South Africa-based Pick n Pay has said that it will invest ZAR500m (US$39.8m) in lowering the prices of more than 1,300 essential products. The investment in prices comes as the economic backdrop in the country remains poor and shoppers cut back on spending.
Investment aimed at aiding shoppers
Announcing the investment in prices, Pick n Pay highlighted how salary growth, which was running at about 4%, was far below inflation, which is at about 6%. The disparity between the two figures is seeing disposable incomes in the country fall month on month.
Discussing the initiative, Pick n Pay’s group executive for strategy and corporate affairs, David North, said: “Customers have told us that they want our help. Incomes have been lagging behind the increases in prices. The pressure seems to be being relieved on fruit and vegetables, but on meat you have quite a lag. The truth is we do our sums. We are on the right trajectory concerning cost and we continue to invest more in the customer.”
Investment and promotions to keep margins under pressure
As shoppers have cut back on spending, retailers in South Africa have had to invest in prices and increased the number and frequency of promotions. Given the ongoing economic challenges it is unlikely that this situation will change in the short term, which will continue to put pressure on margins and profitability.