Corner shop crisis-(24.03.06)

Another year and another supermarket investigation. The OFT seemed very reluctant only two months ago to investigate supermarket take overs of local shops. However, a little political pressure appears to have been applied and another investigation is underway.

Although it is easy to understand the political pressure dimension, it is harder to argue that corner shops should be protected on competition policy grounds. Although some local monopolies may emerge, it is hard to argue that corner shops weren't closing anyway before the supermarkets started to downsize as the planning regime made it harder to open large stores (with the irony being that this was partly inspired by attempting to protect corner shops).

The most likely explanation for corner shops struggling is not because of unfair competition from supermarkets, but because of competition. Consumers are benefitting from lower prices and better quality from the standardised offering of the metro style supermarket that they had already rejected from corner shops by deserting them for the large supermarket. These are benefits of competition, not issues for a competition authority (although unfair terms and pressure on suppliers is another issue).

Local shops can survive and thrive by offering consumers distinctive quality and value, with the plethora of farm shops that are springing up in most areas an example of how to be successful. Although competition authorities should keep an eye on market developments in this area, there would not appear to be a practical action they could take that would not have negative imapcts on consumers.