Supermarkets in Times of Crisis
Dr Peter Alexander, Interdisciplinary Lecturer in Global Food Security
The Coronavirus outbreak in the UK is drawing attention to the resilience of retailers. Fears of shortages of food and sanitary products have led to bulk purchase behaviour from consumers all over the UK, leaving behind empty shelves to the detriment of elderly and less mobile consumers.
The global pandemic has not so far affected food production, and the confident message from the government is that food supplies are not at risk. Yet, this reassurance has not reduced panic buying as consumers are left uncertain about government action to stop the virus from spreading. While the governmental response to Coronavirus has been criticised as “complacent” by experts like Richard Horton (chief editor of The Lancet), efforts by retailers to prevent panic buying, and to ensure essential supplies to the largest possible number of consumers are significant.
Can supermarkets uphold food supply in times of crisis?
In economic terms, retailers and other downstream actors are the most powerful parts of European food value chains, accounting for the largest share of the final food value (48% in the EU). Their market power is often thought to be prejudicial to consumers, yet, sometimes this can be turned to useful affect. Access to infrastructure and logistics together with elevated profit levels, for example, can enable retailers to bear higher supply costs in order to maintain food supply in times of crisis.
The combination of market power with temporary cooperation among competitors as proven to promote resilience to shocks in earlier cases, and resilience is enhanced at the expense of market efficiency that underlies the textbook view of retailing being an almost perfectly competitive market.
In light of the Corona outbreak, antitrust laws in the UK and in Germany are currently being relaxed so that supermarkets can stockpile and coordinate supply to consumers in a more effective way. To prevent excessive profiteering, the Competition and Markets Authority has officially warned UK retailers not to “exploit consumer fears” by overpricing products.
Who should act?
While all actors involved are working hard to maintain supply, consumers have to play their part as well. The current empty shelves are not caused by supply chain problems but by compulsive shopping as consumers prepare the worst and ignore the social consequences of their behaviour. Transparent and concise government communication on its action plan to mitigate risks from the pandemic might help restore solidarity and reason to consumer shopping behaviours.
Interested to read more? You can find previous blogs posted by Dr Peter Alexander on the RUGS Project blogpage here: https://www.rugs-project.uk/outcomes (NOTE: scroll halfway down page to see blogposts).