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.

Singapore Business Review - - CONTENTS - Dan­ganan Arianna

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

Nick Miles

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

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