Defining Deflation
Coming off of an extended period of relatively high inflation, retailers are suddenly forced to contend with a new issue, deflation. What are the consequences thereof and how will retailers deal with this new obstacle?
An important distinction to be made early-on is the difference between disinflation and deflation. The former refers to a period during which inflation is still positive but decreasing over time. Deflation on the other hand, defines a period of negative inflation, i.e. Inflation is at, or lower than, 0%. Generally speaking, 2% inflation is regarded as a safe buffer against deflation.
Effectively what results during a period of internal deflation, is that the cost of keeping a SKU on shelf increases while its value decreases. This puts retailers in a difficult position as they literally cannot afford to drop prices to drive revenue. Furthermore, it may lead to consumers assuming that prices will continue to drop which in turn leads them to put off purchases, further exacerbating the situation.
Shoprite has managed to keep its head above water during increasingly trying economic times. Its turnover in the quarter ended September grew by 9.7%, and its core business, which includes the Shoprite chain, the U-Save Shoprite format and Checkers, grew turnover by 8.5% while internal food inflation averaged negative 1.5%. It has been a while since such negative growth has been experienced and it will certainly make efforts to stimulate turnover growth and increase gross profit margins more challenging.
Pick n Pay are facing similar problems as they admitted last week that “there had been significant pressure on the [their] margins as food inflation was below the growth in the consumer price index.” In August last year, internal food inflation was at 9.8% but has since fallen to 0.1%.
Although early signs are showing, it is yet uncertain if retailers are headed for full deflation. If the current rapid disinflation can be stemmed, it might be possible to disregard the former all together.
New Products
| Bob Martin Prime Cuts Bob Martin is a brand that has looked after pet health & wellbeing since 1892. Bob Martin which is tried and trusted is now introducing NEW Prime Cuts Cat Food. Bob Martin Prime Cuts is packed with the goodness of our Bob Martin condition tablets in a great value for money 100g pouch. Now introducing Healthy cat food for great value every day. read more |  |
| NEW Stimorol Infinity – goes on and on and on… Stimorol, SA’s favourite sugar-free chewing gum brand, is set to deliver a long-lasting intense flavour sensation that will literally go on and on…Billed as the brand’s biggest chewing gum innovation to date, Stimorol’s new Infinity slab chewing gum is guaranteed to deliver flavour that lasts “infinitely” longer. read more |  |
| Pringles Gets Extreme The Fore Good Group, exclusive distributors for Pringles© in Southern Africa, has announced the launch of the new flavour-packed Pringles Xtreme range which comes in three intense flavours: Exploding Cheese & Chilli, FlaminChilli Sauce and SmokinRibs. read more |  |
| A Fresh approach to healthy living Freshpak’s innovative wellness range of speciality teas put the vitality back into lifestyle. The art of balancing the challenges of a busy schedule with the need for a healthy lifestyle just got easier. Freshpak, already South Africa’s favourite Rooibos tea, has developed three exciting new speciality teas to revive and restore you on the go. Now you can sip your way to health and vitality without interrupting your demanding day! read more |  |
| Waterman Writing Instruments Waterman Writing Instruments in new finishes- Silveray Statmark Company is delighted to announce the release of the latest writing instrument and stylish new finishes from the famous Waterman brand, now available in South Africa. read more | |
| Longevatrol™ The trend nowadays is for people to stay young for as long as possible and live for much longer. Now staying healthy and young is easy, simply take one single supplement – LONGEVATROL™, a powerful antioxidant which contains concentrated extracts of Resverapure®, a concentrated extract of Resveratrol, Quercetin and Rosehip seed powder. Resveratrol has been shown to extend the life span of certain cells by up to 70% and many researchers believe it holds the key to living a longer and healthier life. read more | |
| New Parker Image and Writing Intruments Silveray Statmark Company is delighted to announce the release of the latest pens from the famous Parker brand of fine writing instruments. The Parker image has been stylishly updated, and the Parker company has changed the look and feel of their packaging - including the desirable gift boxes to coincide with their introduction of a new range of pens. read more | |
No comments:
Post a Comment