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UK: Corner shops face closure 'within a decade', MPs warn

by Saeed ShahIndependent UK
January 2nd, 2006

An influential group of MPs will warn in a forthcoming report that independent retailers and wholesalers will disappear within a decade, piling pressure on government and competition authorities to curb the power of the big four supermarkets.

The report by the All Party Parliamentary Small Shops Group will highlight instances of manipulation of the planning system, predatory pricing and the unfair treatment of suppliers.

Separately, the Office of Fair Trading is already considering whether to refer the supermarket sector to the Competition Commission for a full scale investigation.

Jim Dowd, chairman of the MPs' group, said that his inquiry had found widespread evidence of supermarkets selling products at below cost. Retailing of food, and increasingly non-food items, is dominated by Tesco, Sainsbury, Asda and Morrison. Mr Dowd, the MP for Lewisham West, said: "People go freely to shop at supermarkets because they provide good prices, but is that sustainable over the long term? Our report looks at trends and asks where consumers' long term interests lie."

The MPs heard of one instance in which the market leader Tesco offered a 40 per cent discount to customers in an area of Yorkshire where it was competing with a Proudfoot, a small local independent chain. Mr Dowd claimed the discounting had been a short-term measure aimed at damaging Proudfoot.

The parliamentary group found that, with independent stores closing at a rate of 2,000 a year, their wholesalers - such as Booker - will not be viable by 2015, killing off the remaining small shops. This could lead large parts of Britain without any easy access to grocery stores. Mr Dowd said: "Small stores do not have a divine right to exist, but in a number of areas their disadvantage to big operators is completely disproportionate."

MPs were told that Tesco was able to get products for 10 to 12 per cent less from suppliers, even if independent chains ordered in similar volumes.

Tesco, which takes 1 in every 7 spent in British stores, entered the convenience retailing sector five years ago.

John Church, a Tesco spokesman, admitted that it had provided an "over-generous" promotion in the Proudfoot case. He also conceded that the company had built a store of a larger size than its planning permission allowed in Stockport. But he described these examples as "one-offs". Mr Church said: "Ultimately, it will be the consumer who will decide the shape of the high street in the future. Our market share is no protection. Just over 10 years ago, Sainsbury was the market leader."

James Lowman, a spokesman for the Association of Convenience Stores, said that suppliers should be forced to make their products available at the same price to all retailers prepared to buy at the same volumes. "We'd like to see the Government take more responsibility for what happens in this industry," Mr Lowman said.





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