Picture credit: New Economics Foundation

The UK's biggest supermarkets are grappling for ever greater market share. Small independent stores and suppliers, and ultimately consumers, are paying a direct price in the face of unfair competition. In the five years to 2002, 50 specialist stores including butchers, bakers, fishmongers and newsagents closed every week. In May 2005 the IGD revealed the loss of 2,157 unaffiliated independent convenience retailers, compared to only 1,079 the year before.

The All-Party Parliamentary Small Shops Group investigated the future of small shops in the UK. Its report "High Street Britain: 2015", released in January 2006, predicted a bleak future for independent shops. The report predicted that independent convenience stores were unlikely to survive by 2015 and independent newsagents were very unlikely to survive. The report argued that the social and economic benefits of diverse forms of retail should be protected. Likewise, a report by the New Economics Foundation (NEF) from 2005, Clone Town Britain, found that chain retailers are damaging to the local economy, social inclusion and local identity.

Small shops are vital for people to access healthy food, in particular disadvantaged groups, and people without cars or with limited mobility. The closure of many small shops has left some neighbourhoods with limited access to healthy food. Please see the food poverty page for more information on this.

What will the future impact of these changes be?

There are concerns that the closure of small shops is a one-way street. Once small independent stores shut, there are often insurmountable barriers to getting back into the High Street. It is very difficult for new businesses to start up. And there are concerns that a tipping point could be reached. Once a certain amount of independent retailers shut, the wholesale industry may no longer be sustainable, and could collapse. The knock on effect of this will be further damage to the independent retail sector. For more information on this, please see the submission from the Federation of Wholesale Distributors to the Competition Commission, as well as the High Street Britain report and the Association of Convenience Stores submission to the Competition Commission.

There are concerns about the way supermarket chains gain an advantage over small shops on the High Street. Their market share gives them a level of flexibility between store formats and over product pricing, and control of supply chains. Smaller shops do not have this flexibility and control.

There is evidence of the large supermarket chains:

• abusing seller power, through practices such as price flexing and below-cost selling. According to the Competition Commission's report on the grocery market from 2000, the big four chains were persistently selling products at below market price. This could damage independents and smaller chains, and in turn damage consumers. This report also found that some of the chains were engaging in price-flexing. In geographical areas with no major competitors, they were selling products at higher products than in areas where they faced stronger competition. The submission by the Association of Convenience Stores to the Competition Commission grocery market inquiry in 2006 found that such practices were continuing.

• abusing buyer power, in particular squeezing suppliers on prices. The larger chains can extract more favourable conditions from suppliers than other types of retailer can. They are able to do this because of their market shares and integrated supply chains. See the Code of Practice page for more information on these issues. The result of these practices can be what is known as the "waterbed effect", when suppliers raise prices for other buyers (including independent shops) as a knock-on effect. For further information on this please see the Association of Convenience Stores submission to the Competition Commission.

• abusing the planning system, because of their superior resources compared to competitiors or local authorities. See the planning page and Friends of the Earth's report Calling the Shots for more information.