• Nick

The big ugly - Sainsbury and Asda need to get smaller, not bigger

Once upon a time High Streets were thriving

When I was growing up my mum would occasionally take me shopping in the town in Kent near where we lived. It was a good place, with a market square, and a few intersecting streets with a wide variety of shops.

There was Gatefield Sounds - a music shop tucked down an alley full of delights. The staff would play stuff for you - and help you discover new bands.

same as it ever was

There was a super exciting video rental store that did both VHS and Betamax tapes. They had a vast selection of films, mostly Ninja adventures, or starring Chuck Norris, and very occasionally both. There was the Wimpy - where my mum would have a percolated coffee and once in a while we could get a Knickerbocker Glory. And there were a load of grocery stores - Fine Fare, and up the road, Safeway, where you could get all you want from a store and a little bit more.

There was abundant choice. There was tons of variety. Not a shop unit was empty. The place was thriving. No out of town big box retailers. No big supermarkets. The economy might have been in a mess. The bins might have gone uncollected every once in a while. The electricity might have conked out whenever the rain came down hard. But we had a town and it was alive. Life was good.

A few decades on and that kind of vibrant town is either a distant memory or as rare as hens teeth. For the exception that nearly proves the rule you could head to Ludlow, which was on its knees 15/20 years ago but now has a little hum to it and a healthy collection of independent shops in amongst the inevitable blandbrand invasion.

It's not just the internet

The internet has made a dent in the high street - especially amongst those everything-under-one-roof department stores that were (to my eyes) merely a physical precursor to Amazon.

But much more pernicious has been the relentless march of the massive (and yearning to be even bigger) retailer.

For a while now the holy grail of retail seems to be the achievement of infinite scale.

But there are - at last - signs that the tide is turning against "big". Hot on the heels of the EU competition folks nixing the Railbus idea, on the grounds that making monopolies is not really what the EU is all about, comes the very welcome rejection of the much mooted merger between Asda and Sainsbury that precisely nobody asked for.

Merging these two supermarkets would create something with 31% market share, which is technically a monopoly, and leave the UK supermarket sector dominated by a duo of Asda-inbury and Tesco.

Mike Coupe - the boss of Sainsbury known mostly for singing "we're in the money" when the tie up was first run up the flagpole - sounded extraordinarily affronted by this assault on his future earnings. He fulminated against the competition authorities having moved the goalposts, the shape of the ball. It was all SO unfair.

But it's hard to sympathise. Nobody asked for this merger. And it's very hard to see how anyone benefits from vesting even more power into a single player.

31% share. For a single entity. That's a lot of power. For producers - especially farmers - it tilts the balance of power further in the wrong direction. They won't have any pricing power, they won't have many alternative outlets for their product, they won't have a choice.

It is a monopsony. Which is really unfair. Unsurprisingly suppliers were very worried about it - 'a fate worse than a no deal Brexit'.

And consumers won't benefit either. There will be less choice, less competition.

"but food will be cheaper"

No it won't.

Food in the UK is already remarkably cheap. As a proportion of household income food is a fraction of what it used to be. Instead the Brits spend vastly more on housing.

What people actually need is cheaper housing, not cheaper food.

And to this end the proposed merger contributes nothing. Far from it - it actually makes matters worse. Of course it doesn't build any new housing. It takes jobs away instead of creating them. It removes competition and energy from UK high streets. It makes towns less attractive. It diminishes the livelihoods of its erstwhile workforce. It diminishes the livelihoods of producers. It makes us all poorer so that Mr Coupe can be in the money.

And now - thankfully - it's not going to happen.

Let's take the next step - make these businesses smaller

Monopolies are a very, very bad thing. We should not only be barring them (one cheer) but we should be going much further. We should be making these mega businesses smaller. Creating a set of smaller, more competitive, livelier, more innovative, less destructive businesses. Capping market share at a level much lower than the 25% (that constitutes a monopoly), encouraging regional players, shortening supply chains, giving producers more power and choice over where they send their product.

Big is ugly. Big is wrong for the times we live in. Time for the beautiful small.

#bigugly #goodgrowth #sainsburyasda

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