Consumers spark retailer price war

RETAILER NEWS

Sep 27th, 11:46

Cape Town - With consumers buckling under rising food, fuel and electricity prices, the gloves have come off as supermarkets go to war for their share of an already tough market.  

Whether it’s aggressive discounting, absorbing increasing costs on staple items, or customer loyalty programmes, all South Africa’s major supermarket chains are trying to give struggling customers value for money while pursuing aggressive expansion strategies both locally and into Africa.

Retail figures for June from Statistics SA indicate that the retail market grew just 1.9 percent year on year, with the biggest growth in textiles and clothing, hardware and “other” retail segments. General dealers such as supermarkets grew just 1.5 percent.

And as major retailers Shoprite, Woolworths and Massmart released their annual results earlier last month it became clear that consumers, particularly low-income ones, are starting to feel the pinch.

The Shoprite Group, Africa’s largest retailer, posted annual results in August that saw growth slowdown in the second half of the year, particularly in its Shoprite brand. Its no-frills USave and Checkers stores performed well.

“Growth within South Africa was hampered during the year by widespread labour unrest, rising costs fuelled by a weak rand, falling commodity prices and consumers’ lack of disposable income due to their high level of indebtedness,” chief executive Whitey Basson said.

As a result, customers were shopping less frequently and closer to home.

Basson said the weaker rand was likely to continue to affect customers, and that the group would aim to maintain its low prices by absorbing some of the inflationary costs.

Christo Wiese, executive director of the Shoprite and the Pepkor group, said tough market conditions were “nothing compared with the difficulties we have dealt with over the decade in retail”.

For the group and for other supermarkets, the magic formula seems to be in expanding into Africa, lowering prices, and capturing the higher end of the market locally.

Checkers, which Shoprite has over the past few years positioned as their higher-end brand, now sees more than half its customers coming from the top income groups. The group also saw excellent growth outside of South Africa too; it has 192 stores in 16 countries.

Woolworths also saw excellent growth in its food retail sector according to the results released in August.

Chief executive Ian Moir said they were consistently gaining market share by introducing more brands and bulk items, while also lowering prices. What helped was that Woolworths customers were traditionally “upper end”.

Pick n Pay said earlier this year when it released its results that the year had “reflected a mixed result for the retailer.

The company’s spokeswoman Tamra Veley said while market conditions were tough, “we have a relentless focus on value, quality and service”.

The chain had issued more than six million “Smart Shopper” loyalty cards.

“Every second our business is open, 10 smart shopper cards are swiped in our stores.”



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