Groceries Order...

Sizzler

Much ado about nothing? How many weeks has it been in place now?? Havent seen a sniff of change in prices. Has anybody seen a difference??

shoegirl

The abolition of this law was heavily lobbied for by the larger players in the retail market in order to simplify the way in which goods are invoiced for.

Only place I know of which has sold anything beneath cost is JC's Supermarket in Swords, who sold milk at a cut price immediately afterwards.

However Tesco and Dunnes must be laughing all their way to the bank as once again consumers were hoodwinked - as I long since said they would be on this issue. After all, if consumers are willing to pay the extortionate prices levied by the likes of Musgrave and BMG retailers, why should anybody bother cutting prices?

parsi

De Paper have a bit about a survey which shows that in some cases prices have gone up.

Certainly the price of nappies (the great Eddie Hobbs mobiliser product hasn't changed.

http://www.irishexaminer.com/breaking/story.asp?j=181121476&p=y8yyzzy8z&n=181122236

gerrycollins

if i said it once ive said it a hundred time the groceries order made no difference to the cost of groceries,dont care what you say,

do you think retailers would give up the small margin they make already plus working the system is hard,cut price here but raise price there its a no win situation for the retailer or the consumer,cutting off your nose in spite of your face kinda stuff

Shoegirl when was the last time you did a price comparission between all the retailers you mentioned?BWG are spar and also centra,londis(musgraves),costcutters(barry's),day today are all the same so enough said there not in the same league as the larger retailers,Tesco and Dunnes and Supervalu are almost par on par with similar items with Superquinn been the more expensive that them on all prices.

It was said time and time again for the government to reduce Vat on gorceries and help cut overheads such as electricity and phone and insurance etc, they help everyone else(ESB,An Post,Eircom,local council) except the retailers but the people look at the retailers as the problem not whats behind the high prices

I know tesco posted 2 billion sterling profit for last year but onlu €150m was made in ireland and their sterling prices are much cheaper due to the tax set up they have

byte

I think "only" €150,000,000 profit for one year operating in Ireland is damn good considering their number of stores in a small country!

gerrycollins

sorry apoligies should have said that that profit was an estimate as they didnt release figures for ireland seperately
look at it this way
most tesco stores are large,city center,large car parks so with this in mind they are the perfect location for the "family shop",then of course they have their marketing gimmicks and store layouts and range of good clothes,non food and groceries,your one stop shop (kinda)

they have 79 stores and counting so on average each store makes in pure profit €36000 a week,granted some stores will differ cause of size etc but when you consider the average Tesco takes in over €600k in sales a week its not a great margin(6%),think of future investment,pay rises,store development,

im not defending Tesco here or anyone else here just putting a different view on it,im a consumer like the rest of the country and would love to see lower groceries prices(and petrol) but i know its not as simple as cutting prices,

Would you take a pay cut?

Then why should these guys cut their margins?

Ps this is the first year in the last 3 that there has been a price increase on general grocery items due to competition,keeping prices as low as possible and tough deals but many companies cannot keep it up and are forced to increase their prices which the retailers pass on to us,the publicans do it and hitch a lift with their own price rise but i dont hear too many complain about it or doin anything about it

Tazz T

gerrycollins wrote:

Would you take a pay cut?

It's not a pay cut - this is profit after they pay wages.

Incidently, there was a article in the Times yesterday that said that prices (mainly butter and eggs) had actually increased since the grocery order came into effect.

gerrycollins

the times article was interesting alright but as i said many of the companies could not sustain keeping prices down so they had to up their prices the first in 3 years for some companies

Apoligies again Tesco's profit is pre tax(dunno what company tax rate is in the UK) and pre share dividends etc

The analogy of us taking a pay cut is to represent the fact that we all earn a wage to live and save a few quid every week/month (well i hope so the way the economy is going) so in essence your savings for holiday or pension etc is your profit at the end of the year so if we just take a pay cut which does not allow us to save and only just live why should the companies give up their profit??I accecpt that some profit is excessive eg. Wal Mart som $200 Billion last year

how many people here who own a company, whatever kind, would cut their end of year profit to satisfy their customers??dont see plumbers doin it,or electricans or software developers well?

Overall im just saying there is more that can be done to cut prices of everyday grocery items other than retailers taking a cut in profit,

Tazz T

True.

But like so many things in Ireland, it all comes down to competition.

Tesco will keep their profit high if no one challenges them. They had cut prices (especially in veg/fruit) when the Aldi/Lidl pairing started cutting into their profits. That's all settled down now. Tesco seem to have changed their marketing strategy as they know there are areas in which they can't compete with the german duo. I expect we will see some bargains at certain time of year. For example, now that BBQ season is almost upon us expect to see below-cost selling of cases of beer in order to get customers to come in a buy their meat and other BBQ items from Tesco.

But I wouldn't expect any further cuts unless another price war is stimulated by someone like Sainsburys entering the Irish market - highly unlikely.

Re the pay cut analogy would profit be more likened to a bonus rather than wages. Since bonuses are generally dependent on profit.

MrPudding

Tazz T wrote:

For example, now that BBQ season is almost upon us expect to see below-cost selling of cases of beer in order to get customers to come in a buy their meat and other BBQ items from Tesco.

Was beer covered by the groceries order? My understanding is that out of the tens of thousands of line they carry only a couple of dozen items were covered. My understanding is that it was esential items. While I think beer is pretty important I am not sure it was covered.

MrP

gerrycollins

Tazz T wrote:

True.

But like so many things in Ireland, it all comes down to competition.

Tesco will keep their profit high if no one challenges them. They had cut prices (especially in veg/fruit) when the Aldi/Lidl pairing started cutting into their profits. That's all settled down now. Tesco seem to have changed their marketing strategy as they know there are areas in which they can't compete with the german duo. I expect we will see some bargains at certain time of year. For example, now that BBQ season is almost upon us expect to see below-cost selling of cases of beer in order to get customers to come in a buy their meat and other BBQ items from Tesco.

But I wouldn't expect any further cuts unless another price war is stimulated by someone like Sainsburys entering the Irish market - highly unlikely.

Re the pay cut analogy would profit be more likened to a bonus rather than wages. Since bonuses are generally dependent on profit.

i think prices would be very high today only for the discounters but tesco and their like are noticing that people are only going to them for the basics then comming to tesco for the rest so tesoc will provide them with everything that the discounters have but of course the better quaility product which is more expensive is right beside it

gerrycollins

MrPudding wrote:

Was beer covered by the groceries order? My understanding is that out of the tens of thousands of line they carry only a couple of dozen items were covered. My understanding is that it was esential items. While I think beer is pretty important I am not sure it was covered.

MrP

the only items excluded from the order was frozen food and breads and fresh foods everything else came under the remit of the act,Dunnes tried to argue this point on nappies as they did not come under "everyday comidities" as not everyone needs them but the court ruled on the side of the act

Beer will never sell at below cost due to the irresponsible behaviour of a few people with drink and the curse of been branded the retailer who supports irresponsible drinking considering how much beer companies are advertising "drink X responsably"

Another point of the act is the "below cost" aspect, the best we can see is lowered prices due to retailer delas where the retailer buys 10 get 1 free from the supplier thus allowing them to retail the item at a lesser price than they would normally but for most the only products that do this are the crappy low selling lesser quaility products,will you see coke doin deals like this?i dont think so!! so dont expect the price of coke to go down pretty soon but some crappy cola more than likely will. ( im only using coke as an example)

Tazz T

Wasn't Tesco reprimanded last Xmas for selling beer and spirits at or below cost?

failsafe

A large part of the abolition of the groceries order is so that supermarkets can loss lead on "hook" items.

For example, Tesco decide to sell nappies at less than cost price, and advertise this discounted price heavily. Then all mothers decide to go to tesco to avail of this offer. Tesco loose €1 on every bag of nappies, but make €150 per trolley load of shopping that these mothers do.

I remember it being explained in simple terms in school. You're walking down the street and you have one pound in your pocket and want to buy some sweets. There's 3 shops to choose from (Murphy's, Mooney's and Centra). You see that one shop (Centra) has cans of coke for only 50p, and you know that they cost 60p everywhere else so you go spend your pound on sweets and coke there.

This doesn't mean that all sweets were cheaper in centra (which is what people expected from Dunnes, Tesco etc) and it doesn't necessarily mean you even bought a can of coke, just that it was a really low price for something that you were fimiliar with (the "hook item") In this example Murphy's and Mooney's didn't have the economies of scale that Centra do and so couldn't compete fairly, and hence the Groceries act was established.

gerrycollins

Tazz T wrote:

Wasn't Tesco reprimanded last Xmas for selling beer and spirits at or below cost?

i cant remeber about that but i know Dunnes were done for selling nappies well below cost and in court Dunnes stated that because nappies were not an everyday household commidity they were not covered by the order

Sizzler

Nevermind nappies why arent prices coming down on everything else?

Wheres Eddie Hobbs now eh???

gerrycollins

Sizzler wrote:

Nevermind nappies why arent prices coming down on everything else?

Wheres Eddie Hobbs now eh???

exactly it will take more than the changing of the groceries order to reduce prices

shoegirl

gerrycollins wrote:

Shoegirl when was the last time you did a price comparission between all the retailers you mentioned?BWG are spar and also centra,londis(musgraves),costcutters(barry's),day today are all the same so enough said there not in the same league as the larger retailers,Tesco and Dunnes and Supervalu are almost par on par with similar items with Superquinn been the more expensive that them on all prices.

As a matter of fact almost every time I enter a shop. This is exactly the point I was trying to make - basically 4-5 wholesalers (if you consider Dunnes/Tesco etc to be a wholesale and retail business combined) control practically the entire wholesale market. So effectively the wholesalers control the prices at both wholesale and retail levels. This emerged after the Groceries Order. I come from a wholesale background and remember the days when there were independent reps all over the country selling from maybe a batch of different suppliers to mostly independent shops. These fell like skittles - mostly in the early 90s.

This happened at the same time as the gradual franchisement of the retail trade - and in some cases aquisition. I think that a combination of factors - none of them related to the Groceries Order, changed things. A lot of the smaller wholesalers were put out of business by a shift to direct selling by some of the manufactureres, and in some cases by the fall of the manufacturers themselves (how many of them mysteriously "burned down" in the late 80s?) Also some of the (then) smaller chains adopted policies that made it tough for independent wholesalers - I remember my Dad used to do a lot of business with some shops who eventually dropped him because they were only allowed spend 25% of their total wholesale buy outside of their central ordering system - thus tying them into whatever prices were set centrally.

I think in Dublin a lot of the older shops were knocked or sold off to new owners who opened franchises as a less risky option.

Yet the irony is that some of the shops that did stay independent (in Dublin anyway) remain this day as some of the best (though not cheap) grocers in Ireland - Mortons of Ranelagh, Donnybrook Fair etc. :rolleyes:
And probably the cheapest supermarket in Dublin remains one of the few independents - JC's in Swords (which manages to survive despite the competition of both Dunnes and Superquinn being nearby).

shoegirl

gerrycollins wrote:

Another point of the act is the "below cost" aspect, the best we can see is lowered prices due to retailer delas where the retailer buys 10 get 1 free from the supplier thus allowing them to retail the item at a lesser price than they would normally but for most the only products that do this are the crappy low selling lesser quaility products,will you see coke doin deals like this?i dont think so!! so dont expect the price of coke to go down pretty soon but some crappy cola more than likely will. ( im only using coke as an example)

But if the wholesaler and the retailer are the same company, what incentive is there to cut margins?

gerrycollins

shoegirl wrote:

But if the wholesaler and the retailer are the same company, what incentive is there to cut margins?

there is no incentive to cut margins,as i said before would you take a pay cut just to live on the bread line and not have any holidays or savings etc
the only way that wholesales/retailers are going to get lower prices is to use their buying power to force to supplier to reduce their cost price,the reason IMO this has not happened yet is that the retailers are happy with the price until someone gets a good deal then the ball starts rolling and the rest start asking for the same cost price,but at the moment there is no pressure on the supplier to cut the cost price,even though I know many suppliers are at rock bottom cost price at the moment (there is a real threat to jobs at the moment in a few companies)

Now the knock on of this is and I use coke as an example because its a good one on this topic

when was the last time you got a bottle of coke from your local takeaway or chinesse and the bottle looked a bit odd and not like what you got in Spar today with your lunch,stubbier but the same content?

Well this is called the grey market,product bought outside the country by a retailer to force the supplier of the same product here in ireland to cut their prices or charges, Basically your hitting the supplier where it hurt,in their pockets but again the long term of this is job cuts and the like so retailers dont like doin it too much but smaller shops and wholesales do it to cut their costs but at a loss to the irish market and a gain to their pockets

gerrycollins

shoegirl wrote:

As a matter of fact almost every time I enter a shop. This is exactly the point I was trying to make - basically 4-5 wholesalers (if you consider Dunnes/Tesco etc to be a wholesale and retail business combined) control practically the entire wholesale market. So effectively the wholesalers control the prices at both wholesale and retail levels. This emerged after the Groceries Order. I come from a wholesale background and remember the days when there were independent reps all over the country selling from maybe a batch of different suppliers to mostly independent shops. These fell like skittles - mostly in the early 90s.

This happened at the same time as the gradual franchisement of the retail trade - and in some cases aquisition. I think that a combination of factors - none of them related to the Groceries Order, changed things. A lot of the smaller wholesalers were put out of business by a shift to direct selling by some of the manufactureres, and in some cases by the fall of the manufacturers themselves (how many of them mysteriously "burned down" in the late 80s?) Also some of the (then) smaller chains adopted policies that made it tough for independent wholesalers - I remember my Dad used to do a lot of business with some shops who eventually dropped him because they were only allowed spend 25% of their total wholesale buy outside of their central ordering system - thus tying them into whatever prices were set centrally.

I think in Dublin a lot of the older shops were knocked or sold off to new owners who opened franchises as a less risky option.

Yet the irony is that some of the shops that did stay independent (in Dublin anyway) remain this day as some of the best (though not cheap) grocers in Ireland - Mortons of Ranelagh, Donnybrook Fair etc. :rolleyes:
And probably the cheapest supermarket in Dublin remains one of the few independents - JC's in Swords (which manages to survive despite the competition of both Dunnes and Superquinn being nearby).

the cost of running a shop is very high so the oppertunity of a wholesaler to take care of the buying and marketing etc with a small fee was welcome by many independant shops,
with the wholesales in the rep was gone as most deals were done at the board room table not the shop floor

To have total control over the market a retailer must have over 35% share of the market and no retailer in ireland has that,this is according to the competition law currently in place,

its fair to say that they have "control" to the pricing at all levels but after 4-5 wholesalers/retailers there really is no one else so I cannot see how the 4-5 can control the whole market, they are the whole market,its the suppliers and the VAT that increases prices

The independant rep is long gone they added to the price of the product,sure havent we nearly closed down a few travel agents witht the advent of using the net for booking our hols,we just eliminate the middle man costs too much.Nowadays its a man who comes in and places a repeat order with the shopkeeper and advertises a few new lines with the retailer ther is no selling involved

Central billing systems make for easy living for retailers because it cuts out the paper work cuts down on man hours so overall the whole operation saves money,what would the prices of items be today if central systems were never set up?

you said it yourself the best independants whom you named are not the cheapest,what do you want value for money or a nice shop.JC IMHO(i stand corrected with proof) gets a lot of its stuff on the grey market thats why it can sell so cheap (why should one shop get such good deals and not the rest fo them??)but if all retailers did that the country would go to ruin as we would be importing almost everything

shoegirl

gerrycollins wrote:

JC IMHO(i stand corrected with proof) gets a lot of its stuff on the grey market thats why it can sell so cheap (why should one shop get such good deals and not the rest fo them??)but if all retailers did that the country would go to ruin as we would be importing almost everything

I'm not sure that JC buys on the "grey" market. He uses an awful lot of the few remaining middlemen rather than just relying on central billing and scours the market for good deals. Not only that, but he is regarded with huge gratitude by local farmers and small wholesalers for keeping them in business - and bizarrely, even runs his own farm somewhere in the northwest (he used to show videos of himself on his own farm!) The man is something of an enigma in business terms. One of the last true independents.

Interestingly enough, Charlie Treacy, who used to own a few shops in north Dublin (unsurprisingly formerally called C&T) also did the same thing for many years - scouring for good deals, building up relationships with small suppliers who would treat him with kid gloves as one of their bigger customers, rather than simply becoming a little customer to a conglomerate. He seems to have retired though, as the shops are now part of a franchise. There was also a shop on Fairview Strand about 6 years ago seemed pretty similar - very cheap, a lot of brands you wouldn't normally have heard of. Again the last of the few little wholesalers and smalltime brands. I still think the end of this niche has only helped to add to growing cost of a basket of goods.