them dominating the food market: Tesco, Asda, Sainsburys and Morrison’s to name a few. Because of their ultimately is their competition. By eliminating their rivals i. e. ompetition they are or going towards becoming an oligopoly market. Being an oligopoly means having a significant market share in the industry, high barriers to entry, huge sunk and set-up costs which all lead to less competition. This ultimately lowers the number of firms in the industry, as named above, which means less choice for consumers. This can be argued simply by a price comparison between local food stores and the big supermarkets. Prices have become very transparent between the so called competitors from the big supermarkets as their price differs only by a fraction.
The question needed to be asked is how much lower can they reduce their prices and still make a handsome profit, yet we see no significant price decreases from any of them, apart from their well known offers of “buy 1 get 1 FREE” or the nation’s favourite “Half Price” on selected items, which are all part of their marketing strategy to get ustomers into their supermarkets and psychologically persuading them in purchasing something they had no intention of purchasing before getting there.