By replacing the light-weight single-use bags with the heavier “reusable” 15 cent alternatives, the companies stand to potentially make up to $71 million dollars in gross profit, according to an analysis by Queensland University of Technology retail expert Dr Gary Mortimer. In a piece he wrote for The Conversation, Mortimer argued that the ban would have a minimal impact on the environment but would be a windfall for the retailers, writing:
“These bags are factored into the cost of doing business for these supermarkets. There are costs beyond just the bags themselves, such as the costs associated with sourcing and negotiating with packaging suppliers, procuring them, shipping and warehousing them, and distributing them to stores only to then give them away.”
“Supermarket margins are already feeling the strain of price deflation. These businesses are generally making less than 6c in the dollar, so the opportunity to phase out this cost certainly makes good business sense.”
While the heavier, reusable bags cost more to produce than single-use bags, fewer bags will be used as customers look for alternative ways to carry their groceries, resulting in fewer being order by the retailers, reducing their packing and procurement costs.
Dr Mortimer came to the conclusion of the $71 million dollar profit figure by crunching the numbers of single-use bags the supermarkets were giving away for free, and the cost of doing so.
Woolworths say they give away 3.2 billion plastic bags a year and Dr Mortimer estimates Coles gives away 2.7 million bags, and with each bag costing around three cents each, retailers stand to save more than $170 million a year in direct costs. Selling the new bags creates another revenue stream, potentially adding $71 million.
As of July 1, single-use plastic bags have been banned in all states and territories except NSW and Victoria, and Coles and Woolworths have chosen not to comment on the profit they could potentially make thanks to the ban at the time of reporting.
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