Why do stores make it so hard to compare costs?

Food price inflation has affected many consumers in recent months. Factors leading to this have included tough economic conditions, as well as the ongoing drought. But highlighting how inflation affects a grocery basket and making comparisons is not as simple as it sounds as, The Sunday Times found this month. For starters, the paper was lambasted by Checkers and the Shoprite Group for publishing inaccurate information.

The report published by The Sunday Times on 3 July compared the cost of a grocery basket of 15 items at Spar, Checkers, Pick n Pay and Woolworths. It found that Spar was listed as the cheapest. But Checkers criticised the paper for the way in which its research was conducted and added the information contained in it was incorrect.

When, Justmoney's sister website, Moneybags, published its own grocery comparison in May, we received similar feedback from retailers about our methodology while our facts were sound. But this still led us to conduct a second comparison.

Unfortunately for the Sunday Times it made an error in tallying up the numbers for the Checkers column. The total cost reported by the Sunday Times for Checkers was incorrect at R711.94, and was actually R698.95. However, despite this error, Spar still came in the cheapest at R674.18.

Checkers responds

But more mistakes were pointed out by Checkers. Neil Schreuder, marketing director at The Shoprite Group, told Justmoney: “In this Sunday Times [article], they measure here 2kg of tomatoes. They don’t mention is it loose tomatoes per kilogram that they’ve doubled to get a 2kg price. We sell 14 different kinds of tomatoes in Checkers stores [and] they range from R14.99 p/kg for regular loose tomatoes, up to R55.99 p/kg for Italian on the vine tomatoes, and in between there are 12 other varieties. I hope they were comparing the same tomatoes, the same locally sourced tomatoes, organic, on the vine, small, plum, across all the retailers, which is highly unlikely, because unless you are close to the product and understand fresh produce it is difficult to make accurate comparisons.”

Schreuder further clarified the main issue that Checkers had with the survey. “Now the particular issue we found that we had exception with was the lamb chops per kilogram price. The other retailers, including ourselves, were between R139.99 p/kg and R184.99 p/k. Spar was R50 cheaper than that and that’s what had the biggest impact on the basket if you look at some of the other things in value terms. We know our prices, we check thousands of prices every single day in every single province against all of our competition, our business is built on offering the best value to customers and we take our price seriously. So as much as we don’t advertise when these things come out we go and investigate every time to make sure that there’s not something that has gone wrong with our pricing. That was a blatant error. We did our own surveys in more than 12 Spar stores in the area and in particular the one store the journalist told us she checked there are no lamb chops, regardless of cut for R89. So it turns out it was a blatant error, the journalist got it wrong. The number doesn’t exist, I don’t know where she got it from, the true price was R129.99 p/kg.”

In addition, Checkers noted that a competitor who was noted as cheaper than Checkers in the survey (Justmoney surmised this to be Spar) capitalised on the survey. A major concern that Checkers had with this was that the survey was based on incorrect information.

Comparison conundrums

Schreuder emphasised: “Media price surveys are notoriously problematic. It is very difficult on a given day on a small group of products to compare against multiple retailers, for lots of different reasons. One of them is on any day a retailer could be running a one store only manager special on a product, which could totally throw out the actual value that a retailer represents on a total basket over time. Second of all it is quite difficult to compare like-for-like quality, product and brand, so you could have a private label brand that is cheaper because it’s cheaper quality spec. You could have free range eggs versus normal eggs, you can have free range lamb versus normal lamb, you could have washing powder with a higher active ingredient and lower active ingredients, so it is very difficult, a) to capture a true sense of value.”

“This particular Sunday Times article measured 15 products, a typical supermarket sells 24 000 items, so you could never capture the total value represented across a supermarket by looking at 15 items on a day. You have to look at it in a bigger basket and over time, and not just at one store, you have to look at lots of stores, and probably lots of different provinces that’s the way to determine whether a retailer is cheaper or not. Shoprite and Checkers as a company, we’ve never capitalised ever on one of these surveys that have found us to be cheaper, and I think retailers generally should know not to capitalise on these kinds of price surveys. We only went to them on a marketing claim because the information they published was not only inaccurate, it was also then capitalised on by one of our competitors who were found to be cheaper. And so after a week of advertising in national newspapers, in store and on social media, we decided we had to correct and incorrect perception.”

Schreuder stated: “We also measure inflation between our various brand and our businesses we measure inflation every single month on 81 000 products, so it’s not 15. We measure that every single month to determine an internal food inflation, to determine how much our prices are going up to consumers. Official food inflation at Statistics SA measure is 111, the one that they report to the country is only 111 products, now there is no way you can capture 55 million South Africans’ eating habits in 111 products, let alone 15 in a survey.

“So inflation and the size of your basket depends on what you buy, which brown bread you buy, which tomato you buy, whether you buy maize or not, whether you eat beef or pork, all these things are subject to different factors, like the exchange rate, the drought has impacted the price of beef more than it has impacted the price of pork. All those nuances depend on how you experience inflation as a consumer. Our internal inflation measure is a lot more pervasive than the official food inflation figure and that’s why, if you look at the 12 months to May, the official food inflation published by Statistics South Africa is 6.6%, our internal food inflation is 3.2%, and it is less than half of the official food inflation rate.

“Why? Because we cover a basket of everything we sell and we look at what consumers buying patterns are, it’s not a static basket year to year, it’s what people are buying now and it takes the price of that same item a year ago and it is weighted against current purchasing behaviour. It is 100 times more accurate than any static 111 price survey could be,” revealed Schreuder.

The way you conduct the comparison impacts the results

An interesting point that came to our attention when conducting comparisons of our own was that the approach you take to conduct a comparison can impact on the results that you achieve.

In Moneybags’ first comparison, we compared 12 everyday items that people would use. As not all the stores stock the same brands, we made note of this in the article. This was a point contested by the retailers, as it was not an exact like-for-like comparison, and therefore the results would not be accurate, according to the retailers.

However, it is difficult to carry out a comparison on everyday items, as stores do not carry the same brands, quantities etc., and therefore according to the retailers’ arguments, it would not be possible to conduct such a comparison.

From the information reported by the Sunday Times, it appears that they took a similar approach to the way Moneybags conducted its comparison. Based on this, the results would not be as accurate as when comparing like-for-like products.

Moneybags conducted a second comparison looking at like-for-like products, and this changed the results. In Moneybags' first comparison the cheapest to most expensive ranked as: Checkers, Spar, Makro, Pick n Pay, and Woolworths. The ranking for the second comparison was (cheapest to most expensive): Pick n Pay, Spar, Woolworths and Checkers.

With the second comparison we were limited in terms of products, because while the stores may stock the same brands, they don’t all stock the same sizes/quantities for some products. For this comparison we looked at 11 products.

However, it appears that regardless of the method taken to compare products, retailers still have their own expectations as to how they should be conducted. Schreuder argues that 15 products is not enough products to come to a conclusion about the value of a retailer, you also need to take into consideration the brand and quality of the product. Furthermore, different retailers market themselves differently.

“Not all retailers offer low prices as the main thing they hang their hat on. Some of our retailers do it on convenience, some of our competitors do it on quality of fresh, private label food or variety. Our business is really built on value and that is why I would like to believe we do it more pervasively and more seriously than any of our competition. And that’s why these things hurt when you aren’t found the cheapest, it’s based on flawed methodology and inaccurate information and then it gets capitalised on in an ad campaign,” he said.

In a radio advertisement released this week following the Sunday Times survey Checkers said: “If you believed a recent article in the Sunday Times that incorrectly claimed another supermarket and not Checkers was the cheapest on a specific basket, you probably ended up paying for it.

“To save the Sunday Times embarrassment and shoppers money, we pointed out their mistake and they admitted that they were wrong, and that Checkers is the cheapest supermarket.

“So, to our 7-million shoppers who save every day, you were right. To the Sunday Times and the rest, it’s not too late to change to Checkers!”

Despite several attempts, Justmoney was unable to get comment from the Sunday Times.

However, the Sunday Times has since issued an apology on its website. The explanation can be viewed here.