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Hard to crack a big fat duopoly

Time heals all wounds. Perhaps.

As the country slowly, but surely, picks itself up and moves on from the heartbreak of the World Cup loss, another less public loss is likely to have a longer-last effect on all of us.

The failure of online grocery startup Supie this week highlights how important it is to reduce the power of the two dominant supermarket companies. They have a duopoly and it is proving exceedingly difficult to break.

Supie, just two years old, has been placed in voluntary administration owing $3 million. It started with the aim of taking on the market’s two big players, but has now been given a red card, as have its 120 staff. While sales had shown significant growth for most of this year, and the company had 60,000 customers, the heat in the kitchen of competition clearly got to be too much to bear. Game over.

Despite an apparent reluctance by previous governments to tackle the market dominance head-on, it still looks like intervention from Wellington is the only way to help establish a meaningful, lasting, third player in the market.

It won’t be easy, or cheap. Much like the weekly family grocery shop these days.

Public policy group, Monopoly Watch, says it would require the government to force the sale of approximately 100-120 supermarkets to a third player and force the sale of some of the distribution centres. The group said it will take $1.1 billion in capital for a new entrant to operate in the market. That won’t be easy for a shiny new coalition to swallow.

But wait, the television match official is about to pinpoint a possible gap in the duopoly’s defences.

National Party deputy leader Nicola Willis is up for the contest.

“If I do become the Minister of Finance in the next few weeks, I will seek advice on how we ensure that we do get a third entrant into this sector, and it doesn’t have to get the sort of failure we saw here [Supie].”

Brave words indeed. However, the hint of doubt about whether she will be the next Finance Minister has me deeply worried about a shock comeback from a former Treasurer. Surely not.

Of more immediate concern is the plight of the now jobless staff. It appears unlikely that there will be sufficient funds available to pay wages and holiday arrears. Not a particularly merry Christmas ahead for them.

For reasons known only to the owners, the staff were not paid by Supie, but by another entity, Workly. Not that it makes any difference now. The next trip to the supermarket for former staff will be difficult, on several levels.

Supie’s founder Sarah Balle recently said the company would “absolutely” hit 100,000 members next year, and it was aiming to scale across the whole country “very soon”.

Supie worked on a membership basis. Those who signed up for free paid $15 per delivery. Those who took a $99 annual subscription, or $14 per month, got free delivery on orders over $70. Groceries were still being delivered as recently as on Sunday evening. It’s a fairly straightforward business model, but one which ultimately couldn’t get a foothold on a slanted playing field.

Roger Parker
Roger Parker
Roger Parker is the Times-Age news director. In the Venn-diagram of his two great loves, news and sport, sports news is the sweet spot.

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