f+v retail primer – lessons from Greece
Greece has suddenly become famous and important. Following musings culled from a fairly recent study compiled by ‘International Food and Agribusiness Management Association’ might offer some lessons for fruit and vegetable retail anywhere.
Looking at expenses in f+v retail, the biggest cost is the purchase of goods bought for resale. This cost is highest at 82.9% in Greece. Expenses for wages and salaries also vary widely between countries. This expense is on a very lower side, a mere 3.4% in Greece. Other expense (which includes rents or lease payments) is also lowest in Greece at 5.6%. Overall, total expenses amount to between 92.0% of operating income. Consequently, Gross margins are just 17.1 % and operating profit margin is 8% of operating income. The apparent gross profit (in monetary unit) per shop earned is also lowest in Greece.
Now juxtapose above information with other fact that Greece has one of the highest densities in the world for f+v exclusive shops and the number of shops is still increasing. Lower gross margin (17.1%) can probably be explained by the higher F&V shop density in Greece, which results in higher competition and thus reduced pricing power for shop owners but increasing the bargaining power of suppliers. This perhaps explains high cost of purchase of goods – too many shops competing for same goods.
From a consumer’s point of view, however, such the Greek situation may be ideal – many shops and low prices, which may partly contribute to the high per capita F&V consumption rate in Greece, which was one of the highest as per 2003 (the most recent available year) FAOSTAT consumption data across the world.
It has been strongly argued that there may be a link between a country’s retail system and its f+v consumption level. Greece demonstrates that. The more highly differentiated the supply structure of F&V, the easier it will be to consume them, provided no other constraints such as low incomes or high prices exist.
Now what are the lessons here?
Tags: