Coles And Woolworths Dominate Australian Retail Because They Give Us What We Want: Economist

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We may rail against the closure of a small retailer when Coles or Woolworths opens up nearby, but the real cause of the closure is, well, us!

As consumers, we choose to buy from Coles and Woolworths rather than the retail alternatives. We may complain but the low prices, the product selection, the convenience or whatever else, draws us in to buy at the major supermarkets and, in so doing, we slowly but surely push the retail competitors out of the market.

This is not anti-competitive; it is the very nature of competition. Businesses who best serve customers win. But when we complain, we should look in the mirror. Because it is our choices as consumers that decide who wins and who loses in the retail wars.

Put simply, Coles and Woolworths have succeeded because they are so damn good at giving us what we want!

It is not like this in some other countries. On a recent visit to Spain I noticed that many of their supermarkets were small, poorly stocked and the quality of the merchandise was woeful by Australian standards. But there are a lot more small supermarkets.

Why? Because regulations have historically restricted large supermarkets. This may benefit the ‘mum and dad’ grocers but the consumers end up paying higher prices for lower quality product.

And this is the problem with the potential political interventions in Australia.

In the lead up to the last election, Bob Katter introduced the Reducing Supermarkets Dominance Bill into parliament. It was supported by Nick Xenophon and Andrew Wilkie.

It would have required Coles and Woolworths to sell about half their stores or to break into smaller companies. It would have benefited small retailers by hurting competitors. It would have made us look like Spain.

The major supermarkets are no angels. But they do respond to customers’ demands. So if you want more small grocers, you have the answer. Shop at them. But do not call on the politicians to make that decision for you.

Stephen King is a professor in Monash University’s Department of Economics. This is an excerpt from his column for The Conversation; read the full article here.

Now read: Coles’ Supermarket Milk War: ‘We Use Every PR Tactic Possible To Neutralise The Noise’

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