The australian grocery industry essay
The Australian grocery industry is dominated by two major retailers, Coles and Woolworths who possess an influential role in determining supply and demand in the market. Their influence on the marketplace creates resistance for new competitors to enter into the industry due to their large bargaining power. This paper highlights the implications that these large retailers have on consumers, primary producers and competitors and how an analysis of microeconomic can identify how these retailers are controlling the market and what consequences can be foreseen.
According to Hubbard et. Al., (2010) perfect competitions takes place in markets where no businesses in an industry have market dominance as there are many sellers and buyers and there are no barriers to enter that particular market as a free flow of information exists.
According to the Australian Competitions and Consumer Council (ACCC) the Australian grocery industry is dominated by two key players, Coles and Woolworths, who together have around 80% market share. While there are other competitors in the market such as independent wholesalers and retailers including a variety of speciality retailers such as independent grocery associations (IGA) and Aldi; Coles and Woolworths have a major influence to control prices which in the long-run would see these smaller retailers either merge through acquisitions to compete or close their doors as they can't compete. In the short term there are benefits to consumers with lower prices and better value for money. However if this dominance were to continue the Australian grocery industry may see the effects of a duopoly which could have some serious implications to consumers as there would be no other choices available in the market and the opportunity costs would be minimised.
Coles and Woolworths have more retailer shop fronts than their competitors (Bonn, 2004) they're in more towns than their competitors and demonstrate better...