Q: I run a small convenience store, one of three in our town. In the past couple of months, I’ve noticed that one of my competitors has put products from Lidl and Aldi (located about a half-hour drive away) on his shelves. He doesn’t sell them for much more than they cost in-store – there’s a mark-up of about 12%.
It seems to be doing well for him – people who don’t want the drive out to the big supermarket go there and are happy to spend a euro or two more. I’ve noticed my business is down a bit, and his shop always seems full. I’m wondering if he’s actually allowed to do this, or whether there’s some kind of law against it. If there isn’t, I’m tempted to follow his lead!
A: There’s absolutely nothing illegal about this practice, so long as your competitor is putting the transactions through the books correctly. If he’s part of a larger chain, then they may have something to say about it, but that’s not really your concern at the moment.
On the face of it, the managers of larger supermarkets might get annoyed that this guy is keeping customers out of their stores. However, a sale is a sale, and I doubt they’d be too concerned about where it comes from. Some supermarkets which sell alcohol below cost price have taken measures to stop off licenses from simply buying up their stock, limiting the volume of product that they’ll sell to any one customer. But it doesn’t sound like this guy is buying enough to cause Lidl or Aldi a moment’s thought. My advice would be to say ‘well done’ to this businessperson for trying something new, and consider doing something like this yourself.
It’s worth bearing in mind that, between fuel costs and his own time, reselling stock from Lidl or Aldi at a 12% mark-up won’t make him rich. More likely, it’s designed to simply encourage traffic to the store, where they might buy a newspaper, cigarettes or a more profitable product. So by all means, emulate him if you want, but don’t think that it will make a huge direct impact on your profitability.