Category: Shopping

The competition in the retail market has become intense, with price discrimination being used to attract patronage. This trend may continue for a long time given the harsh economic climate. And with retailers struggling to make good sales, and consumers determined to ensure they get value for their money, the real competition may just have begun. Who will be the bigger beneficiary? TONIA ‘DIYAN asks.

Rapheal Chukwuma, a young Nigerian in his mid-20s,  likes to look trendy. His reason for this can be traced to his young uncle whom he grew up with. “The way you dress is the way you are addressed,” is a regular phrase his uncle used for him. But looking trendy comes at a price.

This is why Chukwuma, a young and unemployed graduate, takes his time to window shop for best prices  before making purchases from the stipends he gets as allowance from his uncle as well as occasional tips from running errands for older people in his neighbourhood. He, therefore, structures his shopping around clearance sales or promotional sales periods when goods, which ordinarily he couldn’t have been able to afford, are sold at discounted prices.

“I notice a 40 to 50 per cent reduction on items at Mr. P,” said Chukwuma, who explained that he  noticed price reduction on items at Ruff ‘n’ Tumble, Cash ‘n’ Carry and Life mate in recent weeks.

Realising that price is the number one factor consumers consider when shopping, retailers are now evolving more strategies to outwit themselves. One of such is the introduction of several rounds of price cuts, especially on competing items. This development has made the retail market literarily become a theatre of price war, as the contest for shoppers’ pocket intensifies among retailers.

The retailers, determined to remain competitive and avoid losing sales, are offering mouth-watering and irresistible discounts to existing and prospective customers. This is why some retailers have already taken their prices to an all time low, leaving competitors in the cold as they brace up with the need to adjust their price tags in favour of price conscious shoppers.

Checks by The Nation Shopping revealed that the competition cuts across virtually all sectors in the retail segment. For instance, contenders in the clothing sector seek to win back budget-minded customers who have migrated to discounting shops such as Mr. Price and Mango, who recently started lowering the prices of selected items and giving out 50 per cent discounts on its items purchased.

Max store is also launching what is called a ‘significant’ reduction in prices of all items. It said the decision to slash prices is to satisfy their old customers and make new ones. Similarly, Red Tag offers discounts on several of its products. For instance, a plain designer Polo shirt with small logo which sold for N8000 in the store now sells for N4, 000. A striped collar polo shirt used to be N4, 995; it is now N3, 245. A single breasted suit was N24, 495; it now sells for N14, 995.

Accessories 2 die 4, situated in most of the Lagos malls, is offering 10 per cent discounts on all gifts items at the store. Grocery chains are doing much the same. Shoprite is giving a face-lift to its price structure and customer reward programme to grab back market share from competitors, such as Super Saver, Justrite, The Bazaar and Grocery Bazaar, who are its major contenders in grocery business. It has also lowered the prices of perishables and products that are among the most purchased items in its shelf.

In the Home and Furniture section, there is a renewed effort that seeks to win back budget-minded customers who have migrated to outfits known to give good discounts like Lifemate and Bedmate, who recently lowered the prices of over 7, 000 items on its kitty and still discounting it. Also, Sixth Sense, another furniture outfit, has launched what it called a ‘significant’ reduction in prices of often-purchased items, saying the decision is to satisfy customers and possibly entice new ones.

The former General Manager, West Africa, Mr Price, David Botha, said his store has stepped up its game to satisfy customers at this time of the year leading to its slashing of prices with generous discounts. Adducing reasons for this development, Botha explained that the strategy will help the store sell all old stocks to allow new ones come in. “We also want our customers and prospective customers to experience sales of cheap but quality items, which we always make available. We encourage shoppers to buy from our store today instead of our competitor’s website or store tomorrow,” he said.

Explaining the rationale behind this development, the former Centre Manager of Leisure Mall, Surulere, Lagos, Mrs Debola Majekodunmi, revealed that retailers have been lowering prices because they are aware that the consumer is price-conscious.

Another Centre Manager of one of the Lagos malls, Sander Norman, explained that retailers decided to lower prices because they were aware that the consumer is also price-conscious and because it is one of their many strategies to improve sales at strategic times. “Price reduction has to do with timing, planning and sacrifice; being ready to give out at cost price or below cost price most times,” he said.

Sander cited Shoprite, saying that the store is priced about three per cent below the other grocery retail, and that is one reason it has gained a fraction of a point in market share since it entered the country in 2005 at the Palm in Lekki, Lagos, where it tops the grocery market.

Investigations by The Nation Shopping show that retailers who refused to be part of this strategy are likely to experience a drop in demand and low sales. This is so because price conscious shoppers are already moving to discounters or are purchasing less-expensive items from such stores as substitute for items they are used to buying or would like to patronise.

Some retailers have already taken their prices to an all time low, leaving competitors in the cold as they brace up with the need to adjust their price tags in favour of price conscious shoppers. A retail analyst, Modupe Shopeju, attested to the fact that price is the number one factor consumers consider when they pick where to shop. According to her, it is the reason why more people are found in shopping places during promotional periods. “People actually look forward to times like this to make the best of it. Some save towards sales period, some follow the trend and are able to know when sales are on, some do constant check on items in-store to find out if these items are discounted aside finding out what is trendy or new in the market,” she explained.

And shoppers are happier for this trend. “It is encouraging,” said Adewale Odunayo, a shopper, who bought dress shirts from Mango store. He thinks it is best to wait for a time like this to shop. “I am enjoying every bit of shopping at this season. For instance, a David Wej shirt sells for N6, 500 but its price has dropped to N5, 955, thereby saving N505. The ongoing price slash made me buy more shirts than I planned to buy, he added.

Even online stores woo customers daily with price changes to teach their ‘brick-and-mortar’ (traditional retail shops) competitors the need to use price intelligence solutions if they want to compete. Savvy retailers also monitor their online competitors’ prices daily to remain competitive and avoid losing sales.

Yet, there are fears around this trend. Maku Oladele, who sells baby items at Alade Market in Ikeja, Lagos, confirmed this. He explained that the price war has become a permanent feature in the retail segment such that there has been one price war after another without making profit. For this reason, she submits that the trend may be very difficult to sustain.

And some of these price wars are deliberately induced. Oladele revealed that big retailers seem  prepared for price battles as conventional festivals, such as Christmas and Valentine’s Day are no longer enough to keep up with the demand for discounts, so they create event out of nothing, just to initiate new price wars. This, she warns, may soon become a battle for survival for small retailers, most of who aren’t making much profit.

Behavioural economists say promotions have a huge effect on the consumer. And that more than 40 per cent of groceries are bought on special offer, so regardless of what’s on a shopping list, the consumer ends up buying items on special offers. That means what the customer buys is always cheaper, or at least, not much more expensive than it would have been elsewhere.

According to players in the industry, promotions appear more about point scoring against competitors than engaging with customers and their needs.

Whether the trend gives good returns to the retailer is obviously not a concern for the shoppers, who is only interested in retailers offering the best quality at the lowest prices.