Put simply in our business the key drivers are gross profit and net profit (return on investment).

When we  get a discount on our products from a supplier our gross profit increases if we sell the product at the same price or if we put the product on special and we maintain our gross profit but are able to sell the product cheaper so the customer wins.

If we are to receive a reduction in indirect  costs ie reduction of penalty rates, it means our net profit should increase on a permanent basis.

However the major retail chains are driven by profit and GROWTH and this is especially evident with the recent growth of Aldi and the heavy discounting by the major retail chains to maintain market share.

So one of the likely outcomes of the recent  penalty rates decision is that the major retail chains will take a large chunk of that reduction in costs  handed to them and put it into price or more specifically a price reduction to the  customer.

Why will they do this , because they want to maintain or grow their MARKET SHARE,  this is what they have been doing for the last few years so there is no reason to think they will not continue with this strategy.

That means that the new found gains in net return will largely disappear and that  means they major retailers will not really any better off and small supermarkets like mine aren’t either.

So in the end 

The customer will benefit from some cheaper pricing 

Retailers have lowered their costs but really only maintained  their profitability And retailer workers they have just lost a whole heap of income………………………………

I wonder who really wins in the end.

Yours in free thinking and market economics.

John Bishton CPA

Bingara