The Asda Thread

[Finn]

Just to remind people they can listen to ASDA FM at home.
http://www.asda.co.uk/corp/asda-fm.html

I can't think of anything I'd rather do.

[cdd]

Sole traders (under a certain threshold) don't require to be VAT registered, nor do they need a registered business address - hence "baby sitter" and "dog walker" being popular choices when signing up.

One can't expect Costco to have resources to investigate all applications for membership - however that doesn't excuse them coming round business premises (as they have with mine - many, many times) offering trade cards for any and all staff, tacitly and explicitly encouraging personal purchasing.

Gav, I agree with you that this is a Bad Thing, but why are you criticising Costco et al. for taking advantage of a climate set up by the government? You claim they are breaking the law, but it seems that in reality they are in fact breaking the spirit of the law, exploiting a loophole. And I don't see that as Costco's "fault". In the free market, every company wants to maximise profits, and morals don't come in to it. They succeed because consumers want low prices, and also don't care about public/social benefits of high prices. Basically, people are selfish - there's not much you can do to change that. It's up to the government to intercede in that case, and it's them to whom I think you should be directing your criticism.

[Nick Harvey]

Just to remind people they can listen to ASDA FM at home.

Shouldn't this be in the Birdsong forum?

(Sorry, couldn't resist.)

I think ASDA FM has probably been available at home longer than most. I remember listening to it in the early days of the Astra 1 satellites at 19.2E. It was on one of those alternative audio slots they used to have, piggybacked on top of a video channel.

[Gavin Scott]

Gav, I agree with you that this is a Bad Thing, but why are you criticising Costco et al. for taking advantage of a climate set up by the government? You claim they are breaking the law, but it seems that in reality they are in fact breaking the spirit of the law, exploiting a loophole. And I don't see that as Costco's "fault". In the free market, every company wants to maximise profits, and morals don't come in to it. They succeed because consumers want low prices, and also don't care about public/social benefits of high prices. Basically, people are selfish - there's not much you can do to change that. It's up to the government to intercede in that case, and it's them to whom I think you should be directing your criticism.

Extraordinary.

I'm flabbergasted at how you seem to think that the law is there to be broken. This isn't "tweaking a loophole" this is cheating the local authority out of the rates that smaller retailers have to pay. How can you defend this as some "free market" issue? Its got nothing to do with "free market" economy.

Let me put this in a way that might let you see it more clearly.

You have a business with a licence to trade. You go to Heinz and buy a 40ft container full of tins of tomato soup. Your intention is to sell it on.

You can either keep it in a trading warehouse and sell to the trade only. Your warehouse will pay rates based on being a warehouse.

You can open a shop and sell direct to the public. Your shop will pay rates based on being a shop.

You can do what Costco do - pay rates based on being a trade only warehouse and coerce the public into breaking the law by forging an application that claims they are a trader.

My head doesn't button up the back. I know that businesses are trying to find new ways to increase business.

Cheating the system to pay less back to the local authority than "real" retailers is not a legitimate route; and you shouldn't be trying to justify it as a "reasonable" route to extra profits.

It isn't.

[Sput]

I'm with gav on this one. This particular law is clearly intended to protect smaller retailers and, while there's nothing legally wrong with this loophole, it's morally out of the window. I guess that's where the difference of opinion stems from in here. In my opinion the law just needs tightening up, perhaps to set some actual criteria that must be met before someone qualifies as "trade" to shop there, and not some assular one like "they must spend £5000 in their first year" because that's easy to exploit.

[Nini]

My head doesn't button up the back.

Interesting turn of phrase there Gav.

[Sput]

My head doesn't button up the back.

Interesting turn of phrase there Gav.

Especially considering it's actually a waterproof zip.

[Nini]

I was thinking that also though I was reckoning more towards one of those slide closey things you get on bags of grapes.

[Mr Q]

Gavin - I really don't think we're all that far from one another on this issue. You're advocating lower local rates for businesses, which I absolutely agree with. You're criticising Costco for having lower rates, which obviously gives them an advantage over other retailers - and I fully appreciate that.

Good lord, am I not explaining this right? They're NOT retailers. They are wholsesalers. With respect - do you understand the premise of wholesale/retail? Wholesalers buy from manufacturers or import houses in massive quantities, and then sell to retailers who may buy only enough to fill their shelves and that which fits in the back of a transit van.

Gavin - I understand the distinction. You're the one alleging Costco is a retailer not a wholesaler.

The distinction in rateable value is made for one reason only - size of premises. A wholesaler, by their nature, have palletised stock in large quantities. Massive quantities. Have you never been to a trade warehouse? It would be unreasonable for them to pay the same amount per square foot in rates charges. Their trading units run to thousands and thousands of square feet - because that's the only way they can operate.

I'm not sure I understand your argument. It's OK for a genuine wholesaler to pay lower rates per square foot because they have stuff on pallets in a big warehouse. However if a company like Costco (which you seem to be asserting is a retailer) replicates that model and sells ostensibly to the wider public, they shouldn't get lower rates? If you're taking that view, it would seem to have very little to do with property size - and you're then back to justifying some arbitrary distinction between wholesale and retail rates. Again, that's not a level playing field.

I don't understand though why you're blaming Costco for that when it's the government who is responsible for creating that mess of a situation in the first place.

Because they're breaking the law.

Your point is, "If the law is an ass then they're right to break it", which, I'm sorry, is plain wrong.

Have Costco been taken to court over this? Have they been found guilty of breaking the law? No one here seems to be suggesting that's the case. In which case I don't know how you can conclude that they're breaking the law.

You've taken a cursory glance at this situation and have had your "eureka" moment. Well that's all well and good, but neither the retail industry nor the Federation of Small Business agree with you.

They all accept that wholesalers are essential for smaller businesses. They serve and supply those who, (unlike chain stores), cannot negotiate with manufacturers directly; and who don't have the time or resource to land goods in from the continent or beyond.

Rates on wholesale premises should be less than retail. It makes perfect sense. If wholesalers paid the same rates for their massive sites, the cost of "wholesale" goods would increase, reducing margins for retailers.

You're missing my point though. Why shouldn't consumers get the benefit of those directly lower prices if they're available? You seem to be justifying some difference on the basis of helping to prop up small businesses. Now, please don't misunderstand me, I have a great deal of respect for small businesses. They're in fact quite important components to any modern economy - they're drivers of innovation in many markets. But they should be able to do that without the benefit of an uneven playing field. If Costco can deliver lower prices to consumers who buy in bulk (which I understand is their business model), then I really don't see what the issue is.

Government policy immediately results in true retailers facing higher costs, because they have to pay more in rates. That puts them at an immediate disadvantage, and allows Costco (operating on a different model, although I wouldn't accept it is illegal if they haven't been prosecuted) to undercut them because they get to pay less in rates. That, fundamentally, is where the problem is. To my mind, the obvious solution is to get both retailers and wholesalers to pay the same rates, or alternatively, to scrap council rates entirely and collect the revenue through taxes on all goods & services sold (ie. VAT). The only effective way to remove 'loopholes' from the tax system is to make tax systems simple instead of complex.

This isn't some "government of the moment" meddling - this is the way the retail industry has worked for a very, very, very long time.

And I appreciate that. That doesn't mean the system isn't 'wrong' or broken.

I should probably apologise (just a little) for sounding quite so grumpy in the above post.

This particular little act of fraud by Costco really, really makes me mad - so anyone arguing their cause is likely to feel the sharp side of my tongue.

No personal offence intended, you understand.

I wouldn't have taken it any other way Gavin - it's a spirited and lively debate.

Basically, people are selfish - there's not much you can do to change that.

Just a clarification on this point, because cdd is actually wrong here. Individuals are self-interested, not necessarily selfish. Those are two very different concepts. Self-interested behaviour allows for individuals to be altruistic as well - to donate to charity, to offer a seat to a pregnant woman on a bus, etc. This is not the case for selfishness - that is too strict an assumption of human behaviour to credibly make.

[Gavin Scott]

To clarify - Costco legally trade as a wholesaler. They will not trade to anyone without a trade card. That's their policy, and it is checked at the till. Their prices are shown ex-VAT, with VAT added on an invoice at checkout. In the UK, ONLY trade suppliers are permitted to display ex-VAT prices.

They attract business by sending travelling reps round legitimate companies offering trade cards to any individual within that organisation and explicitly encourage "shopping for the home". That's how they put it to me and my colleagues on more than one occasion.

They also explained that, while there, you could pick up an application for your friends to sign up, too.

That's a difficult thing to take to court without people like me reporting the matter to trading standards or the council - but that doesn't mean it isn't happening.

Yes, consumers want to pay the lowest price. A perfectly reasonable thing.

If they want a can of beans at the cheapest retail price in the UK they go to Asda. Asda trade as a retailer, and pay rates for their premises accordingly, and have large numbers of staff in modern, large stores.

But you can buy it cheaper at Costco. Costco pay rates on trade warehouses, with fewer staff and rough concrete floors.

Why should Asda lose the business when they are the model of a modern business?

There is a place for "suppliers to the trade". There always has been and there always will be. Its nonsense to say we can do without. Its not about "propping up" small businesses, its about serving tens of thousands of shops in towns and cities across the UK. There are more independent shops in the UK than there are chain shops and supermarkets. Fact.

The rates model works. It is sensible and doesn't need to be changed.

Some things survive because they are successful, Mr Q. They don't all need to be swept away with "new thinking".

The system only fails when companies cheat. Enforcement and audits may be the answer - not crippling or removing an essential part of the supply chain with a flat set of business rates.

[cdd]

This isn't "tweaking a loophole" this is cheating the local authority out of the rates that smaller retailers have to pay. How can you defend this as some "free market" issue? Its got nothing to do with "free market" economy.

I'm not defending it; I'm saying that under the free market, this is what happens - the consequence of suppliers' desire for high profits and consumers' desire for low prices. The rates difference, and consequent law that only traders may purchase from such places, is an example of government intervention. But it is clearly insufficient if all the onus of enforcement is placed on Costco etc. The law is there precisely to prevent immoral behaviour.

There are a couple of appropriate analogies here. Consider the example of a shop licensed to sell alcohol. Obviously, a key part of this is that the shop may not sell the substance to minors. The shop is giving the task of enforcing this. But it is a task that conflicts with their interests, since a shop will profit by selling alcohol to minors. So to encourage the shop to indeed enforce this law, the government holds the threat of license revocation over their heads. With this threat, it is no longer in the shops' interests to sell alcohol to the minority who try to buy it illegally.

Well, why doesn't the law require the same as Costco, who also have their interests conflicted by being meant to enforce the law about who can shop there, but naturally want to sell as much as possible? Costco should be obliged to carry out more detailed checks, with punishment if non-trade users slip through the net. This is the question you should be asking; not "why does Costco sell things to people who want to pay for them", because it's hard to blame them for that.

You can do what Costco do - pay rates based on being a trade only warehouse and coerce the public into breaking the law by forging an application that claims they are a trader.

Interesting. I've never felt "coerced" into forging applications claiming I'm a trader. If they turn a blind eye to forged or evidently false applications, that is not moral, but neither are the people making the applications. Where there is demand for a product, companies will supply it if they possibly can, and that inludes every legal loophole available to them. It is the consumers' responsibility to be moral and purchase from appropriate outlets; and if the consumers choose to behave immorally (as they, evidently, are), it is the government's job to amend the law to take account of this.

Cheating the system to pay less back to the local authority than "real" retailers is not a legitimate route; and you shouldn't be trying to justify it as a "reasonable" route to extra profits.

It isn't.

This depends on your definition of "legitimate". Do you mean just about legal (allowing people who say they are traders to shop there, with the pretence that they didn't know they were false), or do you mean moral/ethical? Of course, what they are doing is not moral, especially if (as I suspect) they have an inkling that some of the applications are false. But if the government lays out a legal way of making money, organiastions would take it. And it wouldn't be a problem if the "victimised/coerced" (??) consumers you speak of didn't choose to shop there.

Of course, if their activities really are that immoral, you can use the power of free speech - as you are doing now - to condemn them for it, much like what happened with the Nestlé debacle where their immoral activities caused a PR disaster which has cost them inestimable losses. It's not like Costco is the first company to make money immorally. I think cigarette manufacturers are the height of immorality, advertising their poisionous substance until they were banned from doing so by the government. And you might say they are only supplying a demand - well that's what Costco is doing.