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Retail

Buying Alliances Help 'Significantly Lower' Consumer Prices, INSEAD Study Finds

Buying alliances in the retail sector can help 'significantly' lower consumer prices, a new study by INSEAD has found.

The study examined close to 140,000 SKUs from across 20 key food categories – including cheese, confectionery, chocolate, fruit and vegetables and frozen food – over a six-year period, equating to around six million product observations.

If found that shoppers at Edeka paid on average 12% less for articles sourced through the AgeCore buying alliance compared to what they would have paid for said products if the German retailer was not part of the alliance.

In addition, the study found that many of the savings that Edeka garnered from its participation in the AgeCore alliance were passed on to consumers.

Remaining Competitive

“Buying alliances make it possible for SME retailers to remain competitive in food and non-food sectors as it enables them to negotiate on par with large manufacturers operating globally, to compete on prices with large chains and to develop private label products," commented Independent Retail Europe director general Else Groen. "Benefits thereof are therefore necessarily passed on to consumers."

As Groen added, the current market conditions, in which inflation and the cost of living is impacting households across the continent, is also having a bearing on product affordability.

"Lately, retailers are confronted with very high price increases from large international brands for manufactured food products. Certainly, certain commodity prices have increased recently and companies need to invest in sustainability, but all supply chain actors need to absorb their share of these costs.

"Retailers have very modest margins of 1 to 3%, they cannot absorb these costs for the whole chain, nor can these be passed on to consumers in their entirety.”

Retail Alliances

The EU Commission’s Joint Research Centre recently recognised the benefits of buying alliances in its recent study on retail alliances.

According to Independent Retail Europe, it is 'very important for the equilibrium of the chain and, consequently, for consumers that the rules continue to allow parties to negotiate as they do now'.

© 2022 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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