Woollies was for the big Saturday morning shop.
The suburban shop was a little more expensive, but it was open late, and it was good for getting everyday things, like bread and milk and anything you forgot on Saturday morning.
Then two big changes happened.
First, the big chain stores were allowed to open whenever they wanted. Secondly food technology changed. Bigger refrigeration in the store and in the home meant you did not need bread or milk everyday. You could freeze bread and milk lasted longer.
The changes led to more changes. The chain stores started to sell fresh vegies. The chain stores like Woollies, Coles and Franklins could use their superior purchasing power to deal directly with the producers to lower costs and pass the savings on to consumers. They got even bigger with more market share. This in turn led to greater economies of scale. They could rent sites more cheaply; they could build more cheaply; they could raise capital from banks more cheaply; they could buy in bulk more cheaply; they could train their staff more cheaply.
And because there were several chain supermarkets they competed furiously with each other for market share.
And, also in the 1990s, there was another dramatic change. Along came the Mums and Dads shareholders. Remember when Woollies floated with advertisements from that quintessential appealed to the mass undiscerning taste, Ray Martin (check it was not Bert). The Mums and Dads flocked to it. Similarly with Coles-Meyer. The results is that more than half a million Australians have part ownership of the chain store they do their weekly grocery shopping in.
The little guys got squeezed. They screamed blue murder. They chanted the mantra of small business and hoped that champion of small business, the Howard Government, would come to their rescue. It did, to a small degree. Leading the charge was Senator Ron Boswell, of Queensland. A joint parliamentary committee was set up, largely due to his hard work.
And then the facts, as outlined above, got in the way of a good story.
The big, bad chain supermarkets were not all big and bad and the delightful corner store was not all it was cracked up to be.
The committee brought its finding down on Monday. It is a smashingly good report. For a start, committee members listened to the arguments put before them. Boswell, to his credit, changed or at least developed his view. A cynic might say that the MPs realised that there were more votes in shareholders of Woollies and Coles than there were in a few disgruntled small shop owners. It was been a juicy argument. It was not one of consumers vs capitalists but rather small business vs big business. And on this (perhaps isolated) occasion, the consumers have been solidly in favour of big business. For a start they have voted with their shopping trolleys. The chains have gone from 40 per cent of market share in 1980 to 80 per cent of market share now.
This is because the chain supermarkets, once unshackled from restrictive shopping-hours legislation, have responded to what consumers want and, more importantly, responded to changes in demand. Indeed, the actions of the chain supermarkets are a neat reflection of changes in society as a whole. The cry for political (read restrictive, legislative, regulatory) action has come from small business not come from consumers. Consumers are revelling in the one-stop shop for all groceries at all hours.
And this is not the ironic slogan of the television series Open All Hours in which Ronnie Barker as Arkwright is seen waddling out to bring in the NOW OPEN sign as the credits for OPEN ALL HOURS goes up. The chain supermarkets are now literally open all hours, 24 hours a days 365 days a year.
The chains, however, have not been all milk and honey. They have, according to the report, acted in a predatory way in swallowing up the independent grocers. The independents have often been faced with grim choice: sell to the chains, walk away or go bankrupt.
On one argument, this situation has only arisen because governments have foolishly deregulated shopping hours so the big, bad chains can stay open longer and attract more customers.
But the other, sounder argument, is that governments should never have regulated shopping hours in the first place. The regulations gave small shop-keepers a market they could not sustain without government intervention.
Consumers know when they are better off and vote with their wallets. Consumers are not the least bit worried about the demise of the small, independent grocer. The small independent grocer can only blame government for giving a false environment in the first place. Government should regulate only for health and safety not for economic viability; consumers do that.
There has been another satisfying element about the changes in retailing. It has not, for a change, been a case of big multi-national companies swallowing up small Australian-owned businesses. On this (isolated) occasion, the big companies have been, by and large Australian. Woollies is 91 per cent Australian owned, most small shareholders. Coles-Meyer has 320,000 shareholders, overwhelmingly Australian.
(Incidentally, these big shareholder numbers have only been possible because of computerisation. Such a share register would have been impossible before 1985.)
Woollies hires 110,000 Australians and Coles 150,000.
Franklins, on the other hand is owned by a Hong Kong group.
But I won’t wax too lyrically. The chains have engaged in predatory conduct, according to the committee.
It has taken several forms. Predatory pricing has been the main difficulty. A chain would typically price its goods so low in a certain areas that the small grocer cannot compete and is forced out of business or forced to sell to the chain.
But overseas practices are worse. Wholesalers would supply only a favoured retailer, or force a certain quantity be purchased or require the retailer to stock an entire range.
Australia’s trade practices legislation prohibits this sort of conduct. Alas, it is all very well having legislation prohibiting something, but it is hopeless for the small retailer to take on a giant. Legal fees are prohibitive and the giants can spin things out.
The committee has seized upon this point. It has recommended that the Australian Competition and Consumer Commission be given the wherewithal to prosecute more cases of predator pricing and other anti-competitive conduct. That is the commission’s and government’s role: to ensure competition is fair and that monopolies do not develop.
The committee, quite rightly in my view, shrank from recommending divesting orders against the big three: Woollies, Coles and Franklins.
That would have: hurt many small Australian shareholders; jeopardised the career prospects of many Australian employees of the big three; and hurt consumers if stores were closed.
The committee, quite sensibly, urged eternal vigilance, especially to revisit the question in three years. Indeed, there is a solid argument that the fact the committee was sitting was enough to put the big three on their best behaviour.
The committee has gone for a self-regulation environment: a retailing ombudsman and code of conduct and an education program for small retailers.
At present, though, the big three are competing. It means the benefits of vertical monopolies and economies of scale are being passed to consumers — big buying power from producers, EFTPOS, bar-codes and so on. But those economies of scale and vertical monopolies (controlling supply from the paddock to the shelf) can also reduce competition in the long run
In the short-term, though, consumers have not complained and are being fairly well-served. The lesson from the retail experience is that government regulation in economic matters is doomed. The regulation of shopping hours has caused a lot of grief for small shop-owners, because ultimately consumers, who are also voters, wanted one-stop, catch-all shops that opened all hours. That demand arose out of changes in society with more women working and longer working weeks.
On the social side, however, the local grocer may become a thing of the past. Few shoppers personally know the check-out person of shelf-supervisor at Woollies in the way they would personally know their corner-store owner. That said, consumers are putting convenience and price ahead of the personal touch. The latter should not be artificially propped up if consumers do not want it.
The role for government is health, safety and to ensure an environment of health competition. That means prosecuting anti-competitive behaviour. Regulation of the trading hours of big chains will not help small retailers, but they should be given protection against anti-competitive predatory conduct.