Pricing Ethics

Pricing Ethics: Protecting Industry

Most shoppers look for the best value they can find, and this often means choosing the cheapest option. However, a few pence off the retail price can have huge ramifications further down the supply chain. This is where pricing ethics needs considering, in the interests of both supplier and consumer.

One high profile example that is often in the press is the price of milk. Supermarkets have been pricing out the doorstep delivery option through buying and selling in larger quantities, which means they can make savings based on volume. The victims in this scenario are the dairy farmers and distributors, who have experienced challenging trading conditions.

The nation’s apparent hunger for cheap groceries creates a knock-on effect for suppliers, and a lack of funds inevitably leads to falling standards in terms of quality and safety. Fairtrade certification was established in order to provide a better trading environment for food producers in developing countries, but there appears to be no such scheme for farmers in the UK.

Domino Effect

Decent wages for key workers, safe working conditions and (in certain cases) animal welfare can all suffer when supplier margins are squeezed. The supermarkets may suggest that such a situation stems from consumers demanding lower prices, but shoppers will always pay the market rate. It is the driving down of supplier margins that is playing a key role in consumer behaviour.

The inadvertent flip-side to this phenomenon is the added value that is subsequently attributed to quality. In terms of food retail, specialist versions of products have become more prominent such as free range and organic. There becomes a sense of prestige about a product which has been made according to certain practices, and companies are increasingly reviewing their ethical credentials in order to offer consumers a richer brand experience.

Since the rapid growth of imports from the Far East in the last two decades, the concept of Made in Britain has increased its prestige. There has always been an air of quality and durability about British made products, but the connotations go beyond the end product. Issues such as food miles and worker welfare are increasingly important to ethics-conscious consumers, but the knowledge that UK production creates UK jobs is also a powerful promotional tool.

A commitment to quality and ethics can of course translate to intangible products such as logistics. An increasing amount of companies are choosing to put their faith in a transport and warehousing solution that values more than just the bottom line. The concept of value in the supply chain is becoming as much about quality of service as it is about price. However, the UK needs to address the skills gap if we are to increase our output and activity in the supply chain. Immigration’s impact on employment has been a hot topic in recent years but if we simply do not have the drivers, labourers and operatives capable of doing those jobs, then we cannot expect to make progress. An investment in skills could have a huge impact across the supply chain and the economy as a whole.