Bigger role for bigger retailers could trim inflation

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Published: 13 September, 2010, 12:06
Edited: 13 September, 2010, 16:30

RIA Novosti / Ruslan Krivobok

TAGS: Markets, Retail, Crisis, Economy

The government is promising to watch food prices closely amidst concern that food prices are set to jump. But major retailers say a bigger role for large players could help ease inflationary pressure.

In August alone prices on dairy products grew by about 2%, sugar rose 3% and bread was up 5%. Producers stand accused of holding back supplies in the hope of bigger profits, with retailers claiming they can help push prices back down.

Lev Khasis, CEO at X5 Retail Group, says the focus on supplying the most popular goods at the best price, across Russia, helped the chain to fight the inflation.

“Large retail chains can be a serious brake for inflation because they are a real price indicator. Our chain had 1% inflation this August comparing with the last year and that was at a time when the prices on certain goods went up. The way we are fighting against price increase is that we are searching for goods which are in the most demand at a cheaper price and buy them from
suppliers from different regions.”

The CEO of X5 retail says if there were more supermarket chains in the country, with big retailers controlling only 30% of the grocery market, inflation would be lower.

Rival retailer, Auchan, decided to fight inflation at the expense of its own profits. It cut its margin on products that were rising in price, and Ludovic Holinier, a board member at Auschan Russia, says the move paid dividends.

“Results are good. Like we said before, during the crisis we experienced an increase in our customer count – so, more customers. Unfortunately, they are buying less goods at each visit, and with almost no inflation in selling price – we are still experiencing this trend. The last few weeks, the trend has tended to improve.”

Market players understand the government’s eagerness to intervene, but say it should respect market rules. The best way to moderate prices, they say, is to lower customs duties, and ease tariffs on goods that are in short supply.