Zim retailers struggle to remain profitable

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.

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