In other countries across the world, superstores or retail chains usually sell products at a lower price than regular shops. However, this is not the case in Bangladesh, where prices at these large stores are usually higher than the other retailers.
While the retail chains of other countries procure directly from the farmers or factories in bulk to keep the supply chain short and prices down to make larger profit margins, the superstores in Bangladesh use vendors to collect products, effectively raising the cost, an expert says.
Kazi Abdul Hannan, an adviser to the Consumers Association of Bangladesh or CAB, said the superstores in the country also sell products at higher prices than the usual rates by packaging them to add more value.
Although officials of the superstores in Bangladesh claim they follow the rules set by the government and the rates set by the producers, AHM Shafiquzzaman, who heads the Directorate of National Consumer Rights Protection or DNCRP, said the superstores dictate the rates to producers.
SUPERSTORES IN OTHER COUNTRIES
The retail chains in India offer 20 to 50 percent discounts on products, although they are blamed for raising prices through the use of some techniques.
Raja Singh, who has been living in Bengaluru for 14 years, said superstores like More, Spar, Reliance, and LuLu Hypermarket lower prices to compete in the market.
Showing a leaflet of a superstore, Raja said Basmati rice of the Daawat Biryani brand comes with a price tag of Rs 220, but the superstore is offering it at Rs 175. Tropicana juice packs have a 20 percent discount over MRP. Similarly, Bullet Rice is being sold at Rs 700 per 5kg even though the MRP is Rs 950. Aashirvaad Atta, or flour, 10kg packet has an MRP of Rs 552 while the superstore will sell it at Rs 439.
“Interestingly, there are many app-based superstores in this country. Almost all types of superstore products are available there. Products are delivered to homes within 15 to 20 minutes of placing an order. Since they don't have the costs of a physical shop, they can offer products at much lower prices,” said Raja.
“There are also many buy-one-get-one-free offers on cosmetic products. But they are not selling at a loss. They are definitely making a minimum profit.”
Didar Islam, a teacher at Dhaka University who has been in Britain for three years for research work, shared a similar experience. Tesco, Morrisons and other such superstores are very popular in Leeds.
Although Britain is currently experiencing huge inflation, superstores are often cheaper than regular grocery stores. People buy essentials from supermarkets. They rarely go to the neighbourhood grocery stores, Didar said.
The retail price of one litre of sunflower oil is 5 pounds, but it is available in superstores for 2.5 pounds. There is always a 0.5-pound difference between the prices of a 5kg packet of rice at the superstores and local groceries.
“The prices also vary from one supermarket to another. The bigger the shop, the lower the price,” said Didar.
The retail chains in Britain also offer bonus points, vouchers, and membership benefits.
Maruf Mallick, a Bangladeshi expatriate living in Bonn, Germany, said although the superstores in the European country are offering products at a lower price, some retail chains charge relatively high prices because of their operating costs. “But there is a mechanism here so that no one can make excessive profits even if they want to.”
A DHAKA SUPERSTORE
The DNCRP published a price list of the products sold by a well-known superstore in Gulshan while conducting market surveillance in August.
It was found that they bought a dozen eggs from Kazi Farms at Tk 136 and sold them at Tk 155, making a profit of 18 percent. They were buying Paragon's brown eggs at Tk 162 and selling them at Tk 185, making a profit of 22 percent, while eggs from small farms were sold at Tk 10 each against a purchase price of Tk 9.18 – a 9 percent profit. The regular price of eggs in the Dhaka market was between Tk 9 and Tk 10 each.
Similarly, they bought a packet of 5 kg Chashi brand Chinigura rice at Tk 533 and sold it at Tk 650 with a profit of 22 percent. They were selling the same quantity of Aarong Chinigura rice packets at Tk 690 each after buying the product at Tk 571, thus making a 21 percent profit.
When Miniket rice is around Tk 70 per kg amid a price spike in Dhaka, the superstores are selling the product at Tk 80 to Tk 85under different brand names.
ACI bought iodised salt at Tk 30 per kg and sold it at Tk 38 at a profit of 25 percent.
They also bought Fresh brand salt at Tk 29 per kg and sold it at Tk 38 at a profit of 28 percent.
The packet of salt is also priced at Tk 38 per kg at the small groceries in the neighbourhood.
Again, a large wholesale grocery store sells it at Tk 35.
WHAT AN EXPERT SAYS
Hannan, an adviser to CAB and editor of Vokta Kantho, a consumer rights magazine, said the superstores abroad offer cheaper rates because they purchase products in large quantities at wholesale rates for all their outlets. As a result, they can buy products at a lower price than ordinary shopkeepers. As their activities are routine-based, they have lower transportation and operation costs.
“The superstores of our country are also chain shops. They also buy products in bulk. But they are recruiting local suppliers as vendors. As a result, the vendors are making a profit in between the arrival of products from the wholesale market to the superstores,” said Hannan.
“Generally, the government's policy on food products is that the products will come into the retailers’ hands through producers, middlemen, and wholesalers. But the superstores added another level in the supply chain, which is driving up prices.”
He also alleged that superstores manipulate the market for profit.
“They make false declarations. A brand is created just by packaging rice bought from the mills. In this way, new value is added and the price goes up.”
WHAT SUPERSTORE AUTHORITIES SAY
Abdus Sabur Khan, corporate and business affairs chief of retail chain Agora, said they run the business following the government’s directives and never charge the customers more than the retail price mentioned on the product package.
“We always try to follow the price list issued by the Department of Agricultural Marketing, but sometimes the prices go up when there’s a supply crisis in the market,” he said.
While fixing the prices of the products, producers and packaging companies consider the costs the superstores bear, said Tamim Khan, an official in the corporate affairs department of superstore Shwapno.
“They fix the margin accordingly and we never provide any directive to them. They decide on the MRP based on fixed costs, promotional costs and variable costs. We don’t charge [our customers] anything more than the MRP and try to provide quality products to them.”
He said his company tries to offer discounts on those products, as a price rise may agitate customers. “Those products are sold as they’re in high demand. It depends on the customers whether to buy them or not,” he said.
DNCRP Director General Shafiquzzaman, however, does not believe what the superstore officials say. “The superstores are dictating what the MRP should be to companies. Therefore, they [superstores] are completely responsible for the price hike,” he said.
“If Chinigura rice costs Tk 105 per kg in the mills, the retail price should not rise above Tk 110. But the superstores use packaging and fix the MRP at Tk 135 while the packaging cost is around Tk 2. Thus, the price hike in the superstores is directly affecting the market. Shops in the open market are increasing the product prices, citing the rates offered by the superstores.”
The superstores are increasing the price of rice by tagging the products as premium quality and super-premium quality although they come from the same source, said Shafiquzzaman. “The consumers also lack awareness and think that paying a high price ensures good quality of products. The superstores are cashing in on this idea and selling products at a higher price.”
Some brands are only available in the superstores as those are packaged to be sold only in the superstores at a higher price.
“This is a monopoly. It’s okay to run a business and make a profit. But setting a 20 percent profit margin is not acceptable. To me, a 20 or 30 percent profit margin is too high. It harms the market. Considering all of this, we’ll monitor the profit-making process of the superstores.”