‘Dirty tricks’ in retail

Large retail chains are employing shrewd business tactics – or dirty tricks – according to eye-opening anecdotal evidence in a recent the National Agricultural Marketing Council (NAMC) report, which covered the impact retailer dominance has on agricultural producers.
Pick ’n Pay, Shoprite/Checkers, Woolworths and Spar now control 94,5% of the retail food market in South Africa. Large volumes sold through these chains establish enormous buying power. The cold chain is a major problem. Some suppliers say most retailers have poor receiving areas, and as a result suppliers of fresh produce and dairy products often having to bear the cost of products “going off”.
Supplier packaging is another large cost component with losses sometimes built into cost structures. Retailers are said to regard crates as a cost to the supplier, despite the fact they tend to use them for their own storage purposes.
In some industries, roughly 2% of the monthly packaging material is lost. To cut costs incurred through these losses, suppliers sometimes try to introduce deposit payments. In most cases retailers opposed these efforts and suppliers give up trying to solve the crate-loss problem.
Many small suppliers find it difficult to survive financially because of the unfavourable terms of trade and the fear of being “delisted” or “blacklisted” for speaking out. There is substantial evidence certain practices by retailers act as market-entry barriers to smaller suppliers.
A supplier’s good relationship with a retailer has to be treated with caution because other retailers could view it in a negative light. For example, a supplier in the Western Cape was delisted by Shoprite/Checkers because of their good relationship with Spar and Pick ’n Pay.
Such practices can lead to greater monopolisation in the food manufacturing and retail sectors. This sabotages government’s objectives of promoting small-scale business, and becomes an obstacle to BEE. – Staff reporter
Read the full report next week