Consumer power needs to be exercised

14 Apr, 2019 - 00:04 0 Views
Consumer power needs to be exercised

The Sunday Mail

Shoppers have noticed over the last couple of months a large and growing spread of prices between brands of  identical or near identical products plus a tendency by some monopoly Zimbabwean manufacturers to price their goods at the same level as equivalent imports.

As a result brand loyalty is dropping fast, as many do not think the high premiums charged for particular brands of near identical products are worth the extra money. Instead consumers are ensuring their declining purchasing power is giving them maximum value by flowing into the pockets of the manufacturers who treat them more fairly. Such consumer power needs to be exercised more and more. Even when a shopper is loyal to a brand they might feel that the owner of that brand needs to show equivalent loyalty to customers, instead of treating them like sheep to be regularly shorn. And one way of getting the message across that loyalty is  to switch to the manufacturers who cost fairly and treat their customers like human beings.

The gaps between identical or near identical products are already large and growing. It is quite possible now to find the cheaper brand half the price of the more expensive and common to find the cheaper two thirds or three quarters of the price of the most expensive. Supermarket owners and managers have noted the gaps and the decisive switch in market shares. Sometimes they get the manufacturers of the more expensive brands to try promotion pricing; but at other times they just have to assign someone to start dusting the packets and tins taking up shelf space without ever falling into trolleys.

With some honourable exceptions, the more expensive brands tend to be the older and more established.

Perhaps complacency about brand loyalty plays a part; perhaps the brand owner has become top heavy with overheads; perhaps they feel they have a monopoly or near monopoly position and do not have to worry.

It is strongly suspected by many, including President ED Mnangagwa, that these makers of the expensive brands are not costing with actual costs but instead are thinking in US dollars and converting at the prevailing parallel exchange rate, or even the interbank rate, despite the fact that many, and often most, of their costs are in local currency and while rising are rising more slowly than exchange rate swings.

Since some of these outfits quite shamelessly advertise some products in US dollars, with an RTGS price as a small aside, the suspicion is more than justified.

It is also obvious that the growing number of newcomers entering the markets are using actual costs.

Their prices can fluctuate, but do so both up and down as costs vary and as they drive greater productivity out of their overheads. If you are breaking into a market and increasing market share your staff can be paid the same as your competitor but since you sell everything you can make in a shift, your shift is working flat out and you get more goods for each man hour you are paying for. So your costs fall and your goods are even more competitive.

There are suggestions for Government intervention, but price controls have already been ruled out and attempts to get general agreement on costing models might well produce little more than promises to think about the issue, perhaps tomorrow.

What might well be required is the Government doing what it does do best. Monopolies and cartels are dangerous, but they can be broken up or forbidden to form. Only a strong regulator can do that.

Consumers faced with a growing number of alternatives at a widening range of prices need information to be able to make informed choices. Zimbabwe has labelling requirements and many manufacturers go further. We need to enforce international best practice so that a consumer knows exactly what they are getting for their money and can decide.

Consumer education will help consumers understand some of the conventions and requirements and so allow them to make their informed choice.

The progress made in our ease of doing business needs to continue and preferably be accelerated. The easiest way to whip a cartel or monopoly is to make it very easy for the newcomer to break into the market.

And we have smart, bright young Zimbabweans going into business and taking on the giants and winning.

Some of our giants perhaps need to think back more than 30 years when they were young, smart workaholics dreaming of empire and shudder.

There are no guarantees in business. In the end the person who can produce the best quality at the lowest price will always win.

This is particularly so in Zimbabwe right now as many people have incomes that are static or are growing at rates below inflation. Brand premiums on standard prices may just be sustainable when incomes are growing in real terms; when they are declining then the innovative newcomer becomes the consumer’s best friend.

Market forces are already making changes. One major seller of consumer goods with a highish imported content has cut prices by up to half. It was obvious that the old prices were stupidly based on a prediction of rising hyperinflation and a crashing exchange rate.

Zero customers has forced through a rethink and an examination of real costs and real trends. So the dinosaurs can do U-turns and need to if they are to be nimble enough to survive.

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