NTUC Fairprice fires first salvo in intensifying supermarket war
The price freeze of 100 Fairprice housebrand products until 30 June 2020 marked the start of a price competition amongst housebrands seeking to provide customers the best bang for their buck.
When market leader Fairprice announced in March, it would price freeze a basket of 100 Fairprice housebrand products until 30 Jun 2020, it kicked off a price competition amongst housebrands. In addition, more than 50 housebrand products that are deemed “everyday essentials” saw their prices drop by as much as 30%, to ensure all 100 of the selected housebrand products are priced at least 20% cheaper than comparable brands, noted Sze Jia Min,
Maybank Kim Eng analyst, in a report.
Nick Miles, head of Asia-pacific at IGD, told Singapore Business Review that over the last few years, retailers around the world have been moving away from promotional-led strategies towards everyday low price (EDLP), as well as looking to grow the penetration of private label. “Private label products play a key role for retailers globally. They assist in driving competitive differentiation, offer shoppers more choice and help improve retailers’ operating margins. These savings can then be reinvested in lowering prices further and improving operations,” he explained.
With about 6% of Sheng Siong’s sales coming from housebrands, the impact of Fairprice’s price freeze won’t be material. “Private label penetration in Singapore remains relatively low compared to other markets. In the UK, for example, private label accounts for around 40% of supermarket sales,” Miles illustrated.
He noted, however, that Fairprice’s new initiative will help raise awareness of its private label ranges across everyday items, as well as provide improved value for shoppers. “Overall the activity remains relatively targeted, with 50 products having their prices dropped by up to 30% – the largest Fairprice stores will stock 30,000 to 40,000 products,” he said.
On the other hand, as Sze notes, should Fairprice choose to lower prices for fresh produce as well, then a possible supermarket price war could erupt. The only time when a price war happened amongst Singapore retailers was between Fairprice and SSG in the third quarter of 2011, shortly after Sheng Siong’s listing. Whether this latest housbrands salvo is just a skirmish or a new full blown war is yet to be seen, but the real winners will be Singaporean shoppers.
NTUC Fairprice vs. Sheng Siong: which is cheaper?
Maybank Kim Eng Securities surveyed supermarket products amongst Singapore’s biggest players and found which stores provide customers the best bang for their buck. They wanted to find out which stores really offered the best value, and surprisingly found that different chains were stronger in certain categories, with no one chain being cheapest in all.
So, to what lengths did they go to check out which supermarkets offered best value to hardworking Singaporeans, and which is more worthy of your dollar?
To find out, Maybank Kim Eng’s Sze Jia Min and her team made trips to four supermarkets (Sheng Siong at Junction 9, Cold Storage and NTUC Fairprice at Northpoint City, Giant Hypermarket at Sembawang Shopping Centre) on 24 March 2019 to check out the prices.
The survey showed that whilst there were cost savings of at least 8% if customers switched to buying housebrands, rather than branded products at the same store, they could save more by shopping at Dairy Farm International’s brands Giant and Cold Storage, and at Redmart.
This is because they have housebrands for the essential item body wash, which was cheaper by 63.9% and 42.2%, respectively. Excluding the body wash item, Fairprice had the greatest cost savings and is 2.6% cheaper than
Sheng Siong’s basket. Meanwhile, Sheng Siong offered the best deals for fresh produce, with their goods found to be 0.3%-10.8% cheaper than its peers. For non-fresh items (excluding body wash), Redmart led in terms of cost savings, but Fairprice had the cheapest basket, offering the most attractive value in essential items such as instant noodles, liquid detergent and toilet rolls.
The only time a price war happened was in Q3 2011 between Fairprice and SSG, shortly after Sheng Siong’s listing
Who dominates? So, which is the cheapest in each category, and how do they compare?
Housebrands: And the winner is … Fairprice.
Fairprice sells a standard basket of housebrand alternatives picked by Maybank Kim Eng for a total of $74.54 compared to Redmart’s $80.21 price tag. The next best deal for housebrands can be found at Sheng Siong, with a receipt totalling an estimated $77.50.
Fresh items: And the winner is … Sheng Siong.
Customers with a basket consisting of only fresh items could save 11.2% if they switched from buying their fresh produce at Redmart to Sheng Siong, based on the Maybank Kim Eng basket. This translates to an estimated $600 in savings per year, based on a monthly $500 shopping budget. Following closely with the next bang for your buck is Giant, with a bill amounting to $27.97.
Non-fresh products: And the winner is … Fairprice.
Shopping at Fairprice for non-fresh items may save customers 7.3% compared to Cold Storage as a basket of non-fresh goods (excluding body wash) would total $46.34. Buying from Cold Storage could rack up a bill of $49.83, followed by Sheng Shiong with a $49.64 total.
The overall finding of the survey is that, in a basket of items representative of most consumers’ frequent purchases, the price difference between the top two market leaders is indiscernible. However, for Singaporean customers who really want to find the best deals, it pays to shop around, going to Sheng Siong for your fresh produce needs and Fairprice for your non-branded groceries.
Fairprice’s price freeze marks the shift towards ELP strategies
Not to be left behind, Sheng Siong still offers the best deals for fresh produce
Giant, Cold Storage and Redmart’s basket of housebrands yield the most savings
Excluding the Body Wash item, the cost savings are the highest for Giant’s housebrands.
Excluding the body wash item, the cost savings are the highest for Giant’s housebrands. On a basket level basis, Fairprice is only slightly cheaper by 0.5% compared to SSG
Basket consisting of fresh items