The hidden costs of Supermarkets· Blog
Aug 28th, 2011 | By Jayson Bryant | Category: Blog
The real cost of Supermarkets on local communities
On recent visits to my local, but Australian owned, supermarket I have started to see a theme. Now that they are responsible for more than 90% of alcohol sales they can start to price wine as they see fit, thus screwing the price down on the wineries and making massive margins for themselves.
This strategy is no good for the wine industry, as it becomes a necessary evil for wineries to have presence in the supermarkets. The local stores suffer and are eventually unable to compete and the high street starts to see vacant shops where once stood boutique stores which offered more variety.
Convenience is the greatest motivator for the supermarket buyer, and the general premise for supermarkets was great, where small boutique stores where all housed under one roof. This week however, I saw the most outrageous pricing on wine that I have ever witnessed. A $15 cost ex GST wine should retail for $25 or there abouts, but I have seen this wine repeatedly sold at the supermarket for close to $60. That’s a whopping 350% markup.
A recent survey found that supporting local business puts an extra 60% more back into the local economy than supporting a large multinational. Local businesses use local accountants, designers, staff etc who spend their money locally. This should be the economic model that New Zealand uses to get itself back working again.
The UK study found:
- Supermarkets siphon money away from local communities and towards shareholders and distant corporations. A study by NEF (the New Economics Foundation) found in the UK that $3 spent in a local shop selling local produce puts twice as much money back into the local community as $3 spent in a supermarket. An analysis of procurement spending conducted by Northumberland County Council with NEF has shown that $3 spent with local suppliers is worth $4.55 to the local economy, while $3 spent with suppliers out of the area is worth $1. A Friends of the Earth study of local food schemes found that on average just over half of business turnover was returned to the local economy, compared to as little as 5 per cent for supermarkets.
- Supermarkets increase traffic and congestion. The distribution systems used by supermarkets and their large catchment area generates large amounts of traffic. Recent work for the Department for Environment, Food and Rural Affairs (DEFRA) suggests that car use for shopping results in costs to society of more than $10 billion per year, from traffic emissions, noise, congestion and accidents.
- Supermarkets destroy local jobs. Supermarkets claims that new stores bring in jobs fails to consider the wider picture of independent retailer bankruptcies. A 1998 study by the National Retailer Planning Forum (NRPF) examining the employment impacts of 93 superstore openings between 1991 and 1994 found that they resulted in a net loss of more than 25,000 jobs or 276 per store opened.
- Supermarkets are often more expensive. Supermarkets entice customers into their stores with basic goods like milk and bread sold at below cost prices. Once inside customers often end up spending more on the rest of their groceries than they would at smaller, independent stores. Moreover, promotions such as 2 for 1 encourage customers to buy more than they need. It’s not surprising that a third of all food in the UK is thrown away.
- Supermarkets generate waste and over-package. Packaging now makes up nearly a quarter of household waste, and 35-40% of household waste ending up in landfill begins as a purchase from one of the big five supermarkets.
- Supermarkets exploit suppliers and damage the environment. Supermarkets use their market dominance to exploit suppliers and farmers and drive down prices, sometimes below the cost of production, thus ensuring that environmentally damaging practices are continued both in the UK and overseas.
Of course supermarkets are here to stay but surely a balance can be struck. Think local, buy local and you will end up with more variety of goods on sale, a healthier wine industry and economy.