Supporting the local merchant or little guy

A few years ago the town that is my main shopping centre went though a great deal of angst and commotion. Woolworths were coming to town! At that stage the town and surrounds was serviced by two smallish supermarkets that were/are affiliated with various smaller chains like IGA and a range of smaller shops that included two butchers, a greengrocer (briefly) etc. Woolies lodged a development application and then it was on for young and old with various pressure groups trying to ensure that the DA did or did not proceed. One key datum is that both supermarkets were owned by the same family, along with the local general store some 8km out of town. This matter got quite heated but I will try to summarise without too much colour.

For

  • We are being held to ransom by the blank family who ensure that there is no real competition. We need Woolies to break the monopoly. There was some evidence of this, a friend did his own standard basket survey of the locals and 3 or 4 supermarkets in nearby towns for years. On his data we were paying about 15-20% above par.
  • More variety would be good.
  • I like XYZ and the locals don’t have it and I have to drive to elsewhere to get it.
  • We really need fresh produce. The fruit and veg at the existing two was terrible, consistently worse than any supermarket I have seen.

Against

  • We should buy local and not enrich a big chain.
  • The blank family actually organised their staff to do street protests telling them they would all lose their jobs.
  • Local small business will not be able to compete.
  • W will undercut the locals until they go out of business and then jack up their prices sky high.
  • It will ruin the main street (the W site is about 500m from the middle of the main drag but the two existing were in it) as people now walk about and buy various things, if they go to W they will not get other things in town. Social life will be ruined.
  • We locals ought to stick together. (A local is a person who can show that all three of their grandparents were born in the valley)

So before we get to the outcome what do you think should have happened? What do you think did happen?
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What happened

  • The DA was approved and the supermarket opened.
  • Prices, variety and produce quality are all better than before, though I wouldn’t say the produce is now great there was much room for improvement and it is better.
  • The main drag did not die, both butchers are still there as is one supermarket and all the rest. The greengrocer folded for many reasons not to do with the coming of W.
  • W did undercut the local two. One went out of business the other changed hands and continues to compete. After prices went down they did not jump up again and now are similar to those in other towns.
  • The one that shut now has other tenants selling other goods and employing other people.
  • Many of the people put out of work in the one that shut got jobs in W or elsewhere.
  • The sky did not fall.

It would not be hard to predict the DA would be approved. Did you predict the outcome of the revolution that followed? Do you think it appropriate?

Where now?
There is till some grumbling especially from the blank family and their friends. Those who wanted to keep it local and who rail against big chains are not happy, some admit W isn’t so bad, some shop there but don’t like to admit it. I think most people will tell you it is better. I think it is noticeably better. In many respects I do support local merchants as most do not inflate prices and do provide better service. And its kind of nice knowing the people you deal with and having a chat :cowboy_hat_face: Competition does seem to have done the job in this case.

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An interesting scenario. The principle of supporting the local business is sound. Providing you get the service and product you need. This applies in our experience whether you are in a really small community or larger regional city.

However it may not always be that simple.

There are plenty of examples in our experience as for your example of the family blank business. We lived in a small town in Central Qld for a period, one only servo, and the next town 80km away in the wrong direction, or 130km in the right direction (way out of town). Sometimes you have no choice.

We also have examples of local business owners who would go the extra mile to give great service. We would accept a small premium given the tyrany of transport distance and convenience. And understand that was the price to keep the business in town. Many smaller rural locations do not have high turn over like a city. And a small volume retailer will not necessarily get the best wholesale prices.

You can only assume bigger companies like W only come to regional locations that are large enough to have the turn over. One thing they don’t usually offer is great service.

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I like the principle and do my best to support locals, but have found at least a few of our local businesses neither prize customers nor worry about how they operate UNTIL their territory is invaded by ‘someone else’ be it a big player or a regional chain with a few shops. Some have raised their games but at least one is probably wondering why they do not have as much business as they used to.

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We also try and support independent local providers, over big business. But as @PhilT has indicated, such support sometimes is not reciprocated.

One also has to remember that IGA is not an independent local business, but part of a larger Metcash, with some stores run as franchises. It is the Australian branch of the international American-based Independent Grocers Association. In some respects, it is a multinational with local franchiese, and is just smaller than the other big supermarkets.

I also, if I have to, support Australian providers (e.g. Woolworths, Coles, IGA) over multinationals (Costco, Aldi).

While I disagree with Dick Smith on many issues, his views of impacts on food manufacturing in Australia I do agree with. Here it is:

http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A"committees%2Fcommsen%2F20b65902-d679-4e94-9fa5-da8171d93cf7%2F0001"

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That point was obscured during the debate, especially by the status quo faction who played heavily on the management of the existing supermarkets being local.

Other points that were obscured were to do with the supposed job loss if/when the existing 2 went out of business.

  1. Unless Woolies employs many less staff per ton (truck, box whatever) of goods sold you have to think closing some supermarkets and opening others makes no difference to the total staff employed. If W bring more variety and quality and that stops people shopping elsewhere there is an argument that they will actually employ more at the cost of other towns.

  2. There was the claim that W would bring in all their own staff form outside. There may have been some managers brought in but over time such positions will become open to locals with the relevant skills.

Xenophobia lives!

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I think this is the key point. We have a local butcher who added another shop not long ago - in a town of 28k people, 6 smaller IGA style supermarkets, Coles and Woolies - all open at least 0700 to 2100 and some more. His secret? there’s no secret - just amazing range of meats, fish and associated sometimes hard to get products, at competitive prices with amazing service every time, prepared to do whatever it takes to give you what you want. A couple of other butchers have gone out of business over the last 6 or so years - they weren’t ‘bad’ as such, just not as good …

There are other stores in town, not food related as such, that have also had competition arrive in recent years. Stores that have, in my view, fleeced the locals for years. Some no out of business, some doing it very tough - and you don’t hear too many locals feeling sorry for them.

I think it is possible to raise the game when the competition arrives - but its much easier if you’ve been playing your best game all along, because some people (me for example) having been fleeced for so long will simply go elsewhere regardless, once the option materialises …

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We have a butcher the same. It caters for the Asian (food) market and has scores of different cuts and meat products unavailable in other butchers/supermarkets…many that we prefer to eat due to its flavour rather than the standard chops, steaks and roasts.

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Well it has been the key factor in Australian politics for the last 20 years, and was an enormous contributor for the previous 200.

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It’s sort of built in or pre-programmed?
And has been part of the law of the jungle for long before the Picts and the Saxons and the Vikings.

When things are going well for everyone, it doesn’t matter too much who any of us are.

When things are not going well we look for security and support. Some of us take solace in also apportioning blame. We tend to retreat and seek out a tribe as a response. Others encourage us to join them. safety in numbers.

Retailers, small business, big banks, politicians and special interest groups all play around with this response. Mostly for financial benefit or influence, and sometimes much worse.

Not all of us think rationally all the time. Otherwise retailing would only need to advertise their name, address and shop hours, as seductive advertising would not work.

For a small shop/retailer being welcoming, inclusive, offering quality and great service will always win customers if they can fill their needs.
Does ‘shop where the locals shop’ fit this thinking? You don’t need to accept this snip as working on you to appreciate the intent.

No matter how hard Woolies and Coles try to say otherwise, most people we know just hate the whole supermarket experience. Most shoppers appear to be just too busy or worse could not bother to go elsewhere. And the reward points or feelings of cooking like a ‘master cook at a shearing shed’ tell you it was the right thing to do. Applies to small towns as well perhaps?

For retailers is encouraging us into their secure safe environment morally any better than throwing stones to make us feel the street is not safe?

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There is much in what you say. We see tribalism is many aspects of life and, as you say, our leaders have been known to play on it.

It is very nice go to a shop and to be welcomed by somebody who knows your name and actually cares if you get what you want. Sure there is rational self interest in this but that doesn’t mean it is false. It is possible to have commercial transactions where all parties get what they want and enjoy the experience. Certainly it is better all round than a perfunctory ‘have a nice day’ that wasn’t genuinely given or received.

One sad aspect of this case beyond playing on fear of change and of strangers for money was that some others, who would continue to pay more if the monopoly continued, fell for it. You can actually persuade people to do things against their own interest by pulling on the right strings.

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It sounds like you live in Maleny.

“One also has to remember that IGA is not an independent local business, but part of a larger Metcash, with some stores run as franchises. It is the Australian branch of the international American-based Independent Grocers Association. In some respects, it is a multinational with local franchiese, and is just smaller than the other big supermarkets.”

My understanding is that most of the IGA stores are independently owned and operated and that Metcash is a listed Australian public company.

Certainly, all the Supa IGA stores, IGA stores and My Friendly Grocer stores (Baby IGA stores) in Cairns are all independently owned and operated.

The two Supa IGA stores are owned and operated by the Piccone family who have traded in retail in the region for generations, and the current patriarch is so respected that our local council named a park in his honour, something normally only done after a person is deceased.

They are just as competitive as Coles and Woollies and one never has to play find the employee to ask about something. I have been in our local store on occasions when there has been more staff on the floor than customers in the store, and the checkout operators are very friendly.

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Yes it is the case, however, through licensing agreements for the use of the IGA name, the parent company receives significant royalty/license fee payments. See,

http://www.franchisebusiness.com.au/news/what-is-a-franchise-and-how-does-it-work

McDonalds, Coco Cola etc use similar models (while they may be a little more restrictive) and I am sure that one would not call a franchised’ McDonald resturant and Australian family owned business…likewise for Coco Cola produce under licence by Coca Cola Amatil.

On a positive, at least most IGA franchises are held by Australians so some of the stores profits are retained in Australia (Woolworths and Coles are the same as they are majority Australian owned). They also tend to employee more staff than say an equilivant sized Aldi store whose profits alll go overseas.

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I cannot find any reference to any IGA stores being franchisees.

Metcash’s own website states that all stores are independents.

https://www.metcash.com/about-us/

Likewise, I can find no article about Metcash being owned by any foreign entity other that your link to a totally flawed Wikipedia article which is flagged with “This article has multiple issues”.

Metcash’s website states that South African company, Metro Cash & Carry, from whom Metcash derived their current name, was a major shareholder up until 2000.

https://www.metcash.com/about-us/history/

An article on the Financial Review dated 10.08.2018 lists the top 20 shareholders of Metcash.

https://www.afr.com/research-tools/MTS/shareholders

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I just tried clicking on my link to the AFR article which leads to a subscriber message.

However, if you Google “Metcash top 20 shareholders”, which is how I found the article, you can view it.

As they say, there is more than one way to skin a cat.

It is not so different from a Harvey Norman franchise being an independent locally owned business. One does business with the franchise under the franchisees T&C, not with Harvey Norman. Even harveynorman.com.au is an independent!

If you read all the IGA materials about ‘what they are’ it has all the features of a franchise although not as rigid as others. The latter is a plus and minus as there are products IGA sells, but none of our area IGAs sell them. IGA go to great lengths to sell that they are small independents while avoiding the word ‘franchise’ even though their ‘membership’ pays Metcash for the look, feel, marketing, and bulk purchasing arrangements.

‘[IGA] offers a professional support network, backed by volume buying and negotiating power. Strong promotional and marketing programs give independent retailers a unified and competitive voice. This is in addition to behind the scenes support through dedicated retail consultants, IT, marketing, merchandising and, business planning and strategy.’

How is that not a franchise, except perhaps in name?

My conclusion, it Quacks like a franchise.

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Hi Fred,

You might need to look at this link from an expert in the business.
https://www.insideretail.com.au/news/video-easy-201309

I think it is their view the largest franchise in Oz is well known to all in the trade.

Edit note: The answer is in the link.

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I don’t live in any town. Identifying the town where this happened would be unkind and I ask that if anybody wants to exercise their detective skills to keep any conclusion to themself. I offer it as an anonymous case study.

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Malaney, nice town, plenty of parking in the Main Street.
Great coffee and cake stop.
ANZ bank has closed, Suncorp has left town.
Has a ban on any well known fast food outlets moving in, so if you travel with kids you might skip it. Only so us without kids get it all to ourselves.

Friendly people and good service every time, while there are great views of the Glass House Mountains and a brilliant walk at the Mary Cairncross Reserve. Just a few kms away, plus much else. Do you like cheese anyone?

(Disclaimer - I don’t live there either, so hopefully this info may be reliable)
p.s. There is also an IGA if you need one.

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One has to love marketing and PR companies. Some more marketing material from the US…

Why IGA?(pdf download)

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