Economies of scale

[foxy]

There is often talk of the negative aspects of economies of scale, a good example being supermarkets in the UK. People complain that supermarkets dictate and control prices so the poor suppliers suffer and that small shops can’t compete so we lose the cute little butchers, bakers and grocers.

I’ve not thought much on the matter before but since I recently moved to Norway I miss the big supermarkets and I think that the people who complain about them are just nostalgic, poorly informed or unrealistic! Who wants or has time to go to ten shops to do their food shopping? As for the farmers – a contract with one of the main supermarkets is worth millions and if farmers have to compete more then it will usually be better for the consumer. Intensive farming, now that will need a thread of its own!

Go to a large Sainsbury’s or Tesco and the choice is incredible, everything is very fresh, fruit and vegetables are perfectly formed*, you can get everything you need in one place and everything they sell is cheaper than in most small shops. Even smaller supermarkets such as Spar just can’t compete! It's just economies of scale - basic economics.

*Many restaurants take fruit and vegetables that supermarkets reject because the taste is not affected by cosmetic appearance. Many chefs also complain we are more concerned with the look rather than taste of food. If we are honest with ourselves though the presentation of our food is very important to how appetising we find it, the supermarkets are driven by consumer demand so why complain when they give us what we want!

 

[foxy]

ok ok so it wasn't very interesting then! fs I'll get my coat! >>>>>

 

[Martz]

People do not have enough time now-a-days. Having the convenience of all the products you want in one place is a good thing for the consumer. But I think thats the only good thing. Since dedicated shops such as butchers and bakers are cute, they are also masters of their trade. Most of the old guys have either done their job for 40+ years, or it's been a family business for even longer.

These guys are specialists - if you want top quality beef or the best meat and tatty pies in town, you know where to go. They may not be as cheap, but they are dedicated and knowledegable about their professions.


Also, on a slightly related issue of supermarkets and savings..

I currently shop every week as Tesco. We use a loyalty card scheme (clubcard) to collect points each week, and typically get about 8 quid off the next month.

However, if you shop at Tesco, Morrisons, Adsa, Sainsburys etc, and get a loyalty card with each of them, and alternate your shopping - you find that they all send you special offers through the door all the time. If you are a loyal customer, they don't care. They know you are going to come back. However if you show your non-loyalty by shopping at lots of different stores, you actually do better as you still get your loyalty bonus (spread over many supermarkets) but also they send you more incentives through the post....


Damn I must be getting old giving advice about cupons...

 

[foxy]

they are also masters of their trade. Most of the old guys have either done their job for 40+ years, or it's been a family business for even longer.

Yeh that's definitely a good point, a good example is Dixons - they sell plenty of stuff and at low prices but most of it is poor quality and the staff know very little. Which you can't blame them for - who is gonna want to pay for good training for a low paid job, with high staff turnover.

I have this problem at work all the time when trying to get technical information about equipment. Having the problem today in fact: I am trying to get some specialist bulbs with a specific colour temperature. It doesn't give data like that on the RS webpage, so I phoned RS - "colour temperature?" so that wasn't any help, then I phone the manufacturer Philips in the UK - "we are just a supplier we don't have data like that, I'll need to contact a colleague in Japan for data like that, I'll try get it then contact you in a few days" GRR!!

Whereas when I was in the UK and I needed specialist bulbs I went into a small place I found with one guy in it, he was about 60 years old and he knew everything and had all the answers straight away. Was very refreshing since usually my work is hindered by people who cannot do their job all the time. Recently spent 4 weeks trying to get several top end 6000 pound (where's the pound sign, fking norwegian keyboard fs) digital video camera from a USA company, the pricks sent the wrong one and now have to go through another few weeks of phone calls and invoice swapping, drives me nuts. / crazed rant.

With big companies that do and sell a lot people get pigeon-holed into certain roles and so very few staff or none at all can answer all your questions.

 

[ProPain]

you'll never see all small shops leave (luckily) it is often way too expensive to
have superstores everywhere since they are often wat to big to make money in smaller places
often they will lower their range of products and make money on a smaller range of products which turn over more often / quicker, this will always leave a gap open for specialist stores who often have a lower overhead and can respond to demand much quicker.