Strategy squared

While it may come as little surprise UK supermarkets look set to go under the microscope for reported tactics against thier suppliers. The UK’s sundaytimes reported in August 2007 that supermarket suppliers were suffering financially as a result of pricing practices and disengagement strategy.

A recent survey by Grant Thornton found that most suppliers believed that supermarkets weilded too much power and worryingly 83% stated that an increase in insolvency was likely and that pricing pressures from these large buying organizations was key.

While this is unsurprising, the stickier challenge is just what to do about it. Many small shops face increasing competition from major stores with local “cornershop” style outlets (Tesco’s Extra stores for example) this leaves the smaller local retailer unable to compete on price and on the slippery slope of losing customers.

One option is formal sanctions against the supermarkets, but it appears unlikely that a head of steam will be built up by the supplier community as to an extent they will be biting the hand that feeds them and many fear retaliatory moves.

While this battle rumbles on - what of the consumer. While the significant buying power of larger organizations helps lower price - the lack of diversity and “community” touch that local small shops bring is significant and as the supermarket landscape becomes homogenized by the large corporations expect some “voting with feet” from joe public.