Global retail trading companies are becoming increasingly important in the international trading system, linking millions of producers to consumers worldwide. This has led to the mushrooming of supermarkets, whose power often goes beyond trade rules. Supermarkets offer a broad selection of goods under a single roof with advantages of parking facilities and convenience of shopping hours that extend far into the evening. While these supermarkets contribute to the wealth generation through international trade, their increasing power poses a threat to efforts aimed at strengthening the links between trade and human development. With their capacity to dominate the market by concentrating the distribution networks in their hands, they have the growing appetite to bulldoze the small retailers and traditional shops out of business.
Concentration of power has gone together with the development of global sourcing and supply systems to such an extent that the supermarkets have the capacity to bypass preferential markets and regional trading arrangements by creating their own sourcing outside the preferential zone. By working with worldwide supply-chains, they have created their own brands and trademarks that give them a tacit monopoly on the market. Supermarkets are usually part of corporate chains that can allocate large budgets to advertising and influencing the minds of the consumers. They often sell certain products with lower or negative profit margins and attempt to make up for these losses by the sale of higher-margin items. They have the tendency to rely largely on imported products, very often at the detriment of domestic industry and local farmers.
Supermarkets are now the main gatekeeper to developed country markets for agricultural products. Suppliers from developing countries willing to enter the world markets, especially markets for high-value added crops, find themselves obliged to sell to a handful of large supermarket chains. This has important implications for the distribution of benefits from trade. For example, the price paid for a small cup of coffee in Europe (roughly around one Euro) could represent the remuneration for one month labour of a coffee-grower in West Africa.
With the power of controlling information coupled with their enormous capacity to influence prices at their own terms and conditions, supermarkets are creating barriers to market entry that are far more formidable than tariffs for small producers. Suppliers are required to meet exceedingly high product standards, along with stringent criteria for just-in-time delivery. Demands imposed by supermarkets could further marginalize small-holders unable to afford the electricity, green-houses and artificial lighting needed to provide uniform produce.
Initial development of supermarkets has now been followed by hypermarket growth. This is an unavoidable evolutionary process in the fields of marketing, distribution and consumption. However, their behavior will have to be properly regulated so that they do not make abuse of their dominating power.