BIS Review 39/2005  3  price differences between low-price chains and traditional food shops in the Stockholm region; differences of up to 30 per cent. The prices at low-price chains outside the city centre were a further 10-20 per cent cheaper than those of the traditional chains in the city centre. Other surveys also indicate large price differences. The stiffer competition is being facilitated by a greater ambition on the part of politicians to increase the number of shop sites for low-price chains. For example, in Stockholm there are plans to raise the number of new sites considerably. •  Another trend we are seeing is that shops are becoming bigger and the share of sales accounted for by hypermarkets is rising. The total shop space is increasing at the same time as small food shops are being driven out of business. That entails a drop in costs and enables lower prices, partly in order to respond to the new chains’ lower prices. •  Food chains are also concentrating more and more on private labels, which is clearly evident on their shelves in terms of the greater share of products that bear the shops’ own brands as a complement to the different suppliers' brands. The purpose of private labels is to strengthen the chain’s brand name and to reduce costs through lower marketing expenses and fewer middlemen.
Ongoing price squeeze in the non-durables sector So far we can say that the retail food sector is seeing a price squeeze following the arrival of new foreign players, and the current operators have begun to compete through low-price subsidiaries or jointly owned companies. This price squeeze appears to have been made possible by shrinking profit margins and low unit labour costs. The potential for price reductions is difficult to estimate, but comparisons with other countries as well as between different regions in Sweden indicate that there is scope for lower food prices in Sweden. For some time now the price squeeze has become increasingly noticeable to people in general in so far as we have more low-price shops to choose between and there is a wider range of cheap products in the traditional shops, but also through greater downward pressure on the prices of “ordinary” goods. It is difficult, however, to ascertain how long the price squeeze will continue and when it will have reached its full impact on the recorded CPI. Concluding remarks Globalisation and tougher competition have entailed effects both on price developments and on the labour market in Sweden and requires much in terms of the ability to adapt in the economy and in society on the whole. If the structural changes do not generate new employment quickly enough, the competition risks driving companies out of business and reducing the number of employees without  5  Source: International Tax Comparisons 2004, the Swedish Taxpayers Association.