Wal-Mart in SA 'good for prices': research

In a mega deal the Bentonville, Arkansas-based retail powerhouse last year bought 51% of the Massmart group (MSM) which includes Builders Warehouse, Game, Makro and Dion Wired for R16.5 billion.

According to a consumer perception report conducted by the companies, 76% of respondents believed that Wal-Mart's presence would be price positive.

"This result has been accompanied by an improvement in consumer price perception during the last six months of 2011 compared to the same period in 2010," the companies noted.

Having another go at its successful 10-week price promotion, Massmart-Wal-Mart announced a third extended price promotion, which kicked-off yesterday, 9 January.

The first two promotions saved consumers over R100 million, and the latest recognises the additional expenses normally incurred at the start of the year - covering back-to-school, back-to-office and back-to-site.

Massmart CEO Grant Pattison said that while it was still relatively early in the process, research indicated that the extended price cut promotions had been welcomed by local consumers.

"Sales in the second month of the promotion tend to outstrip sales in the first month, suggesting lower prices for longer periods really resonate with customers," Pattison said.

Wal-Mart is known for its aggressive pricing strategies and wide array of merchandise, that attract thousands of customers into its stores around the world goes by the "Everyday Low Prices" mantra - a strategy engrained in the group's ethos from its very beginning in 1962.

According to economists.co.za's Mike Schussler, the global giant's entry brings with it opportunities.

"In a sense the deal will help the inflation rate - it might not come down but it will make a bit of a difference," Schussler said.

Meanwhile, Absa Investment analyst Chris Gilmour believes that Wal-Mart's entry is ground-breaking and revolutionary, mainly because they will bring down prices.

"There will be profound benefits of significantly lower prices and a much greater choice of products on the shelves," he said.

Pattison commented that the Wal-Mart perspective was that the customer was number one and the intensity with which the company drove this focus was "quite remarkable" and permeated their approach to everything.

Low prices aside, Wal-Mart's foray into SA has been mired with controversy.

Unions have been vehemently opposed to the deal since day one, launching an appeal based on a fear that the retail heavyweight's global sourcing network will flood the South African market with cheap imports, undermining local manufacturers and suppliers and ultimately posing a threat to jobs.

Government too has raised concerns and is adamant that the merger will be to the detriment of the local manufacturing sector.

In their review, the departments of agriculture, forestry and fisheries, economic development and trade and industry are demanding tougher conditions to avoid large-scale job losses in Massmart's supply chain.

Competition Appeal Court Judge President Dennis Davis will deliver a ruling on the matter later this month.

In May last year, the Competition Tribunal approved the deal subject to no job cuts for two years, the setting up of a R100 million supplier development fund and the honouring of existing labour agreements.

According to Massmart-Wal-Mart, good progress had been made in identifying opportunities to invest the R100 million supplier development fund, with emerging black wine makers being first to benefit.

The companies also stressed that store openings had continued to contribute to job creation. They aim to create 15000 jobs in SA within the next five years.