Retail: Realities and Prospects
The pricing policy of retail networks reflects changes in the FX market
The pricing policy of retail networks reflects changes
in the FX market
New Economic Reality
The situation on the Belarusian consumer market is unique. Price rises that used to go practically unnoticed have spiraled into a full-blown inflation. Foreign currency was hard to get and many importers tried to hedge against the risks. This spurred a sharp rise in prices for imported products and then domestic goods. Besides, it is not a secret that many Belarusian products are manufactured using
it is an indisputable fact that it is always easier for a trader to raise the price rather than lower it. firstly, it is what traders normally do, because even when the market is stable, inflation makes it possible to raise prices gradually without crushing consumer demand. Secondly, from the psychological point of view, businesses are hardwired to make as much profit as they can, which is why letting prices “loose” does not sound like a good idea.
imported parts. The disparity of prices for domestic and imported products leads to the ‘wash-out’ of the market, as manufacturers find it increasingly worthwhile to export cheap goods at dumping prices instead of selling them at home.
But the situation changed in September due to the start of the additional session of the Belarusian Currency and Stock Exchange. Businesses were given an access to foreign currency, and the exchange rates of US dollar, euro and other currencies started to fall fast.
The market held its breath for a moment looking at where things were going and having no real idea of how to react.
Whatever the Circumstances
The first company to get its breath was Evrotorg, a branch of Evroopt, Belarus’ major retail operator and one of this country’s largest importers. Retail prices in Evroopt started to fall in the middle of September. According to Andrei Zubkov, Evroopt director, prices for some goods were falling by 10-15% in the course of one week.
About one-fifth of the imports sold through Evroopt are goods the company buys outside the country itself. These goods were the first to fall in price.
Prices for a number of Belarusmade goods fell too, but in that case it was the initiative of Evroopt to lower the prices by cutting back on its markups.
“This was not the first time that we limited price markups in the Evroopt chain stores,” he said. “At the height of the crisis that affected the purchasing power of the majority of the population, our company was cutting back on the markups on staple foods. And some of the products, like sour cream, milk, sausages, and the like, were sold without any markups at all.”
A good reserve for reducing prices for many goods in the Evroopt
network is the relations this company has with its partners. The director says, “We are conducting a very strict pricing policy. There are chain stores that try to have as many goods as they can, which is why they agree upon virtually any price. Their positioning is very different from ours. Unlike them, we are fighting to get the price that would be affordable for the consumer; this is our positioning which we practice at Evroopt.
Every time a supplier wishes to raise prices for certain goods, the company wants proof that the price rise is really necessary. And now what we see is that retailers explain to suppliers why it is necessary to reduce prices and prompt them to revise their price protocols by reducing the prices for imported goods.
Belarus’ largest retailer has enough arguments to encourage its partners to act accordingly. The first success came as 10% of Evroopt’s suppliers agreed to the company’s proposal to reduce prices for their goods. Around 40% of suppliers have asked for a little delay in order to prepare new price protocols.
“On the other hand, around half of the suppliers have not responded to our proposal so far due to both subjective and objective reasons. For example, someone has purchased a consignment of goods at a high rate, and until they sell it, they will not lower the price. We know more or less well who has what, and have an idea when to expect consignments at new prices,” said the Evroopt director.
Evroopt: Prices Go Down
The Evroopt initiative is bearing fruit. For the consumer, it is important that prices in Euroopt shops should start to fall. And for the Belarusian retail market, the decision taken by the company is an important signal and an effective stimulus to act accordingly.
According to Andrei Zubkov, the socially responsible behavior is a kind of trademark of the Evroopt stores that he is in charge of. The company keeps a close eye on the changes in the purchasing power of the consumers and makes sure the prices for the goods the company sells are affordable. The company tries to prevent serious inconsistencies between demand and supply.
On the other hand, the company’s management makes no secret of the fact that behind their social responsibility stands economic benefit.
Evroopt Director Andrei Zubkov says, “In addition to altruism, there is also rationalism in our price reduction work. Consumer demand should be reared and sustained. You have to treat it gently. It is really easy to send prices up high and make the whole trading business freeze. What will be not easy is to win people’s trust back afterwards.”
This is why the Evroopt retail network has taken that unprecedented step, namely to reduce prices for all products. The company promises that if the Belarusian ruble continues to strengthen, the prices will definitely go down, which will make consumers even happier.
Andrei Zubkov, Evroopt director