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Pick n Pay commits R500m to cutting prices on essential items

| Economic factors

Against the backdrop of extremely tight economic conditions, retailer Pick n Pay says it will commit more than half a billion rand to cutting prices on more than 1,300 essential items in the hopes of relieving pressure for consumers.

Disposable income declined in real terms in the eight months to January 2017 — salaries also could not keep up with the cost of living, rising by an average of 3.9% in January, which is far below the more-than 6% inflation rate recorded in that month.

Pick n Pay’s group executive for strategy and corporate affairs, David North, said the initiative was in response to customer needs and would apply across the business.

"Customers have told us that they want our help. Incomes have been lagging behind the increases in prices. We hope this move will not only relieve some pressure on their baskets but also that it will build into their loyalty with us," he said, adding that products such as fresh fruit and vegetables, as well as meat, have been especially targeted for cuts.

"The pressure seems to be being relieved on fruit and vegetables, but on meat you have quite a lag. The national herds and flocks are under pressure so prices on meat will remain [high] for longer," he said. "The truth is we do our sums. We are on the right trajectory concerning cost and we continue to invest more in the customer."

Retailers across the board have been ramping up promotional activity in the past year to encourage consumers to spend. Analysts have warned that these moves could have repercussions on margins, but forecast that this promotional activity is likely to continue for the first half of the year.

Meanwhile, a Nielsen study found that customers in SA were reacting to the tight economy by purchasing only essentials and cutting down on luxuries, buying in bulk to get lower prices, and switching to cheaper brands.

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