Predatory pricing of Mark and Spenser

 

Article from: 

https://www.farmersjournal.ie/ifa-protests-outside-m-s-store-over-predatory-pricing-model-426888

The IFA staged a protest outside an M&S store in west Dublin today over below-cost selling of fresh produce.

 On Thursday, the IFA launched its Christmas food producers’ campaign in the hope of deterring retailers from discounting food in the run-up to the festive holiday.

 IFA president Joe Healy accused M&S of gross hypocrisy by slashing the price of fresh produce below the cost of production.

He said: “It is ironic that in the M&S ‘Farming for the Future’ programme they refer to sustainability and ethical standards. It begs the question as to what is ethical and sustainable about these predatory pricing tactics?”

Lies

“I want to nail the lie that vegetable and potatoes can be sold below cost without hurting Irish growers and ultimately driving them out of business.

“Using farm produce as a tool to drive footfall undermines Irish production and the financial viability of specialist growers and producers.”

He made reference to the decline in the number of field vegetable growers, which has fallen from 377 in 1999 to 165 in 2015, a drop of 56%.

Healy said those who remained had invested heavily in their businesses to ensure there were sufficient supplies of fresh Irish produce.

Predatory

He added that a “predatory pricing model” took the value out of fresh produce, which left it “difficult to ensure sustainable farmgate prices and demeans the category in the minds of the consumer”.

Healy said: “It’s been a very tough year on producers, with significant extra costs because of the late spring and the drought conditions during the summer.

“Reducing the shelf price of some vegetables and potatoes to as low as 20c/kg sends a very misleading message to consumers regarding the costs, risks and skills associated with this sector.”

Non-Irish veg

 The lack of support for Irish growers by M&S also left Healy disappointed, as he remarked on the number of vegetable lines in the store which were non-Irish. 

He concluded by calling on Minister for Enterprise Heather Humphreys to address the issue of unsustainable discounting.

 

Predatory pricing is a deliberate strategy of driving competitors out of the market by setting very low prices or selling below AVC (Average variable cost). It is a type of anti-competitive behaviour usually used by large firms in-order to compete with other firms. In this case, Mark and Spenser uses this strategy because they know that other firms will not be able to survive if they tried to lower their selling price below their AVC, as it is the shut-down price of firms. Mark and Spencer uses this to decrease the numbers of consumers going to the rival firms, and will force them out of the business, thus, gaining more monopoly power over the market. Furthermore, when the existing firms have been driven out by Mark and Spencer, they will increase the price again to create a barrier of entry against new firms who wants to enter this market, thus, allowing them to secure their position as the monopoly.

Although predatory pricing will hurt the local vegetable producers, it will however, benefit the consumers. Consumers benefit from the low prices set by Mark and Spencer because it will allow them to have a higher spending power. Furthermore, if the rivalrous firm retaliate by lowering their prices, the consumers will benefit even more due to the low costs.

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