New Zealand retail industry short of competition: report

2021-07-29 08:59

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WELLINGTON, July 29 (Xinhua) -- The New Zealand Commerce Commission's draft report into competition in the retail grocery sector has found that competition is not working well for consumers.

"If competition was more effective, retailers would face stronger pressures to deliver the right prices, quality and range to satisfy a diverse range of consumer preferences," said Commission Chair Anna Rawlings on Thursday.

In November 2020, the government asked the commission to look at whether competition in the 22-billion-New-Zealand-dollar per year grocery industry was working well and, if not, what could be done to improve it.

The commission's draft findings are preliminary and subject to consultation prior to its final report being published in late November.

"Our preliminary view is that the core problem is the structure of the market. In competitive terms, the major retailers, Woolworths NZ and Foodstuffs, are a duopoly, and while there is an increasingly diverse fringe of other grocery retailers, they have a limited impact on competition. This is because they are unable to compete with the major grocery retailers on price and product range in order to satisfy the widespread consumer demand for a main shop at a single store," said Rawlings.

During its study, the commission observed features of the grocery sector which indicate the market is not working as well as it could be. These include persistently high profits being earned by the major retailers and high grocery prices when compared internationally. The level of innovation in the sector also appears modest by international standards.

"The major retailers appear to avoid competing strongly with each other, particularly on price. Meanwhile, competitors wanting to enter the market or expand face significant challenges, including a lack of competitively priced wholesale supply and a lack of suitable sites for large scale stores," said Rawlings. (1 New Zealand dollar equals to 0.69 U.S. dollars)
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