This post is inspired by a Kannada post run by “Shree”
See the ad below, issued by Big Bazaar. Their claim is this: “We’re buying 26000 tons of rice every year. Since we buy in such a bulk quantity we are able to buy them at amazingly low prices, which we eventually pass on to you”. Might sound logical and one may feel thankful to Big Bazaar for being so kind. But then, there’s another side to it- Since these supermarkets have started buying goods in 1000s of tons and store them in their racks and warehouses, they have created a huge demand for all necessary items and the prices have shot up. With everyone selling their stuff to supermarkets in bulk, small retailers are unable to procure them at low prices. Do you feel prices would have been lower if these supermarkets didn’t exist in the first place?
Normal rice (unsubsidized) was costing less than 20 Rs per kg one year ago. Now it costs twice that amount. I have a feeling that supermarkets never bargain enough (or in case they bargain enough, they are not passing all of it to consumers-sell at market price and pocket the gains) with their suppliers. Just think: If only all major retail companies take a stand: “We’ll not pay more than 20 Rs a kilo for rice” there will be no takers for such a huge quantity of rice and suppliers will be forced to reduce the price of rice to 20 Rs a kg. Instead, these supermarkets buy it at whatever price quoted by supplier and then sell it by adding their margins. Since suppliers got an idea that retail giants will buy from them even at high prices, there’s no hesitation to hike the price, which eventually is getting transferred to consumers like you and me. Since Big Bazaars and the likes are ready to pay higher price, small retailers can’t fight but shell out more.
If it was some other item, consumers would have forced a price correction-for example when tomato price shoots up to Rs 40 a kilo, people reduce preparing tomato based dishes and shift to some other cheaper vegetable. But rice is a basic item everyone is heavily dependent on (wheat based products are a substitute, but not so famous in South India). So with supermarkets and their suppliers manipulating the price, consumers are forced to pay more. At least if the high price reaches the farmer who grew paddy we can take some console, but often it’s the middlemen who pocket all the profit.