Shopping with Oligopolists

It’s great to have Steve Hannford and Oligopoly Watch back after his short break. I like oligopoly watch; I find the observations particularly relevant to what happens here in Australia. We are a little economy based on an isolated island, with small markets centred in basically two cities (Sydney & Melbourne) on the East coast. Fertile ground for monopolies, duopolies and oligopolies….

Anyway, upon returning from his Euporean vacation, Steve observed the following:

"One thing that struck me was the extent to which, in the United States, the landscape has been altered by oligopolies, and how that hasn't (yet) occurred in Europe.
What I mean is this: in the US, the streets and highways are defined by the presence of large, national or international companies in all the key locations. The cityscape of any American downtown is a series of Starbucks, McDonalds, CVSs, major banks, Gaps, and so on, with other smaller, local companies on the margin. In the suburbs the same; Safeways, major gas stations, Wal-Marts, Marriotts, Home Depots, Dunkin Donutses and their like define all the critical points in the landscape.
Local businesses do exist in the US, but they are ever more hidden, more peripheral. As national oligopolies get bigger, they impose a sameness that is overwhelming."

Well, Steve, it’s certainly starting to happen here in Australia, to a degree anyway. We don’t have stand alone Hypermarts like Walmart, but we do have an ever increasing number of Shopping Centres (or “Malls”) dominating the main roads through our suburbs. And increasingly, these Shopping Centres all look the same. They all have a department store from one of only three big retail companies (David Jones, Coles Myer or Woolworths), a supermarket (owned by the same people who own the department store) and a whole host of franchised retail outlets, from bookstores, to record shops, clothing even coffee and cake. Franchising is huge in this country and it is fuelling a massive change in our retail habits.

In every suburban shopping centre the small retailers aren’t just “hidden”, they have have all but gone; the small coffee shop has closed, replaced by Gloria Jeans (or Starbucks), the independent music shop is long gone, and in its place HMV or Sanity, the owner-operated book shop has made way for Collins Books, the sandwich shop is now Subway.... and on it goes.

Even the Shopping Centre owners are few in number (Gandel, Centro and Westfield and Lend Lease own over 92% of all suburban Australian Shopping Centres between them). Whether the centre is Southland, Dandenong Plaza, Chadstone, Fountain Gate or Bayside Frankston; all south east Melbourne, all within 25-30km of each other; the shops are pretty much the same. There is nor real point of difference between them, not special reason to go to one over the other; they all look the same; they all offer the equivalent, but limited choices.

But what we need to remember is that these franchised businesses are often owned and operated as small business by the franchisees; its just that “Big Co” (usually some oligopolist company) is now getting a lick of their profit.