The retailer's frenzied moratorium is a serious indictment
Dis-Chem has not exactly covered itself in glory as a corporate citizen in South Africa.
It was found guilty of price gouging during the pandemic, after hiking the price of surgical masks by "exorbitant" levels. The Competition Tribunal found the "massive" increases "utterly unreasonable and reprehensible", especially since it potentially excluded poor South Africans from life-saving equipment.
Also during the pandemic, Dis-Chem refused to pay full rent to its besieged landlords during the hard lockdown, even though it – unlike most other retailers – was allowed to trade and doing brisk business at the time.
Over the years, it has seen particularly fractious labour relations, and has not always been the most transparent – earlier this year, for example, it refused to share more information after a data hack compromised the personal details of 3.6 million of its customers.
Last week, it sprung another leak.
An internal memo, written by founder and CEO Ivan Saltzman, announced a moratorium on external appointments and internal promotions of white people, and found its way on to social media.
While Saltzman warned that the company could be crippled by a fine of 10% of its turnover for failing to comply with employment equity targets, its shares took a hit amid threats of legal action and consumer boycotts.
But Dis-Chem deserves little sympathy and certainly no plaudits for finally taking transformation seriously.
For more than four decades it has been doing business in a country where only 8% of the population is white – and where employment equity became law 24 years ago. It’s a stunning indictment that Dis-Chem has not built a representative workforce in this time, especially in a non-technical sector not known for scarce skills. What has the company done in terms of developing its staff? Where are the black managers who should have progressed through the ranks? How could the company allow its workforce to be so unrepresentative that "harsh measures" (Saltzman’s words) are now inevitable?
His memo is also textbook terrible. CEOs should preferably steer clear of near-panic and threat when deciding on a tone for a key communication. Also, Saltzman neglects to mention any other reason for having a more representative workforce, apart from the EE fine. There's no acknowledgement of the benefits of inclusion, any historical context or mention of the business rationale for having staff who better reflect the customer community. The internal memo was not meant for public consumption, which says even more about the real culture of the business.
Dis-Chem customers are a loyal bunch, and many have over the years enthusiastically contributed to a popular social media trope that it’s impossible to emerge from its stores without a bagful of items that weren’t on the shopping list. They deserve better.
Pick n Pay's slump underscores trouble ahead for consumers
Picking promotions now, paying with pain later
One trend is hard to miss for those keeping up with the latest reports from JSE-listed firms: the outlook statements are becoming increasingly pessimistic. Repeat offenders that almost always get a mention include Transnet and Eskom, but there are of course business and industry-specific strikes, regulatory uncertainty, as well as the worry that, given that politics is the art of the possible, fiscal consolidation isn’t.
However, hard as it is to accept, ultimately the majority of the fate of SA’s consumers will be determined offshore, whether this is Ukraine or China, or in Washington, DC at the US Federal Reserve. The latter has acknowledged it’s lost some credibility in the market (based on just how sticky inflation has been), and the world’s most influential central bank is now clearly willing to create an ugly recession in order to get on top of it.
There are positives (global supply chains seem to be unsnarling, despite Transnet), but all of this is pointing to a tough start to 2023, given that the war in Ukraine looks set to continue, and interest rate expectations for next year have climbed.
While there are growing hopes inflation peaked in July, both in SA and in the US, unfortunately it seems the worst is ahead for SA consumers as months of high inflation erodes their spending power. Food inflation is expected to average 8.2% in 2022, according to the Reserve Bank’s latest forecast. Food inflation clearly didn’t peak in July (9.7%), however, hitting 11.3% in August.
SA’s major retailers and food producers have responded to surging costs as consumers would hope they would, pursuing cost-saving initiatives, slimming down product offerings, boosting package sizes, and pushing promotional activity. This is something that has helped many keep internal product inflation below that of average CPI, offering hard-pressed shoppers some respite, even as they are still forced to cut items from their baskets.
Unfortunately, signs that there are limits to this, and some of these came on Tuesday, when Pick n Pay’s share price slumped almost 9% (still up almost 14% this year). The retailer, which has been busy pushing its new strategy, told its shareholders not to expect too much from it in terms of second-half earnings growth, and that it probably can’t fully offset external pressures, which includes unprecedented long shedding. Base effects, as well as it being a year of investment, are responsible for this caution too, though.
It is of course difficult to attribute this stance by Pick n Pay to apathy; it has just concluded its new strategy shift and its store rollout continues apace, as does its pursuit of cost savings. It has also said it's looking to build long term trust with customers over prices.
But like Shoprite, which is eyeing the data from its Checkers Sixty60 app to better tune its promotional activity to the needs of the market, Pick n Pay is also looking to its Smart Shopper offering (80% of its sales is now through the loyalty programme) to better calibrate its promotions.
Unfortunately, even success in these efforts may be problematic, with global consulting agency NielsenIQ warning that all these promotions may in fact be creating a bubble, and masking the true effect of surging inflation. Consumers appear to be "in denial", the market research firm said, and any reduction in promotions – perhaps driven by external events – could prompt a crash in volumes.
Still, even if this is the case, Pick n Pay made clear on Tuesday it’s still in the fight for market share, and, at least in terms of its value-proposition Boxer, its strategy is to offer the best prices in the market, so the downward pressure on prices continues. Fortunately, unlike politics, price tags very much aren’t the art of the next best.
This article has been updated to correctly refer to Pick n Pay's loyalty programme, rather than Shoprite's, as well as to correct the below quote, which was mistakenly attributed to Raymond Ackerman. News24 regrets the errors.
Quote of the day
Chart of the day
Despite Minister Patel throwing poultry Master Plan under the bus (suspended duties for a year) poultry imports continue to fall August stats from SARS/SAPS saw imports 20,497t -11.6% m-o-m with all categories showing l-o-l declines Be interesting to watch festive run-up ?? pic.twitter.com/Yu2FLUm47v— Smalltalkdaily Research (@smalltalkdaily) October 18, 2022
Number of the day
News24 encourages freedom of speech and the expression of diverse views. The views expressed in this column do not necessarily represent the views of News24.