Zim retailers struggle to remain profitable

Source: Zim retailers struggle to remain profitable – DailyNews Live

Ndakaziva Majaka      29 January 2017

HARARE – Local retailers are struggling to remain profitable in the wake
of acute cash shortages, an increasingly menacing informal sector and
deteriorating economic conditions, the Confederation of Zimbabwe Retailers
(CZR) said.

CZR president Denford Mutashu told the businessdaily that with competition
from the informal sector and cash shortages, the sector was on the verge
of operating unprofitably.

“The truth of the matter is the profit margins for most retailers are very
low and they are struggling to just break even, let alone be profitable.

“Most retailers have tried to keep their mark-ups very low to retain as
many customers as they can due to competition from the informal traders.
They do not have the same overheads as the bigger players, so that is what
most retailers are up against,” said Mutashu, in a telephone interview.

He also said most were running promotions and avoiding price increases as
a survival mechanism to stay afloat.

“In fact, price increases are detrimental to retailers mainly because of
the competition between informal and formal retailers. Consumers will walk
away.

“Retailers do not increase prices, they are just a conduit and act on how
manufacturers peg against supply and demand,” the CZR president said.

This comes as food prices for basic food stuffs have gone up over the past
few months as retailers reportedly put premium mark-ups on United States
Dollar (US$) purchases.

Beef is now sold at $7 per kilogramme (kg) from an average of $4,50 per kg
in October while chicken reached the unprecedented price of $3,45 per kg.

A 2-litre cooking oil bottle, which used to trade at $2,99 before the
import restriction in June last year, now costs an average of $3,40.

Battling a cash availability crisis, Zimbabwe has left consumers with very
little choice but to transact using cash-lite methods.

Over the past few months, cash-lite transactions have been going up with
Mutashu saying this was the competitive advantage formal retailers had
over their informal counterparts.

Harare-based economist Issis Mwale said the country’s economic meltdown
was the reason prices were going up with retailers getting the short-end
of the stick.

“The retailer is not making the goods they are selling in most cases, they
are just the link with the consumer. If the manufacturer fails to pay his
supplier on time because there is no money in the nostro, then they get
raw materials late and transfer that cost to the consumer whose fault is
it?

“What we just need is economic reform before things get out of hand.

Because believe it or not, the retailers really have low mark-ups,” Mwale
said.