Retail news. Semester 1 of 2014 table of contents

Shoprite holds market edge through convenience, pricing. 3 Jul 2012

Shoprite's dominance in the grocery market looks set to continue for the foreseeable future, according to new research released yesterday, 2 July 2012, by TNS.

The Commitment Economy, an independent global survey of over 39 000 people in 17 markets, reveals that competitive pricing and the convenient location of Shoprite's 1 520 stores are giving it the edge over its competitors, despite the fact that rival brands are more highly regarded in the minds of people.

The researcher's unique modelling exercise found that 12% of Shoprite's market share (equivalent to R28 billion) comes from people who actually feel ambivalent about the brand, but who shop there for practical reasons. These shoppers would go elsewhere if alternatives were closer to home or more affordable. However, competitors are not currently in a position to challenge it on either count in the near future.

Neil Higgs of TNS South Africa, said, "For most market leaders a lower brand loyalty would be a cause for concern, but its position is so firmly entrenched that it would take a significant effort for any competition to make a serious dent in this market giant's armour. However, it would be wise not to be complacent. We are detecting real demand out there for alternatives and smaller players who can meet that demand do stand to make significant gains."

Growth potential

The study points to valuable growth opportunities for smaller retailers such as Woolworths and Fruit & Veg City/Food Lovers Market, which are more warmly regarded by South African shoppers. It found that if consumers were able to act on preference alone, Fruit & Veg City would double its market share from 3% to 6% (equivalent to R7 billion), whilst Woolworths could triple its share. In addition, Pick n Pay Hypermarket could double its market share.

However, affordability and location emerged as the main barriers preventing shoppers switching retailer, especially for these three outlets, suggesting that whilst premium grocers may not be able to compete on price, they could punch above their weight by focusing on convenience. The extent to which these retailers can capitalise on the potential opportunity depends on their ability to remove or reduce these barriers. Higgs added that, in the 2011 Times/Sowetan Top Retailer survey, also conducted by TNS, Woolworths had indeed already made significant upward progress in the scores.

The research estimates that Fruit & Veg City/Food Lovers Market, which recently launched its Freshstop outlets in partnership with Caltex, could generate almost half of the potential R7 billion of additional business available, by simply choosing sites close to other large retailers and locating express stores in urban, high traffic areas.

The survey showed that Pick n Pay is in a similar situation to Shoprite, with lower levels of customer commitment relative to the chain's market share. The figures suggest that up to R12.7 billion of Pick n Pay's revenue may come from shoppers who are more swayed by practicality than brand loyalty.

Interestingly Pick n Pay Hypermarket is seen more favourably than its supermarket offering but the location of these outlets mean that the warmth felt towards them by people in South Africa is unlikely to translate into growth in the near future.

Jan Hofmeyr, chief researcher, behaviour change, at TNS said, "As people are confronted with more choice, retailers should be asking themselves whether footfall is backed up by real commitment to the brand. People may continue to part with their money for reasons beyond their control, but the minute more attractive options are available they are likely to switch. This makes them an easy target for competitors looking to steal market share."
Biggest opportunities

TNS has calculated which retail chains have the greatest growth opportunity in total market share terms.

Ranking (Top 5)	Monetary value attached to opportunity (in billions of Rand)
Woolworths	13.6
Pick n Pay Hypermarket	12.3
Fruit and Veg City/Food Lovers Market	7.0
Makro	6.1
Game/Foodco	5.4

There was an old lady who swallowed a horse...

By: Chris Charter. 8 Mar 2013

Consumers have been encouraged by the acting Consumer Commissioner to "seek redress" under the Consumer Protection Act (CPA) concerning the content of their meat products. Certainly the CPA is concerned with what suppliers put in their products, as well as how they describe them - but consumers looking for a payday will be most likely be disappointed.

As a general proposition, the CPA outlaws false, misleading or deceptive representations. In terms of section 41 of the CPA, a supplier (which in this context would include a retailer as well as manufacturers and producers) must not express or imply a false, misleading or deceptive representation concerning a material fact to a consumer.

To mislead most likely requires some deliberate act of falsehood, so a retailer that markets a product in good faith, without knowledge or reasonable suspicion that it may be something other than what it purports to be is probably not misleading the consumer. However, the meat supplier is being misleading if he fails to disclose the marsupial content of his meat products. Furthermore, now that retailers are on warning that their products are not always what they seem, there is arguably a positive obligation to correct an apparent misapprehension on the part of the consumer.

Although section 52 of the CPA does allow a court to make certain orders regarding transactions concluded as a result of false or misleading representations, this is limited in scope to requiring a supplier to cease such practice and at best for the consumer, a refund of the price paid for the offending product.

Section 76 contains a more general power of the courts to enforce consumer rights. This may include ordering a supplier to alter conduct inconsistent with the CPA so that manufacturers and retailers may be directed to take positive steps to ensure that meat is properly labelled as to the ingredients. Although the courts have the power to award damages (to individuals or classes of consumers), there is little prospect of consumers being awarded damages for any alleged emotional trauma as a result of inadvertent equine dining - however hard that is to swallow.

The situation changes if damage is caused

The situation is of course different if damage is caused as a result - in which case consumers can seek redress under section 61 (liability for damage caused by goods). However, reports are that the products sold are safe for consumption.

The CPA caters more specifically for product labelling at section 24, which provides that a person must not "knowingly apply to any goods a trade description that is likely to mislead the consumer as to any matter implied or expressed in that trade description."

A trade description includes any indication of the ingredients of which any goods consist. This requirement applies to manufacturers as well as retailers. Retailers have the added duty to not offer goods where the retailer knows, or has reason to suspect, that a trade description is likely to be misleading. Prior to the widespread media reports, a retailer may have been able to allege that he did not know that the goods were mislabelled - but now a retailer is probably required to take reasonable steps to ensure that labels are accurate.

A major threat to the meat supply chain's reputation and integrity

Therefore, it appears that the best prospect for "redress" is for the National Consumer Commission (NCC) to conduct an investigation into whether suppliers at any level of the value chain have been deliberately misleading. If this is found to be the case, the matter can be settled in terms of which suppliers might agree to put safeguards in place to ensure proper manufacturing practice and labelling. If the matter cannot be settled, the NCC has the option of prosecuting the matter at the Consumer Tribunal or issuing a compliance notice detailing what steps suppliers should take to ensure proper disclosure and labelling. If suppliers fail to adhere to the compliance notice, then an administrative penalty may be levied.

Ultimately, the scandal poses a major threat to the integrity and reputation of the meat supply chain in South Africa and the incentive to correct the situation lies in re-building consumer trust rather than any draconian punishment to be imposed under the CPA - it is not that kind of an Act. The golden rule of compliance with the CPA is voluntary consumer-orientated conduct by suppliers; open communication and the taking of proactive steps to correct problems in the supply chain will be in keeping with consumer rights and also obviate the need for the NCC to issue compliance notices or prosecute the matter before the Tribunal. If suppliers fail to do this, the NCC will need to invoke its considerable powers to ensure that consumers get what they pay for.

In the meanwhile, consumers should be aware that while the CPA affords them with rights, the paradigm can only shift if consumers also exercise their responsibilities to be more vociferous in demanding that retailers act in a consumer-oriented manner. Consumer activism does not only mean running to the NCC, but involves making shopping decisions based on supporting retailers that are open and honest and which take steps to educate the consumer about the products they are consuming.