Komosinski:
By : Magdalena Wierzchowska
Super- and hypermarkets, still a new phenomenon in Polish shopping, emerged at the beginning of the 1990s and immediately caused controversy. Supporters praised the extended business hours, low prices and "all in one place" buying that distinguished the large multinationals from small, privately owned concerns. Opponents accused them of price dumping and unfair competition. Jacek Komosinski worked as a deputy head of the competitive intelligence department at Geant Polska from 1997-1999. He talked to the WBJ's Magdalena Wierzchowska about what goes on behind the scenes at supermarkets and how they can afford to charge lower prices. The following is a translated, edited version of their conversation.
Q: Is it true supermarkets make an enormous amount of money? What was the turnover of the supermarket you worked for?
A: I can give you data only for the period when I worked there. It fluctuated. For example, January and February were 'dead months' during which the shop often had losses. However, before Christmas people were going crazy with shopping and the turnover was enormous. Before Christmas Eve 1998, in one day, a store in Ursynow had a turnover of $1 million, which put us in the fifth position for all French hypermarkets around the world. Yes, the turnover is enormous, because every day there are about 8,000 clients coming and going.
Q: What is an average that one person leaves at a supermarket? What profit does this bring?
A: It varies depending on the month and day. Within one month it was zl. 100-zl. 130 spent by one person, in one so-called 'basket.' As far as profit is concerned, in September 1998 a hypermarket earned zl. 0.17 on a basket worth zl. 115.
Q: That's not much
A: It's not so little either. The French calculated that hypermarkets would start bringing a profit after 10 years. In the Polish situation, investments in the hypermarket in Grochow paid back three years after its opening. That's because they pushed all the small retail shops that used to be around out of business, all these bazaars and fairs near residential areas. They all died.
Q: Small retailers complain of dishonest competition. Do supermarkets use their position in an unfair way?
A: In my opinion, supermarkets don't create any monopolistic structures here. I think they are a positive phenomenon. It's simply a different form of trade. There used to be fairs in the villages one could go and buy everything in one place. Now there are supermarkets.
Q: How are the prices set in hypermarkets? What makes them so comparatively low?
A: One has to realize that a whole team of people with enormous experience works on this. In France and the rest of Europe immense hypermarkets began to spring into existence at the beginning of the 1970s, that's why there is such a wealth of experience. Hypermarkets, because they are networks, have enormous capital. When, for example, there's a slump in market prices due to a production surplus, they (hypermarkets) take advantage of that straightaway. And as they have immense warehouse space, they can store the goods. Later, a big chunk of the commodities bought some time earlier can be dumped on the market at an almost shocking price. Already, they have a profit of, let's say, 20%. But this is basically for promotion, encouragement. It is connected with an entire advertising campaign encouraging the purchase of one kilogram of sugar at a particularly low price. However, hardly anyone comes to a supermarket to buy one kilo of sugar walking along the aisles, people pick up more and more goods. On the other hand, what I have frequently witnessed, for example, when sugar was at a particularly low price (in the hypermarket), there was a sudden increase of the price of sugar on the market. Then people would come to Geant Ursynow from across the country and buy sugar for wholesale prices.
Q: I've heard comments that the prices at the company you worked for are at a dumping level.
A: Sure. Let's go back to the example of sugar. The wholesale price of a kilo of sugar, let's say in May, was zl. 1. In August, the government-set price was zl. 1.55. The hypermarket was selling it for zl. 1.20. It only waited until all other chains increased the price to the government-set level and then immediately advertised, for example, on the radio, that they have sugar at this and this price. They had such substantial reserves that they could maintain the prices for a week, but the provisions were bought out within three days.
Q: What do the producers think of that?
A: A producer has received payment. He has received cash, which was the most important thing for him, and he got rid of his goods.
Q: Do hypermarkets have low prices for all their goods or do they only create an illusion of low prices?
A: Since they are mammoth warehouses, hypermarkets can afford to lower the prices of 50-60% of their goods. Usually the reductions in prices apply to goods that aren't moving. That influences the consumer's psyche. People are visualizers, so, when they see banners everywhere claiming 'fantastic promotion,' and the higher price is crossed out with the lower price given next to it, they go for it. It does sell. This happens to all food products approaching their expiration dates. Prices for them are lowered, big promotions are arranged, the goods are exhibited in such a way that a person literally trips over them. It's a very efficiently planned action aimed at making the customer buy.
Q: What is the process of product placement in a hypermarket?
A: There's a special section and a special department of buyers. They decide whether to buy a given product or not. The quality of the goods doesn't matter, as in most cases the products are good for nothing. Only it's at a ridiculously low price. It's because Poles undervalue themselves. What they only care about is the prestige, placing their goods in a hypermarket to be able to say later, 'I place my goods in this and this supermarket.' They are capable of paying huge amounts for it, even if that means losing money. It's the buyers I have mentioned that decide which suppliers' goods will be on the shelf. As a head of security, I knew perfectly well, although it has never been proven, that suppliers complained that they handed over an envelope (containing a bribe) and their goods were not placed on the shelf they wanted. They didn't realize that they had only arranged for the goods to be introduced to the hypermarket. But how it would be placed on a shelf and in which spot it would be was for the heads of the given departments to decide. Apart from that, there are so-called 'motivating prizes' and 'motivating thank-yous' handed to the heads of given departments by suppliers.
Q: Who decides about promotions the producer or the hypermarket?
A: There are two kinds of promotions. Promotions in hypermarkets stand for the price reductions I have talked about. Promotions also mean new wares exhibited by the producer or supplier, combined with a sampling. So, as far as the latter is concerned, a producer or a distributor makes a decision. A big company buys out a place in a supermarket at the end of the main aisles. These locations are exorbitantly expensive. Apart from paying, (a producer or supplier) has to behave in a servile way. A department head can cancel the promotion, which often happens. The competition contacts the head responsible for a given department and, for example, the promotions disappear, although they had been paid for. They would disappear under the pretext that a salesgirl stayed on her cigarette break for 30 seconds too long or that her smile was not quite right, or that a client complained. At that point, a promotion would be removed from the area of a hypermarket and another promotion introduced. Everybody knew about these procedures merchandisers, supervisors. It's like that in every hypermarket.
Q: Has it happened that the goods that were on promotion had passed their expiration dates?
A: No. On a promotion, commodities cannot have passed expiration dates. However, very often goods are sold on the verge of expiration dates. We have to realize that supermarkets can't afford any scandal connected with food as their sales will quickly drop.
Q: Do supermarkets cooperate or fight with each other?
A: When I began to work (in 1997), there was a fierce fight between chains such as Auchan, E. Leclerc and Geant. When Carrefour opened, there was an informal ceasefire between these networks. It doesn't mean that they agree on prices. Rather, it's an agreement not to 'give each other problems.' Nowadays the competition is becoming more and more healthy. It's not a fight, but simply a race for a client. Because the chains don't compete with each other.
Q: What was the attitude of the hypermarket to the employees when you worked there?
A: The French lured employees from whom they needed something with promises. Then they squeezed everything out of them and threw them away. The average duration for employment of a manager was one year, a year and a half was for a really tough person, two years that was a man of steel. Or a stupid man. Supermarkets, in my opinion, are modern enclaves of slavery taking advantage of massive unemployment and the need for work at even the lowest wages by people from the job market outside of Warsaw. They are lured with the promise of a permanent contract, while a day before the end of the probation period they are simply sacked without cause. At the same time, information on them is stored in the database and when a period of intense shopping before Christmas comes, they are offered employment again. And people agree. Especially the people living farther from Warsaw, 50-60 kilometers away, where special buses are sent to fetch them to and from work. They are employed at the lowest possible rates and they work very hard. During the intensification of a weekend rush a cashier is really exhausted after eight hours of work. When she stands up from her till, and there's a queue and no alternate for her, and she says she's finished her work, she often hears, 'Listen, darling, you may finish working here permanently.' A poor woman has two choices: she'll either leave and may be crossed off the payroll or she'll sit down to continue working. The average shift is eight and a half to nine hours. At the same time, they are not paid for overtime. If more hours add up, possibly they may be regained in the shape of a day off. (However), it happens very rarely. It is the employer who has rights; the employee doesn't have the right to anything. He only has the right, or rather the duty, of work.
Q: What are the rules on employees working on weekends?
A: Nobody treats a weekend day as a holiday. If your shift is on Sunday, nobody will pay for it as a holiday. This is caused by a gap in the Polish law.
