In a time when money is tight, people are spending less and less on all their essential bills, including food. This might have started with people switching from expensive brands to a supermarket’s own labels, but now saving money is driving us to compare supermarkets in the way we compare utilities companies. Of course, we’ve always been open to bargains and aware of the fact that shopping somewhere else might save us money, but now switching supermarkets has become a vital tool in helping most shoppers save money.
This means supermarkets are having to up their game, trying to lure us in with even bigger and better offers – buy one, get two free, for example – and trying to keep our custom with offers that require repeated visits, such as money off a week’s shopping when you collect so many till receipt vouchers. Supermarkets are so desperate for our custom that they will even sell us products at the prices set by another chain in order to avoid us going there to get our items cheaper. This may seem like a great service, but once examined closely it begins to look more than a little like a retail trick that is actually illegal. So, is brand matching just price fixing by another name?
Price fixing is a practice that can be employed in a variety of scenarios for the benefit of companies or individuals. In the case of supermarkets, it involves two or more companies agreeing to sell certain products or ranges of products at the same price. This means that the consumer does not benefit from prices being forced lower and lower by competition, and therefore means they have to pay the, usually high, price for those goods as the only places they can purchase them are selling them at the same price.
How is brand matching similar? Take the following example. Supermarket X is selling a branded chocolate bar for £1.50, and supermarket Y is selling it for £1.75. Supermarket Y offers to sell it for £1.50 also if consumers notice that the price is similar elsewhere. No matter where they go, the customer has to pay £1.50 for the chocolate bar. Supermarket Y is no longer trying to win our custom by offering us cheaper goods than supermarket X, they are simply matching prices. There is no need for Supermarket Y to offer us cheaper than supermarket X as the only other place we could buy the chocolate bar sells it for the same price. What is the incentive for us as a customer to go to supermarket X, when prices are the same? This works in reverse too.
Supermarkets used to attract customers by offering prices that were lower than competitors. Supermarket X would offer the chocolate bar at £1.50, so supermarket Y would sell it for £1.43. Supermarket X would have to respond by lowering their price, meaning that customers are able to benefit from healthy competition between the supermarkets. If both supermarkets are simply matching each other’s prices, there is no competition. The price of the chocolate bar has been fixed at £1.50.
This may not seem like a bad thing. One company is lowering their price, after all, in order to give us a better offer. In principle this is a good thing, unless the lowest price was expensive to begin with. Supermarkets are constantly battling for our custom. Price is always going to be the main focus of the consumer, so the lowest prices are going to be the biggest influencing factor in our decisions concerning where to shop. But if supermarkets all synchronise their prices, there is nothing to stop them raising them in unison. With nowhere else to go, we are stuck in the middle, paying unfair prices.
Why isn’t the government doing something about this? The problem is, two companies selling a product at the same price is not price fixing. It can only be considered price fixing if it is proved that the two companies colluded to sell the product at a specific price. In the case of brand matching, that isn’t happening, as one company is trying to steal customers from the other by selling goods at their prices.
Supermarkets would argue that they are competing to offer customers the best prices. However, from a customer’s point of view, surely the best prices are those that are cheaper, not the same as, those on offer from another supermarket?
|Written by :||Follow @marktscott
|Mark is the Marketing Director at CompareandSave.com, having previously worked at a number of media agencies on various financial brands.
He now splits his time between promoting CompareandSave and investigating new ways to help our readers save money.
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