Anyone interested in trade or retail knows that to get onto a retail chain’s shelves, you have to pay “to get in”. The bigger the chain, the bigger the so-called “bonus”.
At first glance, this scheme looks like a disgusting example of corruption.
Let’s figure out what’s actually so bad about these kickbacks.
Suppose we’re opening a grocery supermarket.
We design the project, the layout of departments and shelves. We have 1 meter of display space for vodka, which fits only 15 kinds. And there are 100 brands that want to get onto our one-meter shelf. Hmm, what do we do?
We have only one option: pick the most interesting offers. Say we throw out half as low quality and below our level (our price segment). The remaining 50 have to compete somehow for 15 places. Naturally, we hold an auction… What else? Sure, we could choose to our own taste… But isn’t it stupid to pick someone for nothing when someone else with practically the same product is ready to pay us for the place?
So what’s wrong with completely voluntary bonuses for shelf placement? What’s wrong with shelf space having started to sell products, and therefore being treated as a marketing tool, as a product in its own right?
When companies buy TV advertising, nobody shouts “Kickbaaacks for interruptiiing our soap operaaa!”
It’s bad when it happens behind management’s back: the chain’s buyer takes money from a supplier and pockets it. But that’s his management’s problem! They turn a blind eye to these kickbacks. Or does anyone think the CEO is such a fool he won’t notice his buyers have switched to Bentleys?
So why do people try to present this scheme as corrupt? Apparently, to justify yet another government intrusion into private business. Because it suits the state to keep up the image of the “evil capitalist machine” which, if nobody stops it…
This immediately brings to mind the politician Mikhail Brodsky and co., with their claim that supermarkets use the single tax, Ukraine’s simplified tax for small businesses, to avoid taxation, and so the single tax should be abolished. Splendid logic!
The socialists’ main argument against these wicked bonuses is that the huge sums supposedly land on consumers’ shoulders.
OK, and the 1% markup on so-called “social goods”, the price-regulated staples: on whose shoulders does that land?
It really is extremely hard for your average proletarian to grasp how chains cross-subsidize product groups internally. And so it turns out that supermarkets are evil and capitalists are exploiters.
Onward, guys, keep it up!