Independent retailers gaining ground - study
IOL Business - Feb 10th 2016, 10:44
Johannesburg - South Africa is experiencing an emergence of profitable and sustainable independent retailers, a University of Johannesburg (UJ) study has found.
The study, by UJ’s Centre for Competition Regulation and Development, comes amid suspicions that larger and established retailers are muscling out their independent counterparts.
The study, whose findings were published last week, is part of a broad project that the centre is conducting on behalf of the National Treasury concerning entry barriers found in the different sectors of the South African economy.
The overall project’s primary objective is to identify, through firm-specific case studies and sectoral studies the typical barriers to entry faced by new entrants into the different sectors and the impact that this may have on inclusive growth.
Reuben Beelders, a portfolio manager at Gryphon Asset Management, yesterday said that there had been a marked growth of independent retailers. “In the Western Cape, we have also seen Chinese operators take a lot of market share,” Beelders said. He said independent retailers – which are privately owned and do not belong to a chain or group – needed different strategies to compete with established retailers such as Shoprite, Pick n Pay, Woolworths, and Spar.
“For instance you find less independent retailers in shopping malls because of high rentals. Even furniture stores are leaving the shopping malls and moving to strip malls,” he said.
Between 2009 and 2013, the Competition Commission investigated potential anticompetitive behaviour by major supermarket chains in South Africa.
Fruit & Veg City, the A&M Hirsch Family Trust and Ismail Ganchi of Aquarella Investments, complained about the exclusionary effect of long-term exclusive lease agreements entered into between the major supermarkets and property owners in shopping centres or malls.
The commission also probed possible abuses of dominance through a range of different practices, including exclusive arrangements with certain suppliers, and onerous conditions on smaller suppliers; category management practices which conferred decision making powers about product placement, promotion, and pricing on the largest manufacturers; and potential dampening of competition by co-ordinated behaviour through disaggregated information collected and disseminated to supermarkets by third parties.
However, the commission, after investigating the complaint, concluded that there was insufficient evidence to prove that exclusive leases had the effect of substantially lessening competition. The commission did not proceed with the complaint.
Nevertheless, following subsequent complaints from, among others, Massmart and the SA Property Owners Association, the commission last year announced a market inquiry into the retail sector.
The probe will investigate the tenancy arrangements in shopping malls.
Despite the alleged difficulties, Fruit & Veg City has experienced growth in the past decade. The study has attributed the success to the company’s flexible business model, which enables it to cater for different income groups. Fruit & Veg City’s turnover has grown from an estimated R1.6 billion in 2006 to R15bn in 2015.
Fruit & Veg City is not a listed company, so its turnover figures are not public. Beelders said its growth had been at the expense of other smaller retailers such as 7-Eleven, especially in the Western Cape.
In 2007, the Competition Commission recommended that the Competition Tribunal prohibit the large merger between Pick n Pay and Fruit & Veg City on grounds that the merger would result in the removal of an effective competitor in the retail market for fresh food.From © Independent On-line 2016. All rights reserved.
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