Below cost selling holds a heavy price

Brian O’Mahony Column

Tesco is also eating into rural Ireland at this stage, ring-fencing the smaller towns. It’s even selling petrol cheaper than anyone else in Kerry.

The Competition Authority wants to boost consumer joy further by allowing the Tescos of this world to engage in below cost selling.

Below cost selling was banned nearly 30 years ago because it was being used by the Dunnes Stores of this world to draw consumers into their retail web.

Those who argue that the day of the ban is long gone, however, have the wrong ban. The GAA ban was outdated as it was riven by prejudice and an identity crisis about what it means to be Irish.

The below cost selling is a different issue. At stake here is the enormous buying power of the multinationals who have the ability to run loss leaders, as they are known, in order to undercut the competition.

The ban was introduced because below cost selling was seen as grossly unfair to the small shopkeeper at the time. It’s an accepted fact that the small shop keeper is virtually extinct, representing just 10% of the Irish grocery retail sector.

Just because the scene has changed utterly, with the multiples in command of the market, is not an argument for throwing in the towel completely.

If the argument is that competition is good for the consumer, it is a perversion of that concept to say that below cost selling ought to be part of that package.

It’s wrong because, in the long run, only the likes of Tesco will be able to sustain the below cost onslaught in the Irish market and their market share will grow relentlessly. It’s already happening.

Tesco has global reach and is capable of buying at a level and at a reach not known to even the biggest Irish retail chains. At a major retail fair in China recently, Tesco and Carrefour had stalls the size of Croke Park. And the sellers visited Tesco and Carrefour instead of the other way round.

That’s the kind of scale and international clout we are talking about here.

The rest of the Irish market doesn’t have breeze of a chance against that kind of fire power in the long run.

So, if we want the symbol groups to survive, we do not want to see this bit of misguided research from the Competition Authority being used to justify the lifting of the ban.

The argument is that it will save the consumers on the their weekly shopping bill, knocking about 500 off the total annual grocery bill.

But the implications of the move are a lot starker. If it goes ahead, it will make it easier for Tesco to gain an increasing share of the Irish market. Symbol groups, significantly less powerful, will go to the wall and when this is all over, the consumer will be screwed to the wall. We still have time to avoid going down this road, and when the trade union movement and the Irish employer body IBEC are shoulder to shoulder on this issue, then it is time to stop and think.

If the Irish consumer wants to benefit to the mercy of Tesco and Wal-Mart, then so be it, but the price will be a lot more than E500 per consumer before it’s all over.