Small Retailers Struggle as Mandatory Discounts Benefit Large Supermarkets

By: Trademagazin Date: 2023. 04. 24. 13:32

As the cost of living continues to increase, consumers are keeping a closer eye on their spending habits, particularly when it comes to food. This has led to a fierce competition among European supermarkets, with major chains like Lidl, Aldi, Tesco, Spar, and Auchan offering daily and weekly discounts to lure shoppers into their stores. However, while these mandatory discounts may be good for the bottom line of large retailers, they are having a negative impact on small businesses.

According to a report by the ATV News, small retailers are struggling to survive as their market share dwindles. This is due in part to the fact that mandatory discounts imposed by the government provide large supermarkets with free advertising, allowing them to further increase their profits. While the exact details of the government’s mandate are still unclear, it is believed that the discounts will be posted publicly, giving multinationals a massive marketing advantage.

One small business owner in Hungary’s Hajdú-Bihar county expressed concern over the impact of mandatory discounts, fearing that it will drive even more customers away from local retailers and towards the major chains. “We don’t welcome this because it bankrupts small retailers or reduces their revenue, as customers are lured away,” said Szilvia Szilágyi, who believes that small businesses cannot afford to order as much stock or offer discounts on the same scale as their larger competitors.

Agricultural economist Raskó György agrees with this assessment, pointing out that one discount chain was able to increase its revenue by 17% due to mandatory discounts. György believes that the existing price caps on certain products already benefit large retailers and that mandatory discounts will only further increase their profits. He predicts that if the government imposes mandatory discounts, the market share of major retailers will rise from the current estimate of 38% to 40%.

Unfortunately, small retailers are already struggling to keep up, with their market share estimated to be around 35%. According to Neubauer Katalin, the Secretary-General of the Hungarian National Trade Association, the government needs to consult with retailers about the impact of their policies on the market. She notes that in other European countries, governments use tax cuts to keep food prices low, citing Spain, Poland, and Portugal, where the value-added tax on basic food products has been reduced to zero.

In conclusion, mandatory discounts may seem like a good way to keep food prices low and help consumers save money. However, it is clear that these discounts are having a negative impact on small businesses, which are already struggling to survive. It is essential that governments work with retailers to find a balance between providing affordable food options and supporting small businesses.