The Commerce Commission’s radical proposal for a state-sponsored grocery chain is similar to Kiwibank, which was created to address a similar lack of competition in the banking sector

OPINION: The Commerce Commission’s much needed report on the duopoly of the supermarket sector in New Zealand has brought outrage and anger at the contribution this system makes to our high cost of living and the effect this has on well-being in our vulnerable communities.

The commission has come up with some good ideas on how to bring this situation to an end by, essentially, making it easier for competitive entry and legislating retailer business practice.

However, there is third option described and that is the idea of a ‘Kiwishop’. This idea follows a model similar to our state-owned Kiwibank which, you may recall, came about through the need to address similar competition issues in the banking sector, or rather lack-of-competition issues.

Set up correctly, the Kiwishop idea has even more potential to impact positively the morale and well-being of our nation.

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This is how it could work. Firstly, the Kiwishops would be more warehouse and distribution centres than actual retail shops. This would reduce fixed costs and would mean large warehouses could be set up in lower cost real estate areas. For example, some could be sited in rural communities and in the regions where options and access are the most limited and where green-grocery staples would be grown nearby.

Second, being a distribution centre also aligns with constantly growing online retailing trends. Customers would be able to order their groceries online and choose click and collect, or mid-sized delivery trucks could group and deliver a number of orders to designated pick up points, perhaps near Kiwibank parking lots. The distribution centres could still have a small retail space ‘upfront’, displaying the products available ‘outback’, either physically on shelves or in catalogues, digital kiosks, or both. This means people without access to online retail could still shop physically.

Third, the staffing and running of Kiwishops, where multiple roles would include: delivery truck drivers, shelf stackers, till operators, pay roll, warehouse manager, property managers, marketers, website maintenance, security, group managers, could be recruited directly from WINZ. Welfare payments could be contingent on fulfilling job roles/tasks at the Kiwishop or bonus payments could be added to existing welfare payments. The Kiwishop could be a fantastic training centre for vocational upskilling.

We could go one step further by incorporating Kiwicafes into each location to showcase local produce at its finest and provide an additional training ground for hospitality.

Fourth, other aspects of welfare could be structured in a way providing more ‘bang for buck’ at the Kiwishop. For instance, a proportion of the family assistance package could be converted into more valuable credit. For example, if a family currently gets $400 in money from Work and Income, this should be converted to $450 Kiwishop credits, so families are incentivised to purchase healthy staples from the Kiwishop.

Fifth, suppliers could also be incentivised to sell first to the Kiwishop, rather than overseas markets, since the Government would have a number of levers to pull such as tax credits in exchange for stock and guaranteed minimum orders. This would all be possible because the government would have a guaranteed market of end consumers (through affiliation with Work and Income).

Sixth, we have all heard how hard it is for innovative niche players to enter the market due to the saturated retail scene. Here, Kiwishops would provide shelf space and test markets for innovative new Kiwi products. Successful products would then be directed to New Zealand Trade and Enterprise, hopefully creating new export products to bring in more money for the nation.

Finally, the Kiwishop would need to operate like any other public service. The point would be not to make a profit; the point would be to utilise and leverage taxpayers’ money to create infrastructure that benefits and elevates the well-being of the entire country.

Of course, neoliberals and the opposition party would argue that government should not get involved in yet another aspect of our lives. But the argument against such opposition is that the current ‘privatised’ profit-driven system is not delivering value to citizens. Governments need to step in when systems fail, or when the profit incentive of the major players result in poor levels of wellbeing for the population. That’s why governments get involved in public housing, public transport, public education, and public health. So why not try public retailing?

This model does not exclude the privately-owned franchised supermarkets, it simply provides another option. People can still shop at Countdown and New World which are likely to offer more variety than a state-owned system where the emphasis would be on the basics and necessities required to live a healthy life. So obviously no cigarettes and other products proven to be detrimental to well-being, for example, fizzy drinks. There would also be a focus on New Zealand goods and, where possible, from local growers and producers.

Some people would be incentivised to get their staples from the Kiwishop, for example through Work and Income Kiwishop credits and others would choose to it as a cheaper option, which means more disposable income to spread around the economy!

So, for the majority of people already paying tax, wouldn’t you like to see more of it being used to create real value for everyone? Maybe this is the time to look at an inventive new model that moves us out of this high-cost duopoly and into a system that gives a better deal to shoppers, suppliers, producers and growers – and that helps beneficiaries too.

As Associate Professor of Marketing at University of Auckland Business School, Dr Michael Lee is an award-winning teacher of marketing strategy, marketing research and consumer behaviour.

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