Saturday, 9 August 2008

Swings and Roundabouts !

Bulk buying of groceries will mean lower prices ? Right !

Everyone will benefit ? Wrong !

The first law of commerce is certain to apply to the bulk buying fad. There must be a strong incentive for people to buy more than they need - and that incentive is a price saving.

To achieve that incentive it makes sense to make the single item price less attractive by increasing it sharply. In contrast - the price for bulk buying several items looks much better.

That's just fine - provided every purchaser is a bulk buy customer. But what about the disadvantaged ? Those on a pension or low wages who have no option other than to buy single items ?

The more unscrupulous supermarket bosses will also see a cute way of improving their markup. There is no certainty that mini bulk buying is going to continue indefinitely. It may be a passing attraction - but those inflated single item prices will look quite normal because we have become used to them.

The problem in this country is that we lack meaningful competition. Two giant chains control the grocery market and when they negotiate a lease in a new shopping centre they insist on excluding possible opposition stores.

There are moves to make this illegal, but apart from Aldi there is no serious challenge to the supremacy of the big two - and with the purchase power they wield smaller grocery chains have no hope of matching them when it comes to purchase price.

Beware the bulk buy tactic. It is a Trojan horse to quietly lift the single item price !

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