Thread by @CompComSA

Today @CompComSA is holding a #Media #conference on the release of the #GroceryRetailMarketInquiry Provisional Report

Communication Head, @siphongwema is giving the opening & introductions at the #GroceryRetailMarketInquiry #Media conference.

@CompComSA's #GroceryRetailMarketInquiry panel says : Long-term exclusive lease agreements reinforce #market concentration, excluding challenger #retailers & specialist stores.

@CompComSA's #GroceryRetailMarketInquiry panel says : Buyer power by the national chains results in a rebate structure that discriminates against #wholesalers and small #retailers

@CompComSA's #GroceryRetailMarketInquiry panel says : Buyer power by the national chains results in smaller retailers bearing higher rental costs in #shopping malls.

@CompComSA's #GroceryRetailMarketInquiry panel says : South African spanza shops have struggled to adapt to changing #competitive dynamics in township areas.

@CompComSA's #GroceryRetailMarketInquiry panel says: The regulatory environment does not support the development of sustainable and competitive micro-enterprises :
- Trading times regime that is incompatible with the convenience model for informal business.

#GroceryRetailMarketInquiry, panel member, Lulama Mtanga is giving a media address. <<—Swipe to read the full address 1/2

#GroceryRetailMarketInquiry, panel member, Lulama Mtanga is giving a media address. <<—Swipe to read the full address 2/2

Commissioner, @TembinkosiB gave remarks at the #GroceryRetailMarketInquiry media press conference.

Click here to read the #GroceryRetailMarketInquiry preliminary findings and recommendations tinyurl.com/y2oj5zpc

@CompComSA's #GroceryRetailMarketInquiry panel says : As of the date of publication of the final report, the incumbent national supermarket chains (Shoprite, Pick n Pay, Woolworths, Spar (including their subsidiaries).... 1/2

and their successors must, with immediate effect, cease from enforcing exclusivity provisions, or provisions that have a substantially similar effect, in their lease agreements against speciality stores. 2/2

@CompComSA's #GroceryRetailMarketInquiry panel says : There are three principal areas of concern that warrant remedial action. These relate to:
• the use of long-term exclusive lease agreements and the exercise of buyer power by the national supermarket chains;

• the inability of small and independent retailers, particularly spaza shops to adapt to a changing competitive environment; and
• the lack of a pro-competitive regulatory regime that is aligned with the convenience model associated with small and independent retailers.

@CompComSA's #GroceryRetailMarketInquiry panel says :

• small and independent retailers, including spaza shops, serve a useful convenience role akin to that of convenience stores in the garages located in the urban areas.

• the formal retail segment is characterised by high levels of concentration, with the incumbent national supermarket chains namely, Shoprite, Pick n Pay, Spar and Woolworths, accounting for a market share of 72%.

• there are significantly high barriers to entry in the formal retail segment for both challenger supermarket chains and specialist stores.

In addition to these high barriers to entry, market conduct and regulatory constraints further raise barriers to entry and expansion in this sector.

@CompComSA's #GroceryRetailMarketInquiry panel says: The enormous bargaining power that the national supermarket chains have over property developers and suppliers enables them to demand exclusive leases, 1/2

low rentals from property developers and rebates from suppliers for which only they quality. 2/2

@CompComSA's #GroceryRetailMarketInquiry panel says : Regarding the practice of long-term exclusive lease agreements, the Inquiry found that this is widely prevalent across the country and that the exclusionary effects that arise endure for significant periods, some up to... 1/2

forty-five years. The justifications put forth by the national supermarket chains were not compelling for a number of reasons, including that the risk factor presented in justification for the necessity of such contracts is now significantly reduced. 2/2

@CompComSA's #GroceryRetailMarketInquiry panel says : buyer groups have beneficial competition outcomes for their members (generally traditional and hybrid wholesalers as well as independent grocery retailers but generally do not include informal spaza shops;

• the national supermarket chains are a critical route to market for the suppliers of FMCG products;

• rebates are more favourably offered to the national supermarket chains, which resultantly reduce their costs, give them an unfair competitive advantage over the independent retailers and thereby entrench their market positions; and

• there is no clear rationale that explains the difference in the quantum of some of the rebates paid to the national supermarket chains when compared to those obtained by customers in the informal segment, other than simply differential buyer power.

@CompComSA's #GroceryRetailMarketInquiry panel says :

• the entry of the national supermarket chains has shifted the competitive landscape in non-urban areas in relation to price, product variety and consumer expectations;

• the entry of the national supermarket chains in non-urban areas has resulted in diversion of some of the customer demand previously serviced and the convenience factor offered by the small and independent retailers;

this has led to a decline in the number of small independent grocery retailers in these areas;

• in addition to the competitive pressure that local-owned spaza shops face from the entry of the national supermarket chains, there appears to be increased competition from and displacement of local owned spaza shops by spaza shops owned by foreign nationals;

• the entry of national supermarket chains into townships and rural areas has helped to provide more choice and cheaper pricing for weekly and monthly shopping in closer proximity to consumers;

• However, the spaza shops will continue to play a critical convenience role for daily top-up shopping; and

• the regulatory environment is not conducive to supporting the sustainable competitiveness of these micro-enterprises in competing with supermarket chains, and, in many cases, it actively undermines their ability to respond to the changing competitive environment.

@CompComSA's #GroceryRetailMarketInquiry panel says:As of the date of publication of the final report, the incumbent national supermarket chains (Shoprite, Pick n Pay, Woolworths, Spar (including their subsidiaries) and their successors must, with immediate effect, cease from 1/2

enforcing exclusivity provisions, or provisions that have a substantially similar effect, in their lease agreements against speciality stores. 2/2

• This also applies to other provisions which serve to restrict the product lines, store size and location within the shopping centre for speciality stores.

• No new leases or extensions to leases by the incumbent national supermarket chains may incorporate exclusivity clauses (or clauses that have substantially the same effect) or clauses that may serve to restrict the product lines, 1/2

store size and location of other stores selling grocery items within the shopping centre. 2/2

• The enforcement of exclusivity by the incumbent national supermarket chains (including their subsidiaries) and their successors in title as against other grocery retailers (including the emerging challenger retailers) 1/2

must be phased out within three years from the date of the publication of the final Inquiry report. 2/2

@CompComSA's #GroceryRetailMarketInquiry panel says : On lease rental rate differentials, the Inquiry is mindful that the elimination of exclusive leases may still not have the desired effect of enhancing 1/2

competition & economic participation if rental rates are highly discriminatory in favour of the national retail chains. 2/2

Changes ideally need to occur to the manner in which rental rates are set and the extent of differentials that currently exist in shopping malls across the country.

The #GroceryRetailMarketInquiry intends to embark on further consultations with property developers, supermarket chains, emerging retail chains and independent stores in the next phase in order to identify a workable transition model.

@CompComSA's #GroceryRetailMarketInquiry panel says : Regarding support for spaza shops and small independent retailers in order to remain competitive, the Inquiry believes that there is a need for:

• improved bargaining and procurement processes;
• the removal of information asymmetries in order to improve access to credit finance; and
• providing support for the enhancement of business skills.