Customers benefit from competition among retailers

Free prices likely to increase sellers’ struggle for sales, probably cutting prices

By Alena Pokalo

Since early March, most prices have been freed from state control, with marginal indices revoked and retailers having no need to justify their pricing strategies. Sellers can now fix any price they like to raise sales.

The Chairman of the Republican Confederation of Entrepreneurship and the owner of a chain of trade and public catering sites, Victor Margelov, is convinced that competition brings lower prices. Moreover, larger trading networks are less able to set prices artificially high when competition abounds. He believes that the market should regulate its own prices, rather than the state. Liberalisation should attract new sellers, while competitiveness should strengthen them.

The Trade Ministry notes that traders now have the power to change their profit margins to reflect demand, with more popular goods perhaps seeing higher prices; those which lack sales might fall in price to encourage sales, benefitting customers. Mr. Margelov notes that this new approach is advantageous, as it presupposes the strengthening of competition and equal terms of trade. “For example, we are observing the monopolisation of hypermarkets in the capital. Every year, several new hypermarkets open; their number will reach about twenty in a couple of years. There are few alternatives.

However, quality always falls if customers lack choice,” he stresses, recalling that the first French hypermarket opened in the late 1960s. At the time, there were 600,000 shops in operation but this number had fallen 8-fold by the late 1980s. This pushed the French to adopt a law on de-monopolisation. The expert considers that hypermarkets should feel competition from smaller supermarkets and neighbourhood stores. Customers need good service, affordable prices and a rich choice of products.

According to the Trade Ministry, about 35,000 shops operate in Belarus at present, every year growing by around 2,000. Most are neighbourhood stores with their own advantages. The Deputy Trade Minister, Irina Narkevich, explains that it’s easier for entrepreneurs to react to change, responding to trends in food consumption. The popularity of fish has led to shops specialising in such produce. In 2009, over 400 shops and departments selling fish opened; last year, they were supplemented by another 1,200. The same situation is observed regarding health food. The Ministry is certain that liberalisation will enhance this process.

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