Retailers ready for battle of Grinches
Competitive pricing the catch phrase for holiday season
RETAILERS are laying down the battle lines for their annual festive season showdown.
And Shoprite has fired the first warning salvo.
South Africa’s biggest grocer will “beat any toy price by 10% if a competitor store advertises the identical item at a lower price this festive season”, a spokeswoman said.
Commenting, Nielsen’s Africa and Middle East MD, Craig Henry, said festive-season marketing campaigns will be dominated by competitive pricing.
“We will see retailers playing this card and saying that inflation is running lower in stores, but whether or not it’s what the consumer really wants, is another matter altogether,” he said.
According to its results for the year ended June 2016, Shoprite maintained internal food inflation at 3.5% for its South African operations, compared to the official food inflation rate of 7.2%.
Massmart — which owns Makro and Game, and is owned by US-based Walmart — reported that sales inflation across all its divisions was 5.8% for the 26 weeks ended June 2016.
A Shoprite spokeswoman said although the group is expecting strong festive-season spending, “these are tough economic times and consumers are more value conscious”.
The festive season is a priority for Shoprite throughout the year, she said.
“The group’s supplier negotiations start early in the year and festive-season orders are placed months in advance to eliminate possible price increases later on.”
Makro’s range of children’s gifts, published in a catalogue released earlier this month, will be among those Shoprite will have to beat. Prices range from R89 for earphones, to R6 999 for a PlayStation 4 Pro.
Makro liquor division director Jonathan Koff said that the annual spike in sales during the festive season did not mean retailers were making profits from alcohol.
“It’s not as big you think. Liquor is a very competitive market.
“We try and get an indication of what type of price points we can see going into December. We obviously have to start taking a view of what the excise increase is going to be and then you start having discussions for every category,” Koff said.
Makro’s liquor division starts preparing its gift catalogue about nine months before the festive season.
“If you take whisky, we’ve got price points from R200 up to R1 000 and then when you get into the premium stuff we get price points from R2 000 to R500 000. Instead of going too high with price points we’ve actually kept the price points lower, ensuring that we give the value to the consumer.”
But Henry said what South African consumers were really looking for was convenience.
“The internet has opened up and consumers think that the entire world market is available in your local store — anything that your heart desires you can EARLY START: Christmas decorations adorn Greenstone Shopping Centre in Edenvale, east of Johannesburg. Shops are competing keenly on prices in their struggle for festive-season sales as many shoppers battle to make ends meet order and receive pretty quickly. So why would my local store not be able to do the same thing?” he said.
“The need for convenience and shopping in my local corner has driven up store numbers and retailers have listened to that, but the sacrifice is that they don’t have the ability to put in the same range [of products] and services into all these smaller stores,” he added.
Makro customers have the option to buy online and collect from a store or have their purchases delivered to their homes.
“They can also use the pickup locker delivery service where they collect from their nearest locker in their own time,” the company said.
But with Statistics SA data putting the June unemployment rate at 26.6%, consumers will have less propensity to spend this festive season.
“People will trade down on a brand or trade laterally to ensure that the same number of categories and the same number of products land up in their pantry over the period,” Henry said.