Buying Group Aims to Reduce Prices at Small Groceries

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Will prices at your neighborhood grocery be coming down soon?

There's a good chance they will, now that around 2,000 corner stores have banded together so that they can obtain quantity discounts from suppliers through one of the big discount supermarket chains, TheMarker has learned.

Eli Stavi, founder and chairman of the Grocers and Food Forum and a Knesset candidate representing the Tzedek Hevrati party, said the goal of the new organization is to enable mom-and-pop stores to get the same terms from suppliers as the big supermarket chains.

Small grocers cannot offer low prices; because of the small inventory they carry, suppliers charge them high wholesale prices. The typical small grocery store charges at least 20% more on any given item than a discount supermarket chain.

The forum is still in the process of registering as a nonprofit association, but it has already begun negotiations with the leading discount supermarket chains, including Rami Levy, Hamashbir Lezarchan's Cost 365 and Co-Op Israel. Rami Levy confirmed he was in talks with the group, saying, "As soon as the idea is put into concrete terms I would be happy to cooperate with them." Levy added: "Right now I supply merchandise to about 400 grocery stores in Jerusalem and environs."

The goal is to pick one of the chains to act as wholesaler for the group, buying from importers and manufacturers. The supermarket chain will profit from the price differential and from the increased buying power it gets from purchasing on behalf of thousands of small grocery stores.

"The group will bring together groceries, mini-marts and small supermarkets as a single buying group," Stavi explained. "Every retailer that wants to join will join a big network that will purchase goods with better terms than any single small grocer could obtain."

Stavi estimates that once the buying group begin operations, grocers will be able to cut their shelf prices by 10% to 15%, starting as soon as March. That would make it possible for mom-and-pop grocers to compete on price with the neighborhood supermarket outlets of Super-Sol and Mega Bool as well as with the AM:PM 24-hour mini-marts.

Reducing VAT on food is a slippery slope.Credit: Ofer Vaknin