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Cheap bread, cheap prints and cheapskates

Criticisms of the latest move from Woolworths to drop the price of bread to 85 cents have some resonance with the photo retailing channel if ’85 cent bread’ is replaced by ‘8 cent prints’, and ‘independent supermarkets’ replaced by ‘photo specialists’, and ‘Coles and Woolies’ by ‘Big W and Harvey Norman’.

CheapbreadIndependent senator Nick Xenophon, perhaps the only member of Federal Parliament who demonstrates some understanding of the realities of the retailing sector, had this to say: ‘Woolworths’ latest discounting gimmick of 85 cent loaves of bread might seem appealing to consumers, but in the long run it will cripple independent supermarkets who can’t access bread at that price from suppliers.

‘When independents are pushed out of business that hurts competition and consumers too. Whether it’s milk, petrol or bread, (or paper and chemistry, KS) why shouldn’t the competitors of Coles and Woolworths be able to access prices from suppliers at the same cost as the big two? Prohibiting this sort of price discrimination will level the playing field once and for all.’

Xenophon is calling for the re-introduction of a section of the Trade Practices Act preventing suppliers from offering large and small customers dramatically differentiated prices.

Morgan Ranieri, founder of independent grocery store delivery business, commented to small business website SmartCompany on how below-cost discounts impact consumer thinking:

‘The fact that consumers believe milk is now worth $1 per litre and a loaf of bread is going to be worth 85 cents’ (and photographic prints no more than about 10 cents, KS) ‘means that the industries surrounding these products get decimated.

‘The bigwigs at Coles and Woolies know the impact this pricing decision will have on small bakeries around the country. They won’t survive. And when the local bakeries are closed, they’re certainly not going to keep selling bread for 85 cents,’ he said.

‘For consumers, cheap bread is a short-term gain, but it will hurt us all in the long run if we let the big players use pricing strategies that aim to cripple competition.’

COMMENT: – And if anyone needs proof of the damage caused by below-cost discounting by large competitors, they need only survey what’s happened to photo retailing in the past five years or so. Let’s be honest – hundreds of independent stores have shut their doors in response to the predatory moves by Big W and Harvey Norman.

But the damage has now largely been done, and stronger retailers (with no disrespect to the casualties) are still standing. The photo specialist channel has moved on, with surviving players having developed niches to make their businesses work in spite of unfair price competition. 

In fact, it could be argued that the bargain-hunting consumers who save up their digital images and place an order for 100s of 8 cents prints every six or 12 months are better off out of your store and with Harveys – that kind of relationship doesn’t represent an opportunity for photo specialists. This was the sector of the market which every 12 months or so sent off two, or three, or half-a-dozen rolls of film to Rob Tolmie for $5.99 processing and cheap replacement film.  

Could we be approaching a ‘post-decimation’ era in which photo retailers don’t even bother offering 6x4s as a stand-alone product any more: ‘If you’re just looking for cheap prints, Big W up the road will do them for you for 10 cents each – but have you considered a photo book – it works out at a cheaper price per image and they look great?’ Or, ‘Sure we can do your 6x4s for 8 cents, but only in a package deal with an enlargement order – we’d love to show you what your favourite pictures look like printed large and put in a frame.’ 

– It would be a gutsy move, but it just might work in a business sense.
– Keith Shipton

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