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Why ‘special offers’ may not be that special after all

FINANCIAL STANDARD
By Graham Kajilwa | August 3rd 2021

When you walk into many supermarkets today, you will not miss items paraded at the entrance or along the busy aisles as being on “special offer.”

Such deals are popular with many shoppers, who believe they are making huge savings on their shopping budget.

But have you ever asked yourself how special the offers are? And does it cross your mind that the “special” price could be the product’s actual price?

It is not until French retail chain Carrefour started selling items at ridiculously lower prices compared to its counterparts that some shoppers realised some items could be bought for even 60 per cent less.

For example, a two-litre Fanta soda goes for as low as Sh165 at Carrefour compared to over Sh200 at other retailers. Such discounts then raise the question: how special are these offers?

Retail Trade Association Kenya (Retrak) Chief Executive Officer Wambui Mbarire said it is up to individual retailers to offer discounts.  

“There are no regulations around it,” said Ms Mbarire. It means that at the end of the day, it is the retailer who determines what product to sell at what price. This is regardless of how much the manufacturer spent to create that particular unit of product.

And since a consumer does not know the manufacturing unit cost of the product, then if it is priced lower than what other retailers sell, amounting to discounts as the buyer just wants to spend less. But just because a consumer buys a kilo of sugar at Sh110 does not mean the retailer will not make a profit if it is sold on offer at say, Sh90. Mbarire explained that discounts or special offers can be a decision between the manufacturer of the product and the supermarket as a way of pushing their market share.

“So it can be jointly agreed with the supplier that let’s do a promotion, and the way to do it is either discount the price or have those who buy one get one free,” she said.

The retailer could also decide to offer a discount in order to draw footfall into their premises, and once a customer is in, they will buy other things. Mbarire, however, insisted that retailers do not hike commodity prices and then slash them to portray them as discounted. “The consumer does not determine the price. The price is determined by the supermarket and the manufacturer. And it is very highly unlikely that a supermarket will hike a price to pretend to give a discount. That does not happen,” she said.

Special offers also come in handy when retailers want to get rid of near expiry goods or damaged items in their stocks. But still, the price may not be a bargain and could possibly be the product’s actual price.

But if retailers were to do this, it would be difficult for consumers to know since the unit cost of manufacturing is not indicated or known. Competition Authority of Kenya (CAK) in a statement explained that Kenya’s economy was deregulated in 1994.

“However, practices such as predatory pricing, where a dominant firm prices its goods and services below the average variable cost in order to drive out competitors, is outlawed by the Competition Act,” said the watchdog.

According to the Competition Act of 2010, it is an offence if goods are falsely represented to be of a particular standard, quality, value, grade, composition, style or model, or have had a particular history or previous use.

As such, as long as a supermarket tells you a particular product is price X, whether on offer or not, as long as it is price X when you purchase it, it is not an offence. It will be an offence only when the price changes.

“The authority has not received any complaint regarding discounts and offers,” said CAK. Betting Control and Licensing Board Chief Executive Peter Mbugi said their scope is limited to competitions and promotions that involve a certain prize. Special offers also come in handy when retailers want to get rid of near expiry goods or damaged items in their stocks. But still, the price may not be a bargain and could possibly be the product’s actual price.

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