Luther12
Elder Lister
From detergent to sausages, tissue paper and even sanitary pads, almost everything seems to be on a discount across Carrefour supermarkets in Kenya.
In-store, every so often an announcer will come on the address system to entice shoppers with the various deals of the day, ranging from foodstuff to electronics.
It is a strategy that has helped the giant French retailer make headway in Kenya's tough retail sector, which is littered with the carcasses of other supermarket chains from far and wide.
Since setting up shop in East Africa's biggest economy in 2016, Carrefour has expanded quickly and now runs 13 outlets in the major cities of Nairobi and Mombasa, making it one of the country's biggest foreign supermarket chains. But as a recent ruling by Kenya's Competition Tribunal (CT) showed, Carrefour's success is coming at a steep price and not to the chain itself.
Carrefour 'abused its power'
While most shoppers may not be interested in how Carrefour arrives at the lower prices, it would appear that the supermarket chain has been deriving some of its discounting power from compelling its suppliers to shoulder the burden of the apparent bargains.
The CT ruled in April that the French retailer had forced suppliers to accept lower prices through a system of discounts known as rebates. While rebates are common in the retail sector, the CT found that Carrefour had abused its power as a major buyer.
For two years now, Carrefour has been locked in a tussle with Orchards Limited, a Kenyan yogurt-maker - the case which led to the tribunal's ruling.
Papers filed with the Competition Authority of Kenya (CAK) - which dealt with the dispute before it was referred to the CT - showed Carrefour required Orchards to give a 10% rebate on all supplies to Carrefour, and a further 1.25% discount on annual sales. So over a year, Carrefour would pay 11.25% less for goods than other outlets.
In a ruling that had repercussions beyond the dispute between Carrefour and Orchards, the French retailer was ordered to revise more than 700 supplier agreements within 30 days.
'I'll stop shopping at Carrefour'
The retailer has lodged an appeal with the High Court following the rulings against it by both the CAK and the CT, which is headed by an advocate to deal with often complex commercial disputes.
For frequent shoppers at Carrefour, the discounts are a major attraction. "You really get pushed towards shopping there [more] than any other locally available supermarket - their discounts on sugar and chocolate are a boost to my business," said Pollyne Khasandi, a baker in Nairobi. "We've always wondered how Carrefour gives [bigger] discounts than other supermarkets yet the suppliers are the same. It's unfair but the supplier has an option to supply elsewhere," she said.
Carrefour in Kenya: The true price of the discounts
The French retailer has expanded massively in Kenya but a tribunal has found it guilty of unfair practices.
www.bbc.com
Carrefour faces Kenyan watchdog wrath over unfair supplier deals
Kenya’s competition watchdog has fined Carrefour and ordered the French retail giant to review all its supply agreements within 60 days after the supermarket chain was found to be exploiting traders who supply it with goods. The Competition Authority of Kenya (CAK) also ordered Carrefour, through its franchise holder Majid al Futtaim’s (MAF), to expunge six items from its supplier contracts that are said to give the store the power to offer ultra-competitive pricing to boost sales and increase market share.
The clauses include forcing suppliers to pay a non-refundable fee to do business with it and forcing merchants offering the retail chain goods to provide extra rebates or discounts. Carrefour was found to be in breach of the law for forcing suppliers to post their own staff at its outlets at the expense of the suppliers. It was also accused of rejecting goods already delivered.
The regulator said that the retail chain has been abusing its buyer power and now risks a financial penalty equivalent to 10 percent of its gross sales, which stood at Ksh14 billion ($140 million) in 2018, if it fails to review the “offending provisions”.
The French retail giant has already been fined Ksh124,767 ($1,247) for exploiting yoghurt supplier, Orchards Limited, and the fine is equivalent to 10 percent of the sales generated from the dairy products supplied by the firm in 2018.
“All current supply agreements of Majid Al Futtaim Limited relating to its Carrefour Hypermarkets in Kenya be amended forthwith and in any event within 60 days of service of this order to expunge all offending provisions,” CAK Director-General Wang’ombe Kariuki ordered in a ruling seen by the Business Daily.
The retail giant has also been barred from delisting suppliers unilaterally without notice for failure to meet its stringent supply contract, according to the ruling shared by suppliers.
Buyer Power is the ability of a buyer to obtain terms of supply more favourable than a supplier’s ordinary contractual terms.
Carrefour faces Kenyan watchdog wrath over unfair supplier deals
Regulator says Carrefour has been abusing its buyer power and risks a financial penalty.
www.theeastafrican.co.ke
