Cold comfort for suppliers in need of real protection

The big supermarkets are squeezing suppliers while simultaneously denying their consumers real choice.

I am tempted beyond endurance to observe that last week’s report from the Office of Fair Trading (OFT) into the major supermarkets’ relationships with their suppliers is a statement of the bleeding obvious.

The OFT’s solemn announcement that it had found widespread dissatisfaction with the way the giant retailers deal with farmers and food manufacturers, but that such evidence was only anecdotal, must rank with the discovery that the Pope is indeed an adherent to the Church of Rome. Or that bears really do defecate in the woods.

On the first count, dispassionate observers – me included – have been telling stories for ages of how the superstores beat up on suppliers, driving down their margins while failing to pass such savings on to customers.

On the second, it is not good enough for the OFT to feign surprise that such stories have never been corroborated beyond the anecdotal. It is always notoriously hard to gather substantial evidence from the oppressed and fearful.

From the school bully to the organised criminal to the state tyrant, fear of reprisals is invariably a sufficient disincentive to the provision of witness statements. Only the very foolhardy and the very brave will risk standing up to be counted – especially to authorities that have shown little propensity to take swift and effective sanctions against oppressors in the past.

If I were a farmer or supplier I would not take much comfort from those who claimed to defend my interests, while concurrently taking so long to do anything practical in support of that claim.

After a 16-month investigation, in 2000 the Competition Commission produced a report on the retail industry that effectively absolved everyone, while rather wetly suggesting that there should be a code of conduct for the way that retailers handle their suppliers.

The OFT has completed a protracted stage of an investigation into whether that code of conduct works. Its verdict suggests that there is not much of a case for retailers to answer, but that there are anecdotes about abusive relationships.

Now auditors will study supply contracts over coming months to see if there is anything more empirical to be uncovered. Meanwhile, we all grow older – and some farmers and small supply businesses will die. They could be forgiven for feeling like an oppressed populace, hoping for protective intervention from the United Nations.

My sympathies, as perhaps you can tell, are with the suppliers in the superstore grocery industry. But there is no great economic – far less political – imperative for the authorities to intervene on their behalf. Our consumer population demonstrates every week that it much prefers to visit local superstores than to shop at the farmers’ markets or independent co-operatives that bravely try to compete.

This is, quite simply, because the superstores make supply choices on behalf of consumers. There is an esoteric study just emerging that precisely makes this point.

Professor Barry Schwartz is an American psychologist who has identified that our problem is not that we have insufficient consumer choices to make us happy, but that we have too many.

Schwartz has identified what he claims are two types of consumer – there are “maximisers”, who seek out the best, and “satisficers”, who settle early for what is good enough.

It’s fun to speculate into which categories our superstores can be placed. Tesco is perhaps a maximiser, given its pursuit of excellence over recent years – though we should note that all the major chains would make claims to seek out the best for their customers.

Sainsbury’s, meanwhile, is perhaps a satisficer, given its relative decline – and especially given its appointment and last week’s rescinding of the appointment of Sir Ian Prosser as chairman-designate. Prosser was very much a satisficer in his previous stewardship of Bass.

But Schwartz is right to apply his categories to consumers, rather than to the companies they buy from. These categories define whether we are prepared to accept what we’re given, or to strive for something better.

Problems arise when the retail industry responds to both categories through the same outlets. The superstores meet the demands of maximisers (choice, quality) as well as of the satisficers (price, convenience).

This is an interesting aspect of the monopolies issue that the regulatory authorities have not to date addressed. The superstores have abrogated consumers’ ability to make a choice, precisely because they make those choices for them and comprehensively covers the available consumer aspirations. We seem to be too lazy to care.

Unless and until, that is, we come up with a fresh category. “Challengers” would, perhaps, be those who were intolerant of such choices being made on their behalf, at the expense of suppliers.

But, then again, isn’t that the job of regulators?


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