Australia’s Giant Supermarkets - have they become too powerful?

ACCC investigation into anti-competitive shopping centre leases – only part of the story!

It is hoped that this investigation receives the full support of the Minister for Competition and Small Business Craig Emerson

Even The Australian Financial Review is commenting…?

Even the bastion of the Australia financial press the AFR is commenting.

Last weekend’s article ‘The Great Shopping Mystery states – “ It’s clear grocery prices are rising faster than inflation” – “ …the report found 5% of profits by grocery chains came from increased grocery prices” – “ Woolworths and Coles already account for more than 70% of packaged grocery sales”.

No wonder in the photograph Graeme Samuel didn’t look too happy?

In last week’s bulletin we reported the ACCC investigation of supermarkets reaching agreements with shopping centre owners restricting the entry of rivals is only part of the retail sector competition story.

We commented:

·         It is hoped that this investigation receives the full support of the Minister for Competition and Small Business Craig Emerson.

The ACCC investigation is said to be into a large number of cases, running into hundreds that are said to attempt to restrict supermarket competition within Australian Shopping Centres.

·         We stated that there has been over thirty years of neglect by all political parties on this issue which is reflected in the enormous market cost imbalance between major retailers vs. Australia’s specialty chains, medium and SME retailers’ – the Minister’s prime constituency.

The following table is a further cut from our submission on ‘Creeping Acquisitions’ and ‘Obligation to Divest’.

Reference 1.

Australian Retail Property Time Period - Occupancy Competition Status

Reference 2.

Strips vs. Shopping Centres Terms and Conditions for consideration

Small Retailer / Specialty Retailer Retail Lease Choices – Strip vs. Shopping Centres

(Summary Only)
 

This table shows the background cumulative affect of thirty or so years of ‘unreasonably’ close relationships between the Shopping Centre Industry and the Giant Retailers in stark relief.

·         It is strongly suggested that any terms of reference into the relationship between the Australian Shopping Centre Industry and the Giant Retailers arrives at the conclusion that the recommendations made in The RETAiL Alert Group Four Pillars of Harmonised Lease Legislation form part of the solution set the ACCC takes under serious consideration.

·         It is also suggested that the ACCC considers how to break down the monopoly of Supermarkets within Australian Shopping Centres by ensuring that space used by Supermarkets in specialty food categories such as Fresh Produce; Bakeries; Butcheries; Delicatessens; Health Foods; Liquor reflect occupancy costs and terms and conditions similar to those of their specialty food chain shopping centre competitors.

We have contacted the ACCC and the office of the Minister for Competition and Small Business for comment – responses will be detailed in further bulletins.

ARA Executive Director Russell Zimmerman said in a press release that retailers supported an open marketplace and many restrictive clauses in shopping centre leases promoted anti-competitive behaviour across a number of retail categories.

“The ACCC’s preliminary investigations have already highlighted the anti-competitive nature of restrictive clauses in shopping centre leases by limiting consumer choice,” Zimmerman said. 

“Without restricting this debate to the grocery market, the ARA welcomes any change to local planning laws and shopping centre lease arrangements that support retail competition across all sectors including clothing and footwear, department stores, household goods and specialty retailing.

“Only a highly competitive marketplace will allow small retailers, larger national chains and international players to thrive and profit alongside each other.

“An open retail market free from restrictive and anti-competitive leasing arrangements would provide greater choice for consumers in regards to product and price in one location,” Zimmerman said.

The reported ACCC investigation of supermarkets reaching agreements with shopping centre owners restricting the entry of rivals is only part of the retail sector competition story.

It is hoped that the combined ACCC investigation as proposed delivers long overdue retail sector competition reform for Australia’s long suffering small retail sector and consumers – the outcomes restoring the faith of Australia’s small retail sector in the ACCC.

This is a major issue for specialty food retailers battling against massive rent disadvantages against the Giant Supermarkets in Australia’s Shopping Centres.

As we said at the beginning of this article no wonder it is now getting the attention of the AFR.

It is no ‘The Great Shopping Mystery to us.

·         It is clear grocery prices are rising faster than inflation.

·         5% of profits by grocery chains are coming from increased grocery prices.

·         Woolworths and Coles do account for more than 70% of packaged grocery sales”.

·         No wonder in the photograph Graeme Samuel didn’t look too happy?

Australia’s specialty food retailers can be assured that The RETAiL Alert Group will be watching carefully the responses and direction of the ACCC and the Minister for Competition and Small Business Craig Emerson on these matters.

It is recommended however that specialty food retailers’ make their own submissions to the ACCC and the office of the Minister for Competition and Small Business Craig Emerson - further RETAiL Alert Group bulletins will be issued as the situation develops.

To comment on or make suggestions on Major Retailer and Shopping Centre Relationships email Major Retailer and Shopping Centre Relationships.

Tony Standley

Principal
The RETAiL Alert Group (Australia)
Mobile +61 (0)41 924 0497
e-mail info@adsass.com.au
Fax +61 (0)2 9987 0633
Website http://www.retailalert.com.au
 
THE PEOPLE WHO GET RESULTS.................