The way supermarket chains operate in malls, townships and rural areas is starting to change to allow SMMEs and informal businesses to participate fairly in the retail sector.
This is according to the final report of the Competition Commission’s Grocery Retail Market Inquiry. The report was released in November 2019, and one of its objectives was to examine the impact that national supermarket chains have on smaller and independent retailers.
The inquiry found that Shoprite, Pick n Pay, Spar and Woolworths behave in a manner that makes it extremely difficult for informal and independent retail stores to compete with them.
This especially relates to how these small businesses have access to shopping centres, which could potentially create massive growth for their businesses.
“Small and independent retailers used to be the main suppliers that serviced rural and peri-urban areas before shopping malls greatly expanded, causing people to rely more on the malls and less on the independent retailers,” the report reads.
“Although there might be low barriers to starting survivalist informal spaza shops, there are significant challenges to building them into thriving, competitive businesses that can enter higher value segments and receiving tenancy in shopping malls.”
The Commission said that making markets more inclusive was not only a social imperative, but also provided a platform for more competitive markets, which benefited consumers.
The report said that bargaining power was unfairly tipped in favour of national supermarkets, because of lease agreements between businesses and property developers in townships and rural areas.
“National supermarket chains took advantage of the fact that financiers typically require property developers to secure national supermarket chains as anchor tenants that will remain operational for the duration of the loan repayment period of ten years before financing a development
“They did this by requiring exclusivity and claiming that this is to protect their investment.
“In essence the current exclusive leases prevent emerging chains from developing to the point where they can suitably play the anchor tenant role in new developments, which means that the same four retail chains are the only candidates,” the document reads.
Recommendations included that national supermarket chains must stop enforcing exclusivity provisions in their lease agreements against SMMEs, specialty stores and other grocery retailers in shopping centres.
Earlier this year Shoprite Checkers was the first retailer to sign a consent agreement with the Commission Tribunal to stop these practices. This week Pick n Pay agreed to eliminate exclusive lease agreements in malls.