Price competition in supermarkets in Malta

Abstract

The relatively new phenomenon in Malta of large-scale supermarkets looked set to be a surefire success. Yet, many supermarkets faced great problems. Many of the problems stemmed from the fact that the supermarket system had no proven track record in Malta. It is a relatively new business. It seems that success can only be achieved with a very large turnover, given the tight operating margins. After all, the reason that supermarkets dominate the grocery trade is that they offer the consumer lower prices. The concept used in the supermarket system is to bring down prices and offer the consumer a better deal, thereby ensuring a great deal of business. The aim of this dissertation is to analyze the supermarket sector, paying particular attention to how supermarkets undertake pricing in order to attract custom. The main focus is price competition. Yet, supermarkets cannot play around with prices all the time. Therefore, non-price competition will also feature in the analysis. Since there are many supermarkets in Malta, a sample of fifteen will be taken, consisting of the largest supermarkets in the industry. The analysis will be based on questionnaires for this sample of supermarkets. A sample of fifteen products will also be taken to indicate different prices from different supermarkets. Competition surfaces in many forms, the most obvious being price and non-price competition. Price competition, the main focus of this dissertation, occurs in 90% of the supermarkets included in the survey as indicated by the price variations between all the supermarkets.