Zimbabwe: Big brands knock out small retailers

FMCG SUPPLIER NEWS

NewsDay.co.za - May 6th, 10:36

Experts contend that the introduction of the multiple-currency system in 2009 has seen low income retail shops which thrived during the years of economic meltdown scale down their operations due to heightened competition. 

They say large retail chains with strong shareholder support have managed to enjoy economies of scale, piling pressure on small players with lower revenues.

In 2010, South African asset management firm Investec acquired 20% of retail giant OK Zimbabwe, resulting in the latter embarking on an expansion programme which yielded remarkable earnings.

Retail giant Pick ‘n’ Pay also acquired a 49% stake in TM, giving it a cutting edge.

Since dollarisation, some of the small retail shops that have folded or significantly scaled down their operations largely as a result of working capital constraints include Afrofoods, Mr Price, Prycmart, Gumbas, Tashas and Buscod.

While these shops have crumbled, traditionally big brands like OK Zimbabwe, Spar and TM have all clawed back market share, embarking on massive expansion programmes as dollarisation tipped the scale.

So resurgent has been the big brands that most stockbrokers this year picked out retail stocks as favourites.

In an interview with NewsDay, Food World general manager Denford Mutashu said the closure of retail shops was a sad development.

“The closedown is not something that we expected as we thrive on competition, we don’t like the market to be monopolised.

“The big retail shops are making inroads due to their recapitalisation plans and some have found new partners to revamp their operations.”

He pointed out that the retail environment had resulted in most players revising their business models.

“A lot of businesses have changed their models and have come down on the margins. The margins are now between 2,5% and 20%,” he said.

Mutashu said the fact that wholesalers had now turned into retailing was another major problem as that meant the role of retailers had been taken away by wholesalers.

“ . . . that never used to happen that a wholesaler would retail. Imagine the ability of the wholesaler it’s so enormous as compared to the small shops, ” he said.

He said: “Small retailers do not have the capacity to control shrinkage and expenses and they do not know how to do basic retail — it’s not in the system.”

TM Supermarkets managing director Dave Mills said the retail sector required professional, operational and merchandise skills to thrive. He said the small retail players entered the market when the large supermarkets were being scrutinised for price controls.

“People came in because it was a good option, but now the big ones are now resuscitating their businesses,” he said.