In the past decade, chain stores have sprung up like mushrooms in both big and small cities. Some of these stores are affiliated with large domestic holdings, while others have been established with foreign investment. Due to the alarming inflation, especially in the food sector, and the price difference of products offered in chain stores compared to small stores, a high percentage of people have been encouraged to shop at these stores. This text examines the damages caused by this phenomenon.

Some may consider the existence of these stores beneficial for the economy due to reasons such as cost savings from scale, but it is possible to refute these reasons by focusing on the existing political economy. This text discusses this recent topic.

History

In 1328, the cooperative store “Sepah” was established as the first chain store in Iran and a manifestation of consumerism during the period of urban growth. After the revolution, stores such as “Atka”, “Qods”, “Shahrvand”, and “Refah” were also established with government ownership, but due to the special circumstances after the revolution and the inappropriate structure, they did not receive widespread public acceptance. However, in recent years, the trend of establishing high-speed chain stores has been increasing, to the point that they are swallowing up small retailers. Domestic examples of chain stores include “Kourosh” (affiliated with Golrang Holding) and “Haft” (affiliated with Golestan Commercial Group), while “Hyperstar”, “Hyperme”, and “Carrefour” are among the foreign-invested stores that have gained a special position among the people through extensive advertising.

Statistical evidence

According to statistics provided by Fakharian, the head of the national union of chain stores, there are currently 2,450 chain stores across the country with a total area of over one million square meters. Out of this number, approximately 400 chain stores have been established with foreign investment and around 25,000 people are directly employed in chain stores. Although there is no accurate data on the share of retail sales in the country’s distribution system, it can be said that based on the financial turnover of chain stores, which is 15 trillion tomans, the share of chain stores in the distribution system is approximately 10 to 15 percent. The share of online retail sales in the market is also around 4 to 5 percent of the total retail market.

Promotion of consumerism

It can be said that in today’s societies, almost all needs, desires, and preferences of consumers are formed in specific historical conditions. The products available on store shelves, their prices, the social and economic status of consumers, marketing of products, and cultural and social habits shape these desires. For example, in the 1870s, automobiles were not at the top of the list of essential goods for American consumers, but today they are one of the essential products for consumers around the world.

One of the functions of chain stores is also this; creating demand for a product that has been produced or achieving the same saying “supply creates its own demand”. Chain stores display a variety of attractive, stylish, diverse and colorful products on shelves for consumers to see, and many of them claim that they do not need or did not intend to buy a large portion of the products they have purchased. Encouraging more consumption is the most important function of chain stores. In fact, when consumers are faced with a collection of products with different brand names – which have little difference from each other – they may feel that they have the right to choose. The advertising industry tries to ensure consumer loyalty to a brand name with very subtle differentiations.

Monopoly on growth

Chain stores, with a focus on capital and workforce, bring a heavy blow to the structure of local economies and lead to record production workshops. Karl Marx explains why capital tends to concentrate more over time, citing two structural reasons: first, in times of crisis, stronger units grow larger by swallowing weaker units. Second, the displacement and concentration of society’s savings through institutions such as banks and stock markets facilitate the concentration of capital in larger units.

The gradual growth of chain stores in Iran over the past years can also be interpreted as an increase in monopolistic power due to their strong bargaining power with producers, bulk and direct purchasing, and ultimately high profit margins. This is why no small retailer can compete with them.

Unfair competition

Other tricks, such as offering discounts by reducing the volume and quality of goods, create unfair competition between themselves and other small stores and gradually drive them out of the market; also, listing prices higher than the actual price with the cooperation of the manufacturer, price difference between the barcode price and the price listed on the product, and increasing prices under the pretext of packaging are other tactics used by these units for higher sales and profits. All of these factors lead to unfair competition between large and small local stores and ultimately contribute to a recession in a significant portion of the economy dependent on the free market and the economic well-being of this sector.

Existence of conflict of interest

Large companies, through their financial power, regulate laws in decision-making centers through lobbying in a way that maximizes their profits and benefits. It can be said that large companies influence laws and regulations through their financial power and change political and social equations in their favor. For this reason, there is a need for some non-governmental public institutions to mediate between them and the government. The government can also benefit from these stores by collecting taxes.

Investment in workforce

One of the important issues about chain stores is the disregard for workers’ rights. Women are the cheap labor force in these stores; workers who many people see as carefree employees in hypermarkets and supermarkets, unaware of the long working hours, low wages, and hard work hidden behind the colorful facade of these stores. Not only in Iran, but evidence of similar cases in foreign chain stores is also available.

As an example, the real wages of workers at Walmart are low and, considering Walmart’s influence in this sector, it will probably become even lower. Currently, Walmart controls twenty percent of all grocery sales in the United States and this share is increasing. The anti-union policies of these companies are policies against wage increases and overall have an impact on the retail sector in the United States. Other supermarkets have no choice but to find ways to reduce their labor costs in order to compete with Walmart. Currently, Walmart has four thousand branches in the United States and its policies have greatly harmed the rights of union workers.

Summary

Although the continuous growth of chain stores in Iran has made products more accessible for consumers, the problems that these units have created for small-scale sellers cannot be ignored. In addition, the monopoly has led to the neglect of workers’ rights in these units, while also keeping consumer rights out of the view of regulatory bodies. False discounts, offering low-quality products, fraud, and under-selling are among the common issues that can be seen in these stores.

The use of some of these units with government currency in the past years has caused an increase in the prices of imported raw materials, including rice and oil, and has led to a lot of rent-seeking and corruption. In general, for a country like Iran that does not have any production other than oil and gas, the existence of such stores promotes consumerism and promotes a wrong culture.