Food supply in the COVID-19 crisis: Why we need to ensure small retailers stay open

supermarket

Local food retailers staying open longer can help reduce congestion and contagion.

In a time when social isolating is critical, reducing the number of shops and hours available to people to shop for essentials is dangerous. Fewer shops open means more crowds and more risk of infection, that’s why having small food retailers open locally and longer will reduce congestion and contamination.

‘John’ is 88 and lives 100 metres from the local shopping strip, which includes an independent small supermarket. They have sanitiser at the door and there’s a steady flow of people. If this store closes, the next closest is a 15-minute drive, and includes an underground crowded car park, a lift and long queues to the checkout in a national branded supermarket. A trip to the bigger shop is a longer and riskier ordeal. John is better off getting his food from the smaller supermarket. The locals know him and help him get his shopping.

The butcher and baker, the convenience store, and the local small supermarket need to stay open and open longer. The government must act quickly to stop behaviours that are reducing the ability of small food retailers to open their doors and continue to trade, including powerful conglomerations being created along supply chains that are inhibiting supplies.

A better approach, at least from our perspective, would be for people to travel to local businesses such as small supermarkets, local convenience stores, local butchers, local greengrocers and service stations to purchase necessities. This makes for a smaller number of people in places where buying and distance management is more manageable. It also means there will be fewer long lines of people waiting to get into a shopping mall to then get into a large supermarket which inhibits panic.

We have already seen small business placing ‘gaffa’ tape on floors, sanitiser at the door, sticking up signs and enforcing social distancing. It makes sense, in a time of crisis, to have the reassurance that you can duck out to your local store, buy the necessities, and go straight home. Reducing your exposure in large crowded shopping malls is a critical health measure. Having shops open longer will also reduce public panic.

We recognise the gravity of the situation, the need to minimise contact. Small shops are doing that now, asking people to wait outside and limiting the number of people who can enter at any time to maintain safe social distance.

But small shops can only stay open if they can get supplies and right now there are powerful forces at work to stymie those supply chains.

  • A distributor business being told by a significant confectionery supplier it should submit its last orders as, due to a 40% increase in demand from the supermarkets, the supplier was unlikely to be able to provide products for sale in convenience stores until further notice.
  • A significant Australian family business in the food manufacturing industry has been told that the supermarkets have recently ‘bought total farm lots’, resulting in the business not being able to source potatoes for its manufacturing operations. The business has been advised that the situation is likely to continue for the foreseeable future
  • A family-owned service station business in Sydney being told by its fresh juice supplier that it would not be able to supply product until further notice, given increased demand from the two supermarkets.

These reports come on the back of recent and growing concern being voiced by many small-format retailers (for example, convenience stores, mixed businesses, newsagents, butchers) about extreme difficulties being encountered in sourcing core products over recent weeks… apparently due to a surge in demand being experienced by the two major supermarkets.

We are not alleging that this action is coordinated (it isn’t), yet the net effect is starving smaller market participants of grocery product. If the current situation continues, there is a significant risk that large numbers of smaller market participants will be forced to close.

While this will, in the long term, further concentrate market power in favour of the two supermarkets, the short-term consequences are far more dire. By concentrating people together to shop, given limited choices, we face greater spread of coronavirus.

There’s great concern around apparent arbitrary decisions being made by state and territory governments about forced shutdowns, where small format retailers will be required to close, while their large format ‘supermarket’ competitors can continue to trade. We saw this confusion play out very publicly with confusing messages around hairdressing.

Given the COVID-19 economic downturn is expected to last up to six months, any business that is forced to close its doors as part of the progressive national lockdown is likely to be closed for a significant period. Such an occurrence runs the risk of severely damaging market competition, as a result of embedding new consumer behaviours that deliver benefit to the two supermarkets. Examples of the types of businesses that would potentially be impacted by such actions include independent supermarkets, mixed businesses, stand-alone bottleshops, convenience stores, newsagents, butchers, and greengrocers.

There needs to be recognition of the community service that local, smaller retailers contribute, especially in times of crisis. We saw great examples during the bushfires, and similar stories are emerging now in the face of COVID-19.

Smaller, local, food retailers need to be able to open longer hours and get guarantees that their supplies won’t be impacted by more powerful players. Opening longer hours is not possible in an efficient way due to high penalty rates. Changing business behaviour is also difficult due to inflexible workplace relations rules.

As we go into recovery, healthy competition must survive for people to have choice and convenience. Long term planning, with practical steps now, will make sure small, local businesses are well placed to pick up again when this imminent threat abates. Workplace relations rules need to be simplified and fit for purpose.

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