Tuesday, June 30, 2009

Horse, Stable, Bolted

Consumers are becoming more price conscious and thereby forcing retailers to cut their prices - shock, horror! That's just about the conclusion of today's Retail-Related Import and Distribution Study from the Competition Authority. It examines the grocery, clothing and pharmaceutical sectors in Ireland for evidence of 'anti-consumer' practices and abuses. Though as the word cloud I've created from the text of the report shows, consumers don't actually get much of a mention in the report ...

The report has rather more to say about the role of government in preventing consumers from getting a better deal. Take pharmaceutical products - the study notes that:
The prices of the vast majority of medicines in the Republic of Ireland and the UK (and thus Northern Ireland) are determined by State policy. Approximately 80% of the value of all medicine sales in the Republic of Ireland is recouped from the State, effectively making it the single largest buyer of pharmaceutical products in the Republic of Ireland.

As part of the tight controls on the sale of medicines in the Republic of Ireland, retailers and wholesalers are legally restricted from going outside the Republic of Ireland for supplies of pharmaceuticals - with the exception of a very small number of specially-licensed importers who, typically have less than 5% of the Republic of Ireland wholesale market.

The impact of the sterling depreciation has been negligible in terms of reducing sales or lowering prices of medicines in Republic of Ireland. Demand for medicines is always relatively stable, even the recession has had only a small impact. The sterling depreciation has given a boost to licensed importers but they are such a tiny part of the supply chain that there is little or no benefit to consumers.
Which might explain why prices in most categories are falling except in those dominated by state pricing decisions (pdf) - namely education and health (and, indirectly, alcohol and tobacco).

Nevertheless, there is a sense from reading the Competition Authority report that it's analyses are already rather dated. Much of the sterling/euro exchange rate anxiety that vexed so many late last year has partially abated. Moreover, recent efforts by retailers to avail of more efficient international buying processes (Tesco and now Dunnes) have ensured further gains for Ireland's cash strapped consumers.

Let's hope their next study takes a more detailed look at the impact of Government policies themselves on consumer welfare (and harm). I suspect there's much, much more room for improvement in that regard. And maybe the forthcoming report from An Bord Snip Nua might go some way to delivering said improvements.

2 comments:

  1. Good post and nice word cloud!

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  2. Good post about the pharmaceutical costs. When you consider all the other things that the government have done or are doing to drive up prices to the consumer you have to wonder why the country hasn't decided to burn them out of their buildings... I guess it's because they've fed up some drugs with all that bulls**t.

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