|Supermarkets' Super-marked-up Prices|
|Subject||Equilibrium and contrast with competition|
|Key Words||Prices, Profit Margins, Sales, Monopoly, Advertising, Predatory Pricing|
Supermarkets in the UK are being criticized by farmers who see livestock prices plummeting while retail prices are falling only slightly. Supermarket prices are much higher in Britain than in the US or in Europe. Profit margins are about three times greater than in France, Germany, Italy and Spain.
As supermarkets have spread, they have squeezed out smaller stores: one consumer noted a reduction from 15 to 4 stores in her locality. The main four supermarkets have 60 to 70 percent of supermarket sales. A government report views supermarkets as islands of monopoly. They rarely establish stores close to competitors. Their size gives them buying power; they can afford costly advertising and can outbid smaller competitors for new sites; and they can produce own-brand, lower-priced, versions of foodstuffs. Bakers complain that their loss leader strategy results in predatory pricing below cost.
Nevertheless, consumers pay what is asked. They like the convenience of one-stop shopping.(Updated November 11, 1998)
|Source||Stephen Bevan and David Smith, "A Raw Deal", Sunday Times, September 27, 1998.|
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