part-time musings

Tag: supermarkets

KK goes shopping

Yes, I know, TWO supermarket posts in a row. But in my defense, this isn’t so much a post as a photograph which will serve as a placeholder until I get back to my old ways and have something important to say about Tanqueray. I stumbled across this photo on the interwebs while looking up something on Zambia. It’s a classic representation of a genre of photography that was prevalent in 1960s and 1970s Africa and intended to calm the nerves of foreign investors by showing how ‘normal’ Africa is. Featuring prominently in this genre of photography are pictures of African leaders doing ‘normal things’. Here, for example, is Kenneth Kaunda, shopping in a supermarket. The normality is admirable, non?

*Actually I wish I knew who took the photo and why; if you know, please drop me a message.

How shoppers helped invent the supermarket

Some research I worked on in 2007 as part of the Reconstructing Landscapes Project has been developed into an article co-authored with Andrew Alexander and published this month by the journal, Enterprise and Society. In ‘Co-Creation of a Retail Innovation’, we examined shoppers’ reactions to the development of early supermarket retailing in post-war Britain and drew on insights from recent research on the role of consumers in innovation to show that more attention needs to be given to the shopper’s input in the debate on retail innovation, including the supermarket.

Shoppers’ contributions to the supermarket innovation are shown to be multi-faceted in nature, incorporating processes of co-production and value creation; processes that were altered in the transition from counter-service to self-service retail environments. Shoppers’ discussions of such alterations were frequently structured around four aspects of interaction; with the physical environment of the store, with the goods for sale, with other shoppers and with shop staff. Continue reading more….

What does being Somali have to do with running a supermarket?

I’ve been reflecting on the attacks in recent months on Somali-owned shops around Cape Town, including the violent attacks on Somali-run shops in Masiphumelele township last year. I grew up near Masiphumelele and it’s a place I’ve always regarded as relatively laid-back, so I was shocked last year in August when I heard that a mob of around 200 people attacked Somali-owned businesses in Masiphumelele, chanting anti-Somali slogans. In spite of robust interventions by the police, 27 shops were destroyed and the Somali residents and shopkeepers fled the township fearing for their lives.

While there is undoubtedly an ethnic dimension to these attacks, when you look beyond this you see that issues of pricing, consumer choice, and the growth of supermarkets all have a part to play.

The retail environment in South African townships has, until recently, been dominated by so-called ‘spaza’ shops or residential retailers running small counter-service operations from their houses. In recent years, however, larger self-service supermarkets have begun opening up. Retail chains such as Shoprite own some of these, but Somali immigrants, operating on their own or as relatively small group concerns, have also opened many new supermarkets.

And the arrival of supermarkets seems to have been welcomed by many township dwellers. The Argus newspaper quotes a Khayelitsha woman as saying, “In general, customers prefer supermarkets than over-the-counter shops”.

Some customers like the increased choice offered by supermarkets, but it is clear that these supermarkets are also competing on price. While hardly systematic, a price-check by the Argus newspaper noted that basic grocery items at the Somali-run 1st Choice Supermarket in Khayelitsha were cheaper than those at a nearby South African-run spaza shop. For example, a 2,5kg of bag of sugar cost R14.50 at the Somali shop compared to the R15 in the spaza shop.

We know from previous studies on African retailers that shopkeepers operate with vastly different margins of profit, some as little as 1-3% on particular items. (see e.g. Barry Isaac, ‘Price, Competition, and Profits among Hawkers and Shopkeepers in Pendembu, Sierra Leone’, Economic Development and Cultural Change, Vol. 29 (2), 1981) Perhaps the Somali store-owners are merely operating with lower profit margins than some of their South African counterparts? A quote from a Masiphumelele businessman suggests they may be: “They [the Somalis] said us Xhosa people, when we buy things for R5, we put R2 up. They will only want 50c.”

Or perhaps they are buying their goods at lower wholesale prices? Newspapers in Cape Town have made much of the fact that Somali shopkeepers appear to operate collaboratively to buy in bulk and thereby secure discounts from wholesalers and factories. This is in contrast, they argue, to most South African shopkeepers who buy “in dribs and drabs” for their smaller spaza shops. They have also argued that Somalis have better access to capital than South African shopkeepers.

A great deal has been written in recent years on ‘ethnic entrepreneurship’, and, although its precise definition is debated, Waldinger, Aldrich, and Ward give a pretty solid description of it as

“A set of connections and regular patterns of interaction among people sharing common national background or migration experiences” (Ethnic Entrepreneurs, 1990)

A lot of the literature on ethnic entrepreneurship looks at how ethnicity can impact on the success or failure of businesses. There is considerable evidence to suggest that it is fairly common for shopkeepers from the same ethnic group to club together to, for example, negotiate with wholesalers, and that this may help some businesses to be successful. But this is not so much about particular ethnicities as about social networks, and Zimmer and Aldrich have argued that all shopkeepers, whatever their ethnic backgrounds, share a tendency to draw on social networks of kinship, customers, and suppliers. (Zimmer and Aldrich, ‘Resource Mobilization Through Ethnic Networks’, Sociological Perspectives, Vol. 30 (4), 1987). So, ethnicity is one way into these networks, but there are others.

And there is some indication that South African shopkeepers in Masiphumelele have been collaborating through networks of their own. Local South African traders have tended towards retail price equalization, selling items for roughly the same price according to an unspoken “gentlemen’s agreement”. They were upset when the Somali shopkeepers arrived and started operating outside this arrangement. So in the final analysis, the discord between South African and Somali shopkeepers in Masiphumelele is possibly more a clash of retail strategies and networks than purely a clash of ethnicities. Although I’m not sure that’s any consolation to the shopkeepers of Masiphumelele.

MILKING IT? Supermarkets and Farming

I noted with interest the recent full-page advertisement in the Guardian (5 September 2007) on behalf of pork producers in Britain, which accussed supermarkets of ‘squeezing the life out of pig farming’. It echoes several recent events and reports that have highlighted the opposition of some farmers to supermarkets- not only in Britain, but elsewhere too. On the surface, the argument appears to be straightforward: Farmers want the best prices for their produce. Consumers on the other hand, want low prices, which means that supermarkets want to pay the lowest farm gate prices possible in order to offer consumers low prices while still maintaining healthy profit margins. The larger retailers are accused of using their power as buyers to force produce prices down to levels that make it difficult for farmers to sustain a living.

In the UK, the Competition Commission is approaching the end of a 15-month long investigation that deals in part with the relationship between supermarkets and farmers.

In India, protests by farmers and small retailers have forced the supermarket chain, Reliance Retail to halt the planned opening of 145 supermarkets and nine distribution centres in West Bengal, while thirty of its stores were forced to close following arson attacks in Uttar Pradesh. Leaders of the anti-Reliance protests heralded this as a triumph for the region’s farmers: The BBC quotes politician Ashok Ghosh as saying that

This is a victory for the working class, the toiling peasants and the small traders involved with retail of agricultural products.

Last year, German, Canadian, and Australian farmers staged protests against supermarkets, complaining that low supermarket prices for milk were driving them out of business.

It would be wrong, however, to assume that supermarkets are bad news for all farmers.

Some farmers prefer selling their produce to supermarkets because the large procurement operations run by retail chains serve to diminish uncertainty for farmers by providing a relatively constant demand for agricultural produce. Many farmers see this as preferable to having to rely on smaller local buyers and markets where demand and prices may fluctuate on a sometimes daily basis. Farmers designated ‘preferred suppliers’ operate with understandings from supermarkets that their produce will be bought at agreed prices provided it meets specifications. (These agreements are often verbal rather than formal contracts; a survey by accountants Grant Thornton’s Agribusiness Recovery Group found that 30% of farmers prefer it this way).

Supermarkets have also encouraged some farmers – particularly in the developing world – to meet ‘export’ standards of food hygiene and quality. Supermarkets carry the responsibly (and liability) for the quality of food they sell to consumers and consequently set their own ‘private standards’, often in the absence of reliable local regulations. Some farmers – especially small scale farmers in developing countries – may struggle to meet the requirements set out by these standards. For this reason, development agencies, governments, and many of the large supermarkets themselves, have launched programmes to help farmers in developing countries understand and meet the standards of food hygiene and quality that will enable them to export.

Initiatives have also been launched to improve the organisational capacity of small producers, encouraging them to club together to benefit from economies of scale, improve access to capital, make investments in machinery and infrastructure, and offer more consistent levels of supply.

A long-term impact of the growth of supermarket demand may ultimately be to further encourage a shift from small-scale farming to large-scale commercial farming operations in developing countries. There is some debate over what this might mean for the people who become labourers on these farms, but in the best-case scenario they would have better security and social provision than they had as small-scale producers. (The Future Agriculture Consortium provides useful references on this issue).

Of course I wouldn’t wish to downplay the very serious concerns that exist about the relationship between farmers and supermarkets, but I think it’s important to keep in mind that supermarkets are benefiting many farmers, and maybe it’s a case of promoting the more positive aspects of the relationship — the question is whether this should be left to the supermarkets themselves and to the influence which consumers may bring to bear on retailers, or whether it requires the intervention of regulatory authorities.