Watchdog probes the dark art of the ‘special’ supermarket

Supermarkets are using “specials” to deceive consumers, increase profit margins and exert control over their suppliers, critics of supermarket chains told the Trade Commission.

The commission heard that some shoppers were so used to frequent price promotions that they got used to not buying the products they wanted when they weren’t on sale.

Consumer NZ chief executive Jon Duffy led the assault on supermarket practices on day two of a Commerce Commission industry conference, saying they were intentionally mistaking consumers for ‘savings’ which customers couldn’t be sure weren’t genuine.

Supermarket loyalty programs were a form of “price discrimination,” he said.

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“In a very concentrated market, we believe that linking access to discounts to the mandatory collection of personal information is unfair and penalizes consumers who do not wish to exchange their privacy to increase the profits of the industry”, a- he declared.

Sue Kedgley of the National Council of Women said that because there was “no control, no control and no transparency” of supermarkets, no one could know what the specials were based on or how genuine they were.

Representatives from Countdown and Foodstuffs said they were changing their pricing and promotional practices and shifting their marketing towards “everyday low prices”.

Countdown Strategy Director John Gluckman said it’s been a trend for retailers around the world as they look to improve confidence.

Countdown now offers about 4,000 products per week “at low cost, every day” through its “low price” program, he said.

“Our focus on ‘everyday low prices’ means that while the percentage of sales sold on promotion once exceeded 60%, it is now well below 40%.”

But he said specials always had a role.

“Kiwis love good deals and are very committed to prices and promotions, so it is only natural that we respond to this demand for ‘surprises, fun and excitement’ during the shopping experience,” a- he declared.

MARTIN DE RUYTER / STUFF

Doors open to Richmond’s new Countdown supermarket, which is set to be New Zealand’s first supermarket to be Green Star accredited.

Gluckman said Countdown is also deploying electronic shelf labels to “improve price integrity, improve efficiency and reduce tickets falling off our shelves.”

The company said two of its stores, Countdown Pukekohe South and Countdown Richmond, have electronic price tags and that it plans to roll them out to 15 more stores by the middle of next year.

Foodstuffs North Island merchandise manager David Stewart said he was making a similar change in pricing and working hard to provide “a stable price on important and essential consumer lines.”

But Giles Barker, director of confectionery company Bloomsberry, said “the two dominant supermarkets” were using promotional pricing to control supplier behavior.

“I have worked extensively with supermarkets in the US, UK and Australia for 20 years and New Zealand is a tough place, with a veneer of ‘classic New Zealand collegiality and goodwill’, but underlying is a very aggressive stance, “he said.

“If you are not on promotion, you are not selling, and people are denied promotions to control their behavior and send very strong messages to suppliers at both supermarkets,” he said.

Barker said he was hesitant to participate in the commission’s market research, saying he believed it was dangerous for companies to speak out.

Food and Grocery Council Executive Director Katherine Rich endorsed Barkers’ comments.

Supermarkets have sometimes asked suppliers to offer promotional prices without giving buyers the full benefit, she said.

“Very often, preventing vendors from promoting is used as a way to leverage vendors.”

Monopoly Watch NZ spokesperson Tex Edwards said current usage of specials will change if there are more competitors in the market.

Edwards reiterated that a consortium he is involved in, Northelia, could access $ 1 billion in capital to establish a third group of supermarkets if the commission re-regulates the industry.

In today’s two-player market, supermarkets have used promotions to increase profit margins and “stock up on inventory,” he said.

But if there were four or six supermarket chains, they would be used more as they should be, to try to attract new customers and “get into the store,” he said.


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