With a rather lethargic quality and process monitoring mechanism in place, consumers in Bangladesh are forced to pay exorbitant price while shopping at super/chain shops. But on a global scale, shoppers are seen buying products at cheaper prices from super shops compared to grocery stores. Asked why consumers are deprived of genuine quality, fair prices and appropriate process monitoring, Directorate of National Consumer Rights Protection blamed super shops for applying ‘various tricks’ like attractive packaging, labelling fancy names etc. In this investigative piece, SM TANJIL UL HAQUE tries to bring out compromised quality and price manipulation in super shops here, price and quality differences in super shops elsewhere and the ways forward.
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There is a growing concern among shoppers about compromised quality and unfair pricing of products in super shops and chain shops across this country. But in different countries of the world, good quality products are offered usually at a fair and sometimes at even a lower price in super shops and chain shops compared to the grocery stores with a watchful quality control and process monitoring system in place. Why are then the consumers in Bangladesh paying exorbitant price for buying compromised quality products from super shops? The Directorate of National Consumer Rights Protection (DNCRP) says ‘excessive profiteering’ is having a negative impact on the open market as well. The national consumer rights watchdog also vowed to take counter measures to rein in the wrongdoers. Mentioning that the country’s retail market is being affected by inflated product prices in the supermarkets, the DNCRP has called on the super shop owners to be watchful about the growing concern.
Making the clarion call on September 13, DNCRP Director General AHM Shafiquzzaman at a view exchange meeting in Dhaka with representatives of super shops, suppliers, and manufacturers said manufacturers set the price of various packaged products, but many super shops are setting the price of some products themselves, which affects the price of the relevant commodities in open market.
Moreover, the DNCRP has found that some of the super shops are charging 30 percent more from the customers by packaging ‘loose rice’ that is available in the open market at a lower price. In this regard, DNCRP chief said, “The high price of packaged rice is having a negative impact on rice prices in the open market. As a result, the price of rice has increased abnormally in the market. The super shops have also made unethical profits in the same way in other products including sugar and salt,” he observed.
FINDINGS OF DNCRP
Directorate of consumer rights protection have found in their drives that the profit margin for many products are very high in super shops. The findings reveal that various brands of rice including Rupchanda, Pran, ACI, Teer, and Chashi are being sold in packets in the market. According to the observation of the director- ate, every kilogram of loose Miniket rice is being sold in the market at an average rate of 68 Tk. But the same quality rice is being sold in packets at a much higher price in various super shops including Agora, Shwapno, Prince Bazar, and Meena Bazar. These super shops are making 14 to 33 percent profit on Miniket rice and 21 to 29 percent on Chinigura rice.
In case of salt, the profit reaches up to 28 percent while in case of Hilsha, the profit is 27 percent. In the discussion meeting, the DNCRP Director General said that loose fragrant rice bought at the price of 120 Tk per kg is being sold in packets at 150 Tk in some super shops, which they can’t do. He mentioned that a kg of rice can have a maximum price gap of 5 Tk. But due to the unusual profit of 30 Tk, prices are affected in the open market. DNCRP is set to take strict measures to reduce this gap. In the name of super premium rice, super shops are selling rice worth 52 Tk at 88 Tk.
DNCRP FINDINGS: PROFITEERING OF A SUPER SHOP IN THE CAPITAL
|FRAGRANT RICE||120 Tk||150 Tk|
|LOOSE RICE||52 Tk;||88 Tk|
|AARONG RICE (5 KG)||571 Tk;||690 Tk (Profit 21 pc)|
|KAZI FARMS KITCHEN EGGS (PER DOZEN)||136 Tk;||155 Tk (Profit 18 pc)|
|PARAGON BROWN EGGS (PER DOZEN)||162 Tk;||185 Tk (Profit 22 pc)|
|FRESH IODIZED SALT||29 Tk;||38 Tk (Profit 28 pc)|
|ACI IODIZED SALT||30 Tk;||38 Tk (Profit 25 pc)|
They are also making a profit of 18 Tk per dozen of eggs. Pointing out that consumers are becoming more aware than before, DNCRP chief mentioned that the number of complaints filed in a year now got doubled. He further stressed the need of a permanent solution in case of consumer fraudulence. To prevent this, the information of which super shops are selling the product at how much profit has been collected. Intelligence agencies are currently working on these issues. He also said fraud is going on in the name of Miniket rice among other things, this needs to stop.
SUPER SHOP OPERATIONS ACROSS WORLD
Super shops are very popular and famous all over the world for its consumer-friendly service. Consumers are seen buying products at a discount of 20-50 percent over the maximum retail price (MRP) in various countries, including neighbouring India. There are several super shops scattered in Bengaluru including SPAR, More, Reliance Fresh, and Lulu Mart. In a competitive market like Bengaluru, there is a competition among the super shops and chain shops to woo buyers through discount offers. Of late, a consumer living in Bengaluru told a local news media about the prices and discounts there. In Indian super shops, Daawat Biryani Basmati Rice packet price is 220 rupees (Rs); but it’s usually sold at 175 Rs. Tropicana juice is 20 percent off the price. Similarly, 5 kg of Bullet rice is being sold at 700 Rs even though the MRP is 950 Rs; A 10 kg packet of Aashirvaad flour is 552 Rs, but is being sold at 439 Rs and the Head & Shoulders shampoo has an MRP of 450 Rs, but the super shops are selling it at 250 Rs. Explaining the reason for this, he said, “business has become very competitive here as many app-based super shops are launched and almost all types of products are available there. Product arrives at home within 20 minutes of placing orders. Since they don’t have exhibition shop costs, they can offer products at much lower prices. To compete with them, super shops are coming up with various attractive offers.”
In this regard, a Dhaka University teacher Didar Islam, who has been in the United Kingdom for three years, said super shops of various names are quite popular in the city of Leeds, including Tesco and Morrisons. Compared to normal grocery stores, super shops there offer products at relatively low prices, so people buy essentials from the supermarkets. He said the retail price of a litre of sunflower oil is 5 pounds, but it is available at 2.5 pounds in the super shops. A 5 kg packet of rice is always at least half a pound less in super shops than in stores. He also said that the big- ger the shop is, the lower the price will be. Besides, there are various competitive offers including bonus points and vouchers for shopping at super shops.
There are also membership cards, which help keep prices down. In Germany, super shops offer products to consumers at lower prices than other retail market units, said Maruf Mallik, a Bangladeshi living in Bonn. He said, “In Germany, products are sold at a lower price in super shops than conventional stores. Again, the prices are relatively high in some super shops. That’s because of their operating costs. But the point is that there are mechanisms in place so that no one can make excessive profits even if they want to.”
SUPER SHOPS IN BANGLADESH
The super shop culture is not very old in Bangladesh. In 2001, Rahimafrooz group’s venture Agora entered the market as a retail super shop. This new type of initiative received quite a response from the upper class. Next year in 2002, Meena Bazar started its journey. Since then, the super shop industry has been running vigorously. Among the leading super shops; Agora, Meena Bazar, Shwapno, Prince Bazar, Daily Shopping, Aarong, Nandan Mega Shop, Unimart, etc. are notable.
SUPER SHOPS’ PROFIT SCENARIO
PROFIT IN MINIKET RICE: 14-33 percent
PROFIT IN CHINIGURA RICE: 21-29 percent
PROFIT IN HILSHA FISH: 27 percent
PROFIT IN SALT: 28 Percent
|COUNTRY||ITEM||PACKET PRICE (MRP )||SOLD PRICE|
|INDIA||DAAWAT BIRYANI BASMATI RICE||220 RS||175 RS|
|5 KG BULLET RICE||950 RS||700 RS|
|10 KG AASHIRVAAD FLOUR||552 RS||439 RS|
|HEAD & SHOULDERS SHAMPOO||450 RS||250 RS|
|UK||PER LITRE SUNFLOWER OIL||5 POUNDS||2.5 POUNDS|
A TYPICAL SUPER SHOP IN DHAKA
The DNCRP in September published a price list of products marketed by a notable super shop in Gulshan after conducting a monitoring drive in the capital. It can be seen there, a dozen eggs with Kazi Farms Kitchen sticker is being bought at 136 Tk and sold at 155 Tk in the super shop–making a profit of 18 percent. Brown eggs of Paragon are being bought at 162 Tk and sold at 185 Tk, the profit is 22 percent. In that super shop, a 5 kg packet of Chashi Chinigura rice is bought at 533 Tk and sold at 650 Tk at a profit of 22 percent. Aarong rice packets are being sold with a 21 percent profit margin at 690 Tk from 571 Tk. ACI iodized salt of 30 Tk per kg is being sold at 38 Tk making a 25 percent profit. Fresh salt is bought at 29 Tk and sold at 38 Tk – thereby making a profit of 28 percent. Regarding this, Shafiquzzaman said, “They do business and make profit, that’s right. But making 20 percent or 30 percent profit is excessive. The negative impact falls largely on the general market. Considering these, we will interfere in the profit process of super shops.”
A CONSUMER’S EXPERIENCE
This correspondent went to a famous super shop in Mohammadpur of the capital recently. The purpose was to observe functioning rather than shopping. Thousands of items were seen neatly arranged on the shelves. None can see from one end of the shop to the other. The ever-smiling salesmen were there to ensure that customers can easily get all the items they need. Taking a tin of foreign olive oil in hand, it was seen that the price on the logo of the super shop was 200 Tk, while the price of the same amount of olive oil in the nearby market is 150-180 Tk. The prices of some other products were also found to be dissimilar.
|ITEM||LOCAL PRICE||SUPER SHOP PRICE|
|OLIVE OIL||150 TK||200 TK|
|BODY SPRAY||260 TK||340 TK|
A foreign body spray was priced at 340 Tk, while it costs between 260-280 Tk in nearby shops. The price of vegetables, fish and meat, and some other raw market products also seemed relatively high. On the way back, this correspondent went to a local grocer and asked for the same olive oil; the shopkeeper said the price is 170 Tk. But after a small bargain, it came down to 150 Tk! It was surprising to know that the super shop was taking 50 Tk more out of the customer’s pocket. In addition, there is value added tax (VAT) fee on the super shop’s products. Although the signboards of the super shop read “Best Products at Fairest Prices”. But in reality, it’s just the opposite!
WHAT DO THE SUPER SHOPS SAY?
In response to the complaints made by the Directorate, representatives of super shops and chain shops said the MRP of packaged products is not determined by the super shops. Brand appeal and marketing tactics coupled with customer loyalty contribute to that end, therefore, they claim to be not responsible. Super shops, thus, claimed that they are making profit according to the rules. Head of Agora’s business and corporate affairs department Abdus Sabur Khan said they are doing business according to the government’s directives regarding the increased prices of products. He said, “We are not taking more than the MRP written on the packet. We always try to follow the price list of the Department of Agricultural Marketing. Still, whenever there is a supply shortage, the price of the product often goes up.” Shwapno’s Corporate Affairs Department Officer Tamim Khan said the manufacturing and packaging companies set the price. “In some cases, they fix the margin by taking into account the costs of our company. But they are not given any instructions from us. They fix MRP considering three types of expenses – fixed cost, promotional cost and variable cost. We do not charge more than the fixed MRP. We strive to provide quality products to everyone. We try to give discounts on the products that create volatility in the market. The products are being sold because there is demand. It’s up to the customer to buy or not,” he said.
However, DNCRP Director General Safiquzzaman rejected their claim and said, “Super shops are telling the company how much MRP should be written, they are interfering in this matter. Therefore, the responsibility for the price rise is entirely theirs.” Regarding the additional cost, he said, “If rice is 105 Tk per kg in the factory, it can go up to 110 Tk in retail. But super shops make it 135 Tk in the name of packing it. Although they may cost just 2 Tk for packing, but they are keeping an extra 30 Tk at least. We have found that even though the rice comes from the same source, the super shops are increasing the price by calling it premium quality or super premium quality.”
HOW TO ADDRESS THIS MALPRACTICE?
The chief of national consumer rights body said they will take strict action in these matters to prevent fraud and ensure the rights of consumers. To prevent price manipulation, the super shops should inform the manufacturing companies. Experts believe strict monitoring should be done to ensure that prices aren’t manipulated.
They also said super shops’ dealings with manufacturing companies should be done directly and transparently so that third parties do not make any profit. There is a role of middlemen or ‘vendors’ behind excess prices in such markets.
Referring to the role of vendors, Consumers Association of Bangladesh (CAB) representative Qazi Abdul Hannan said, “Instead of buying directly from the wholesale market, super shops are also making a profit by entrusting the delivery of products to the vendors, the burden of which finally falls on the shoulder of customers.
In general, the government’s policy on food products is that the products will come to the retailer through the manufacturer or wholesaler. But another layer is being added as super shops deal through vendors, thereby increasing price of their products ultimately.
If they themselves collect the products from the wholesale market, the vendor-centric cost would be reduced.” He also said, “Overseas super shops usually have lower prices than traditional stores. They buy a lot of products at wholesale prices directly from the manufacturers. As a result, they can buy at lower prices than regular shopkeepers and reduce transportation costs, operating costs.”
To conclude, the journey of super shop in the world started about 50 years ago but its journey in developing countries like Bangladesh started not too ago. Super shops were initiated from the necessity of getting all the products that people need under one roof – especially grocery items. Since its inception here, the demand of super shops are increasing every year at an estimated rate of about 8-10 percent.
It is expected that nearly 20 percent of the countrymen will rely on super shops in next 20 years. Keep- ing this in mind, experts are calling for making the ever-growing super shop industry in the country more consumer friendly. Section 40 of the Consumer Rights Protection Act-2009 stipulates, “Any person who sells or offers to sell any product, drug or service at a price higher than the price prescribed by any law or rule shall be punished with imprisonment not exceeding one year or a fine not exceeding 50,000 Tk or both.”
Therefore, the owners of these super shops who charge high prices illegally should be punished. In most cases, the mobile courts end up doing their duties by way of imposing fines only. The price written on a product is the maximum one of the item. So the extra money, if and when super shops charge from customers as VAT in our country, is illegal and unethical. As direct tax is not paid by the buyers, the sellers have to pay it. And, it is recognised worldwide. With the passage of time, the need for super shops has now turned essential. Any start-up of a new business is a bit chaotic, so that is the case with super shops here. People believe that the super shops in a few years will provide customer service with a more professional approach and the irregularities will be addressed. For this, proper government policies and proper monitoring are required. Also, owners of super shops need to have a more customer-friendly attitude. As the scope for super shops in Bangladesh increases, the employment of people will also increase by leaps and bounds, which in turn will reduce unemployment and expedite the tempo of Bangladesh’s burgeoning economy.
How is the super-shop business going on in Bangladesh?
Bangladesh has a $16 billion–$18 billion retail industry with a 1.6% to 2% supermarket share. In India, it’s 8–9%; in Sri Lanka 43% and it’s over 50% in Thailand. The market share is too small here in comparison to other Asia-Pacific countries. But at the same time it grew from 0.3% back in 2010 to this level. We can say it’s still in the infancy stage.
Why is Bangladesh in this situation?
There are a few variables to be considered here. One is the unfavourable trade law and absence of a level playing field. Consumers have to pay 5% additional Vat in supermarkets. Besides there is not much available players with equity investment for a long-term payback plan. Third reason could be unavailability of proper space and lack of regulations on growth of rent rate. Total GDP and per capita income also contribute to this infancy stage.
Can supermarkets become an alternative to kitchen markets?
Supermarket culture is growing in Bangladesh as it has many advantages over kitchen market. It’s convenient for the urban shoppers especially when the families have to spend a lot of time at work. Women feel safe, people feel more hygienic shopping at supermarkets. According to the best global practices for food safety , one must maintain 0-4 degree temperature for preserving fresh meat. To ensure this, supermarkets use chillers . Supermarkets keep products from the manufacturer ’s authorised distributors or importers. So the products are authentic. Some supermarkets like Shwapno have got laboratory and few like us source directly from the fields to ensure transparency. All of these are giving rise to the acceptance of supermarket culture.
Why do you think people will choose Shwapno?
Shwapno is everywhere. It’s near your home. It’s convenient and the team is down to earth, guest friendly. These are the most important reasons. Shwapno gives promotions and value for over 1000 SKUs all the time. That’s the second reason. 50% of Fish vegetables and fish come straight from the farmers. There is a lab to test samples. Shwapno is the first retailer in South East Asia who get their crops and farmers Global GAP certified. Many of the stores are HACCP certified. It’s human, socially responsible and inclusive. These are the reasons for consumers to come to Shwapno.
It’s often alleged that super-shops manipulate prices. What’s your take on this?
A certain segment might have this misperception that supermarkets charge higher than grocery shop prices. This is mere a wrong perception. In the supermarkets there are exciting promotions running all the time. In fact they get 5-7% extra value or lower price if someone considers the benefits out of these promotions. No one call sell products at higher price than the company declared MRP written on the products. No supermarket or grocery shop can do that. Rather they can get extra promotions at the supermarket. No retailer can change MRP, while their processing system won’t allow it. The unorganised sectors can give some rough discount on the total bill while supermarkets offer more value than that (5-7% through promotions). And supershop only contribute to 2% of the total market. So they don’t have any enough bargaining power in fixing the MRP as well. It’s the Manufacturers who set the MRP.
The Directorate of Consumer Rights Protection has recently observed that some super-shops are packaging open rice and selling it at a higher price, which negatively impacts the market. Are the super-shops to be blamed here?
No. Super-shops’ market share is too small. They can’t take any risk as customers are extremely price-sensitive and they have options to leave the supermarkets. It could be macroeconomic factors or factors at the millers or stockist end, which should be taken into consideration.
Which growth model should we follow for supermarkets’ better future?
Super-shops’ growing market share from 0.3% to 2.0% in last 10-12 years indicates that the industry has been making significant progress. One growth model involves increasing the number of small-sized superstores or convenience stores ; if we continue on this path for next five years, we will add between 2,000 and 10,000 new superstores to the industry. The second idea is to establish 20 premium megastores that will provide clients with an exclusive experience. Besides in the third model, supermarket industry should open over 400 stores of medium size supermarkets. Omnichannel should sit on top of these models.