The shopping spree you can expect as the New Year holidays approach will be a blast. Young parents - when was the last time Pampers diapers were selling for NIS 50 per package, or less? When did you last see Similac baby formula for less than NIS 25? Moving on from parents, when was the last time you got Tasters Choice instant coffee for less than NIS 25?
Blue Square dropped a bombshell on the retail market with the launch of Mega in the City, formerly known as Super Center, where price is king. Or rather, you are, anointed by discount oil. Mega in the City vowed to be 15 percent cheaper than its rivals in the hood, and prices plunged by 10 percent.
If anything, the year 2007 has been characterized by soaring raw materials costs and rising prices of consumer products, yet suddenly Israel's shoppers are being treated to a boom in discounts.
How much do consumers stand to save from the retailers' war over your hearts and wallet? Market sources believe that it could run to NIS 500 million a year, all from discounts at the mega-supers.
Blue Square slashed prices on the most popular products, at an estimated savings to shoppers of NIS 130-150 million a year. Super-Sol is the bigger chain with bigger turnover, and its discounts are likely to save shoppers NIS 200-300 million. The so-called private chains can't stand by idly while the giants slash at prices and each other: They'll be handing over NIS 50-100 million in discounts to shoppers a year, retail experts say.
Half a million shekels in a market turning over NIS 38 billion a year may not sound like much, but who's going to pay for it? Will the retailers simply see their profits shrink, or will they pass the pain on to their suppliers? Analysts wonder, seeing that panicked selling sent Blue Square stock diving 20 percent in the 10 days since it announced the launch of Mega in the City. Other retailers have hurt, too (see graphic). Evidently investors, at least, believe that much of your savings will be at the expense of the supermarkets' profits. And then there's their outlay, present and future, on advertising how cheap they've become. There go more profits down the drain.
The holidays are usually a time of joy for both consumers and suppliers, but the retailers are already preparing for the days following Rosh Hashana. Put otherwise, they're battening down the hatches as they battle tooth and nail over consumers in the hope of ending the year 2007 with strong financial statements. Expect the chains to start turning the screws on their suppliers. For the time being, the contacts have been amicable, but the retailers are likely to become tougher soon.
Suppliers say Super-Sol tried to get a "blank check" from them, to retroactively cover discounts. Most say they turned the chain down flat. Nor have they returned to the bad old times of the giant retailers exploiting their sheer clout and might to unilaterally decide to pay less than invoiced, as used to happen, say the suppliers. A Super-Sol spokesman said the chain does not comment on its relations with suppliers.
Among suppliers, the talk of the town is loss leaders, which is when the retail chains sell a popular product for less than its cost price. Some suppliers mutter that none of them should help the retailers lower prices because that just fans the flames, and that this is a fire that needs to be put out.
Weirdly, small groceries are better off buying products from a Mega in the City branch than from suppliers. Unlike many other countries, Israel has no law against selling below cost. The trustbuster believes that price wars benefit consumers, and therefore are good for competition, too.
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