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The Canberra Times
The Canberra Times
Brittney Levinson

Inquiry to scrutinise market power of Bunnings, Ikea

It's been almost 10 years since Ikea moved into Canberra, bringing its signature Scandi furniture to the masses at affordable prices.

More than 12,000 Canberrans attended the opening and still today it's not unusual to see the Majura Road store's car park almost packed.

The expansion of major retailers like Ikea has been a win for many shoppers, but small businesses such as Marco Furniture in Fyshwick have been forced to adjust in order to survive.

Operations manager Murtaza Ameer said the independent furniture shop could "never" compete with the prices offered by large retailers.

"It has actually, definitely, [taken] a percentage of the share from the local businesses," he said.

And it's not just Ikea shifting business away from an independent furniture store; Bunnings and Kmart have also expanded their product mix to offer items including desks, bar stools and outdoor furniture.

"We have actually discontinued outdoor [furniture] because there's no way that [we are] competing against the big giants," Mr Ameer said.

Marco Furniture operations manager Murtaza Ameer says it is impossible for small businesses to compete with 'big box' retailers. Picture by Gary Ramage

The price setting and market power of large-format retailers, also referred to as "big box" retailers, will be scrutinised in a fresh Parliamentary inquiry.

A Senate committee is exploring the role of big box retailers in Australia, with a focus on their negotiation practices, use of market power and how they engage with suppliers.

'Not physically possible' to compete on price

In a bid to differentiate, Marco Furniture steers clear of "trending items" that would likely be sold at a large retailer for far cheaper, Mr Ameer said.

For example, Marco Furniture is selling a tan-coloured bar stool for $289, down from its recommended retail price of $399.

Kmart sells a similar, low-cost version for $49.

"It's just not physically possible that we can sell it for that price. So you just discontinue that product," Mr Ameer said.

Ikea, Bunnings, Dan Murphys make submissions 

The committee only received about a dozen submissions for the inquiry, so it is unlikely to be as comprehensive as the ongoing supermarket inquiry, which reached its halfway point in September.

However major players such as Ikea, Bunnings and Endeavour Group, which owns Dan Murphys, have provided comments.

In its submission, Ikea said the average length of its relationships with suppliers was 11 years and they must all sign up to a supplier code of conduct.

It said price negotiation and supplier engagement practices can differ.

"Inter IKEA Group makes sure that the unique IKEA range is produced at the right time, right volume, right quality, and at a low cost to an ever-expanding customer base," the submission read.

Marco Furniture operations manager Murtaza Ameer welcomed a parliamentary inquiry into price setting by major retailers. Picture by Gary Ramage

The Australian Competition and Consumer Commission said in its submission big box retailers can acquire "significant market power" through large-scale operations and extensive supplier networks.

The Large Format Retail Association urged the committee to take a "balanced approach" to the inquiry to avoid "unnecessary regulatory duplication and overreach" and preserve consumer choice.

Meanwhile, the Australian Retailers Association said it was concerned by the "unprecedented political scrutiny" on the sector, which it said was undermining confidence in some of Australia's most trusted brands.

The Senate committee will also look at whether big box retailers that sell grocery items should be included in the grocery code of conduct, and inquire into the acquisition and use of land.

A public hearing is expected to be held before the committee's report is handed down in February 2025.

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