You are off your trolley if you think supermarkets rip us off

Published on Monday 27 June 2011 16:57

Every day, millions of ordinary people from Lerwick to Penzance hand over wedges of hard-earned cash to their local supermarket in return for trolley-loads of goods.

There are those who believe this proves that supermarkets are profiteering bullies, that we have gone from a nation of shopkeepers to victims of rapacious capitalists. The litany of complaints rises to a peak when supermarkets announce their results, but it is always there in the background.

They destroy town centres and crush smaller competitors; they exploit suppliers; they manipulate the planning system to their advantage, and they con their customers with bogus special offers and loyalty schemes.

All effective caricatures must contain a germ of truth, and it is true that supermarkets are run by astute business-people whose main aim is to grow their businesses and make a profit.

It is equally true that in this objective they have been remarkably successful, to the extent that supermarkets now have a dominant market share in their core areas and are making steady advances in other categories, such as clothing and household goods.

This dominance is not the result of some malign plot, but rather the outcome of a number of fundamental changes in the way we lead our lives.

Most households have access to a car, and it is easier to bring your shopping home in the car than to lug it home on foot.

When you add in the declared policy of every local authority in Britain to restrict the use of private cars in town and city centres, you have tilted the balance strongly in favour of out-of-town or suburban supermarkets with ample parking.

Those same councils are also often involved as developers of retail parks and the happy recipients of business rates, so when you next hear a councillor bemoaning the fate of the small shopkeeper, this shows at best a degree of confusion and at worst downright hypocrisy.

Until a few generations ago most women worked either in their own homes for nothing or in some-one else's for very little. They were almost exclusively responsible for food shopping and had the time to do it, which meant little and often at a range of local shops. Now that women are more likely to have paid work outside the home, shopping is more of a shared responsibility and neither partner has the time to shop in the old way.

As no-one is proposing to uninvent the car or take women out of the workplace, the clich about how wonderful it is to have a diverse range of high-quality, local, independent shops needs to be taken with a liberal dose of salt - even those who repeat it don't always put their money where their mouth is.In some parts of Edinburgh, such as Stockbridge and Morningside, many such shops survive, and I am glad of it, but I would be surprised if their combined sales came anywhere near the turnover of the local supermarket.

The idea that supermarket shareholders are making whoopee at the expense of everyone else is equally wide of the mark. We've all stood at the checkout with a full trolley, handing over 100 knowing all too well how much effort it took to earn it and wondering where it was going to.

Well, taking the latest Tesco annual report as an example, just over 80 of that went to employees, suppliers, landlords and local government. About two-thirds of the remaining 20 went to central government in the shape of corporation tax and VAT (to which of course should be added income tax from employees' wages and corporation tax on suppliers' profits).

After the company's management spent about 5 on capital investment, shareholders got 1.60 worth of your 100 trolley in dividends. Tesco shareholders are the providers of risk capital to Britain's biggest private sector employer, which supports nearly 300,000 jobs in this country (and another 200,000 overseas). From your full trolley, they're getting roughly the price of a loaf of bread and a pint of milk as their reward. Not exactly large-scale profiteering.

• Gareth Howlett is investment management director at Brooks Macdonald Asset Management