Smaller retailers ‘under siege’

FMCG SUPPLIER NEWS

IOL Business - Jun 26th, 10:19

Independent food and general merchandise retailers and wholesalers remained the backbone of the economy despite pressures from corporate and listed retailers that wanted to buy them out, Unitrade Management Services (UMS) chief executive Jad Pereira said.  

In an interview on Friday Pereira, who heads UMS, a buying group for independent retailers and wholesalers, said his main concern was that independent retailers were being bought out by the four major chains – Shoprite, Pick n Pay, Massmart and Spar.

He added that the independent retailers market, which he believed accounted for about 24 percent of the market share in the fast-moving consumer goods sector and was estimated at R80 billion annual turnover, was under siege because it posed a threat to major local retail chains.

“The only reason why these retailers are being bought out was because they are competition to the corporates,” he said.

The major difference between the corporate and independent retailers was that the independent retailers’ cost of sales in terms of warehousing, distribution centres and infrastructure were much lower and they could also source their supply from various suppliers.

“Unlike the Shoprite, Pick n Pay chain stores who buy from a specific buying group and also have to run a distribution centre, the independent retailers can trade at lesser costs.”

While it cost about R15 million to set up a corporate store, the independent retailers spend about R2m to R3m.

UMS was founded in 2001 and came out from former standard buying groups. It manages about 150 individually owned stores.

Most of the stores are owned by families, a format Pereira believes is the backbone of the economy. UMS trades under the Power Trade, Food Town and Best Buy brands, which are accompanied by individually branded stores. The stores are branded according to the owners choice.

“We took the independent retailing a step further, we made it professional and more of the value-driven business by providing support to these retailers.”

Over the years UMS has become an independent support office where it provides training services through an academy and trains cashiers on housekeeping and customer services. It also provides support in the form of branding.

“Our branding is quite strong and we are planning to expand our advertising to radio and television in the future.”

Pereira said UMS specialised in poor communities. “Our customers come from mine, industrial and domestic workers. Most of our customers use public transport hence our stores are situated next to taxi ranks, bus stops and train stations.”

These are the same markets in which Shoprite’s USave, Pick n Pay’s Boxer and Massmart’s Cambridge chain stores trade.

“This has created a good competition in our trading spaces but it also helped the customers because of variety.”
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