Walmart’s acts force rivals to cut prices

The entry of Walmart, with its low-price philosophy, into South Africa continues to shake up the retail sector, as suppliers to its Massmart subsidiary cut prices and its competitors are compelled to do the same.

Alan Coward, the chief executive of home appliances supplier Amalgamated Appliances, said last week: “Walmart’s entry has indeed resulted in consumers being winners.

“With Walmart coming here things have changed and competitors have upped their game. Suppliers have cut costs where necessary, especially in their distribution centres and their warehouses.” This had made suppliers more competent and efficient in distribution centres.

Coward said although some suppliers had to reconsider their selling prices, “they have worked with the retailers but not in a collusive manner”.

Massmart merchandising executive Jon Martinek said previously it was not only consumers who won, but also suppliers, especially if they were able to forecast production needs.

He said most of the local suppliers had been proactive and requested to be part of the group’s promotions.

It is evident that competition is heating up in the retail space, especially between Shoprite and Massmart, which have adopted longer price-cut promotion periods.

Retail analysts said price-cut promotions had definitely benefited consumers.

Since the beginning of the year, both Massmart and Checkers claimed to have collectively saved consumers up to R300 million through aggressive discounting and keeping prices lower for longer.

Viccy Baker, the director of Red Gekko Design and Branding Solutions, which runs the Retail Price Watch website, said retailers had been competing in the “must have” items by ordering in large quantities and selling at low prices. She said there had been special offers on items such as toilet rolls, washing powder and tinned goods.

“Prices have dropped a bit, but a variety of items have contracted because most of the retailers have ditched luxury brands,” she said.

Absa Investment equity analyst Chris Gilmour said it was too early for South Africans to see Walmart’s true colours.

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