Many consumers think competition is good as it creates competitive pricing for the general public. In most cases, I agree.
The economics of supply and demand are simple. Take the petroleum industry. People closely watch the price of gas, knowing that it typically increases as weekends approach. More travellers = greater demand. Some consumers will leave their traditional gas purchasing location when it is a penny a litre cheaper down the street. Can you imagine what they would do if it was 5 to 10 cents cheaper all the time? The growth of gas stations located on Aboriginal lands is a fine example of consumers seeking and paying less for gas where all taxes are either not applied or not applicable.
For tobacco, the same holds true for consumers. They are price sensitive and will shop where they know the price will be cheaper. Hence the boom of cigarette smoke shops located on Aboriginal reserve lands. Combine the two offers, tobacco and gas, and you have a very, very busy petroleum convenience store by today’s standards.
Where average gas throughput is below 4 million litres per year, it is not uncommon to hear of gas stations on Aboriginal lands selling in excess of 10 million litres a year. For tobacco, average weekly carton requirements are approximately 130 cartons a week, when on the reserve, convenience smoke stores can sell in excess of 2,000 cartons per week. The magic is simple: price. Both gas and tobacco are heavily taxed by all levels of government, and Aboriginal business owners have the legal right to buy these products excluding some of the applicable taxes.
Given that this problem has existed for years, and despite its recent and robust growth, the lesson to be learned is not to build a petroleum and/or convenience store within a 20-minute drive of Aboriginal lands. They say location, location, location in retail. Pull out your map and stay away from locations close to reserves.