Letter from China – No: 4

Shops open late in the evening and during the weekend? Enjoying a big choice of restaurants on Sundays and on public holidays? Service minded owners? Smiling staff in shops and hotels? Affordable prices for ordinary folk? Finding a reasonable job and agreeing with the owners on a fair wage easily? These are really available here in Hainan, but they are the sorts of things we dream about in Finland. Here in China, I asked my hosts why the shops are open every day and so late. Weren’t there rules and regulations limiting opening hours and labor markets? She replied, “The owners care about doing more business. They want to make sure that clients are treated well and that prices are fair. They will quickly go out of business if they treat their staff badly or if their quality and service standards are poor!” You will recall that Aitokauppa and Eat&Joy did not last long with their 5 or 6 shops in Helsinki and Anton&Anton have changed their ownership structure once. A&A are now owned by Heinotukku, the big wholesaler, who has deep pockets… Newcomers are not able to compete with innovative new food stores when K and S shops have swamped the market with over a 60% market share. Within 1 km of my apartment in Helsinki we have over 15 of their shops! But more importantly just think about their structure and behavior of S and K. They employ hundreds and thousands of people. How many shop-workers are motivated to make improvements or introduce new ideas? The great majority of staff cannot even agree on their own salary. That is fixed by the trade unions! It is a feudal system that encourages nothing more than average service. Yes they are fine people but they are very far away from being entrepreneurs. Even the bosses of these shops are owned by K and S. They have to work hard and seldom can enjoy the fruits of ownership. I am not saying anything negative about these people – I am just saying that the dominance of S and K, and other monopolies, has reduced the entrepreneurial spirit, innovation and results in higher prices. Finland has some of the highest food prices in Western Europe when compared to real wages. And that brings me to the next big problem. These 2 groups can openly tell stories to an eager media that they are reducing prices or that Finland has some of the cheapest food in Europe! The press are keen to write about them and they get wide coverage even though some of their claims are nonsense. S group has only lowered a small number of strategically chosen products. K openly makes misleading statements about how Finland enjoys some of Europe’s lowest food prices. Both are put to shame by LIDL. Finally, as seen above, these 2 can kill the competition really easily. The only ones that can last are those with deep pockets and staying power. We have seen that the present government is trying to protect Valio by claiming a “national interest”. The European Commission was adamantly opposed to any kind of competition protection. Is it in the national interest that the competition authorities do absolutely nothing about these dominant market shares? Of course not. Change is unacceptably late in arriving.