The Asda Thread

[Mr Q]

No - don't buy from costco. Apart from the fact that their prices and fare aren't as good as you think - I don't think companies who flout trading regulations to the detriment of smaller high street independents should be supported.

I'm curious Gav - what trading regulations are Costco flouting? Is there some regulation of prices that they're ignoring? Are they mandated by law to only allow certain people onto their premises? Surely it's their choice what prices they charge and who they allow into their stores?

If Costco are helping to deliver lower prices to consumers, I would have said that's a good thing. Small independent shops shouldn't be supported for the sake of it - they need to offer something. If they can't compete on price, then they need to be competing on quality and service. If consumers still don't want to shop there, that's their choice - I've got few concerns if those businesses close. That's the free market at work - or what is sometimes termed "creative destruction".

[Gavin Scott]

No - don't buy from costco. Apart from the fact that their prices and fare aren't as good as you think - I don't think companies who flout trading regulations to the detriment of smaller high street independents should be supported.

I'm curious Gav - what trading regulations are Costco flouting? Is there some regulation of prices that they're ignoring? Are they mandated by law to only allow certain people onto their premises? Surely it's their choice what prices they charge and who they allow into their stores?

If Costco are helping to deliver lower prices to consumers, I would have said that's a good thing. Small independent shops shouldn't be supported for the sake of it - they need to offer something. If they can't compete on price, then they need to be competing on quality and service. If consumers still don't want to shop there, that's their choice - I've got few concerns if those businesses close. That's the free market at work - or what is sometimes termed "creative destruction".

The rateable charge for "trade only" premises are far less than those applied to high street retail premises. Those charges are stipulated by local authorities. Charities, for example, pay significantly less business rates to have a high street shop (rightly so) - although that does mean you'll find a slew of such places littering some areas. Morningside (a posh part of Edinburgh) is a fine example, where you will find dozens of charity shops and little else.

There are other regulations that trade warehouses are not subject to - like disabled access or lavatories, which retailers are forced to provide.

I'm not naive as to the machinations of an open market, you know - but a level playing field this is not.

[Mr Q]

The rateable charge for "trade only" premises are far less than those applied to high street retail premises. Those charges are stipulated by local authorities.

Sorry - I'm a bit confused by this. Which charges are these? Are these the rental rates on the property, a local council tax, or some other fee levied by authorities?

I'm not naive as to the machinations of an open market, you know - but a level playing field this is not.

Agreed - but I see that more as the government's failure rather than Costco's. Costco are simply making use of the regulatory framework to their advantage. The point is not that Costco is perhaps twisting the rules, it's that the rules are there to be twisted in the first place. The level playing field doesn't exist precisely because that's how authorities have set things up.

[Gavin Scott]

The rateable charge for "trade only" premises are far less than those applied to high street retail premises. Those charges are stipulated by local authorities.

Sorry - I'm a bit confused by this. Which charges are these? Are these the rental rates on the property, a local council tax, or some other fee levied by authorities?

"Rates" are the charges levied by local authorities. They previously applied both business and residential addresses, although the latter was changed to the "Community Charge (Poll Tax)" and latterly to "Council Tax". These are the monies collected for things like waste disposal, drainage and other community services. Businesses still pay "Rates".

I'm not naive as to the machinations of an open market, you know - but a level playing field this is not.

Agreed - but I see that more as the government's failure rather than Costco's. Costco are simply making use of the regulatory framework to their advantage. The point is not that Costco is perhaps twisting the rules, it's that the rules are there to be twisted in the first place. The level playing field doesn't exist precisely because that's how authorities have set things up.

No, this is nothing whatsoever to do with a failure of Government. This is to do with deception and fraudulent activity on the part of Costco, Macro and other "trade only" warehouses.

The rules are perfectly straightforward. These places are charged on a lower rateable value per square foot band on the basis that they serve retailers who bulk buy. Their premises are obviously very large for that reason. Lower overheads mean lower prices and therefore realistic margins for retailers.

These places are not open to the public. If they were they would have to conform to the regulations of retail premises and provide access and facilities for them. That's why you need a membership.

Membership is extended to public and private companies and sole traders - and its the sole trader aspect which is abused.

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.

I believe small businesses must work hard for their custom - offering service and aftercare where they cannot compete on price. But it is impossible to compete when your overheads are *at least* one third greater as a retailer and you find your own customers in the queue ahead of you buying homewares and the like from your trade supplier.

I have a lot of experience in this regard. I worked for many years in a family business and often watched customers of ours buying at wholesale price that which they could purchase from me at retail price. House of Sher and Sulleman Brothers were two of the warehouses packed with the public. I witnessed them forgoing the "£50.00 minimum spend" tens of times as punters bought individual items for pennies.

If Costco want to pile it high and sell it low to Joe Public, then so be it - but they should be paying retail rates to do so.

[lukey]

I'm not an economist, so anything I might say on this subject might be completely trite, but it seems to me that if there is an artificial distinction between retail and trade outlets made in how rates are charged, and certain segments of the buying public are quite happy to crawl around pallets in warehouses with stark lighting to save some money, than that suggests the 'actual' shopping paradigm isn't aligned with the 'artificial' one that the law has tried to create. The long-standing retail paradigm is dating so rapidly that maybe it needs to be threatened like this, and that distinction should be dropped?

[Gavin Scott]

I'm not an economist, so anything I might say on this subject might be completely trite, but it seems to me that if there is an artificial distinction between retail and trade outlets made in how rates are charged, and certain segments of the buying public are quite happy to crawl around pallets in warehouses with stark lighting to save some money, than that suggests the 'actual' shopping paradigm isn't aligned with the 'artificial' one that the law has tried to create. The long-standing retail paradigm is dating so rapidly that maybe it needs to be threatened like this, and that distinction should be dropped?

The public would be happy to rake through skips to find a product at the lowest price - but that's not really the point. There seems to be this notion that the public are entitled to get things without paying.

Services have to be paid for. This is a civilised society. Our streets need to be swept, bins emptied, street lights lit and so on. These things come from (in part) the rates paid by businesses.

Those punters who think nothing of getting hold of a trade card to buy at wholesale price are the same ones who complain about getting their bins emptied every two weeks instead of weekly. They also complain that there's "no decent shops" in their town - but that's after they drive a 12 mile roundtrip to go to a mall to pick up £20.00 worth of messages.

You just can't have it both ways.

Should business rates be reduced for retailers in town centres? Almost certainly. That would mean that where there are no shops currently we might start to see them, and it would also stop the homogenised carbon-copy shops we do see monopolising every mid-sized town. Only the large players can now afford to populate such towns.

The Federation of Small Businesses have been campaigning for this for years and years. Lip service is paid by politicians on the matter, but there hasn't been a significant change for decades.

To be honest, its not as big an issue for me as it once was. I saw my aunt and uncle's business slowly die as the costs increased each year and shopping traffic moved to the out of town centres in either direction of the town. He passed away last year, and his son and daughter had to recognise that shopping in small towns died with him.

But I'll be in the cold, cold ground myself before I let anyone persuade me that companies like Costco are "innocently stretching Government loopholes".

They're crooks - and they fucking know it.

[Finn]

When I was in Canada I noticed the Wal-Mart I went in had a McDonalds in it, I may have even dinned there.

As long as you didn't attempt to eat there...

[Mr Q]

I believe small businesses must work hard for their custom - offering service and aftercare where they cannot compete on price. But it is impossible to compete when your overheads are *at least* one third greater as a retailer and you find your own customers in the queue ahead of you buying homewares and the like from your trade supplier.

And this comes back to my point - the issue here is what the government is doing. It is charging Costco one charge and your local retailer something else. And for what end? What really is the justification for doing that? All it does is create an unlevel playing field that is inevitably going to be taken advantage of by firms that are in a position to do so. Again I make the point that this has very little to do with Costco and everything to do with bad government policy. They're the ones who've created this abstract distinction!

I'm not an economist, so anything I might say on this subject might be completely trite, but it seems to me that if there is an artificial distinction between retail and trade outlets made in how rates are charged, and certain segments of the buying public are quite happy to crawl around pallets in warehouses with stark lighting to save some money, than that suggests the 'actual' shopping paradigm isn't aligned with the 'artificial' one that the law has tried to create. The long-standing retail paradigm is dating so rapidly that maybe it needs to be threatened like this, and that distinction should be dropped?

As far as I'm concerned, that is 100% correct.

Services have to be paid for. This is a civilised society. Our streets need to be swept, bins emptied, street lights lit and so on. These things come from (in part) the rates paid by businesses.

Sure - in which case, why aren't all businesses paying the same rates? Why are some businesses charged one fee because they are notionally 'retail' and others charged something else entirely because they are 'wholesale'?

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. 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.

[Gavin Scott]

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.

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 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.

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.

I appreciate you putting your tuppenceworth in on this matter - but your suggestion serves no one - and definitely not small retailers.

Wholesalers get the benefit of a lesser levy on their premises as they are, in essence, a holding place for retail stock. A "warehouse", not a "shop".

This system has worked for 100 years.

It doesn't work if that position is abused by wholesalers who cut out the middle man.

Then they are just "shops".

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.

[Gavin Scott]

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.

[wells]

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

http://www.asda.co.uk/corp/asda-fm.html