Marriage of convenience

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Once again the UK grocery sector has been referred to the Competition Commission, much to the open applause of the independent convenience stores. But should the consumer be smiling at this news?

We all have a tendency to root for the underdog – in this case the local corner store – and of course, there are those cherished delicacies we all appreciate from the small specialist shop, but ultimately, the customer is best served when competitive market forces are free to support the most efficient business processes.

In grocery retail this inevitably centres on the supply chain. Suppliers to the big grocery chains are now resigned to having their margins squeezed, however, the increasing selectivity of buyer relationships lends itself to greater cooperation and transparency. Fewer suppliers, but more business is the trade off.

The big grocers have also lead the way in introducing innovative supply chain practices, such as Factory Gate Pricing, Crossdocking, merge-in-transit, co-packing techniques, automated planning and replenishment processes, and no doubt inthe not too distant future, RFID tagging on individual items. How can the small corner shops hope to compete with such mastery of the supply chain?

Well, perhaps, all is not lost for the independent convenience stores. Scale and sophisticated supply chain techniques may be on their way with the prospective merger of Nisa-Today’s – the buying group set up for independent retailers – and Costcutter, which is a member of Nisa-Today’s buying group but also has its own franchise operation of around 1,400 stores. This move could well place the merged entity in an excellent position to take advantage of its scale and position in a consolidating convenience store sector and should, in the first instance, offer tremendous synergies with plenty of operational savings.

With such a marriage of convenience, who needs the Competition Commission.

Nick Allen, Editor

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