Rami Levy and the State Basket. Of course, he's not to blame for the cost of living, but rising prices have given him great reports.
Rami Levy is not to blame for the high cost of living, on the contrary - he usually offers his chain's customers a cheap price basket compared to his competitors. Shufersal is not to blame for the cost of living either, they tried to fight several large suppliers who raised prices - and in the end they were beaten. The same applies to other competitors in the field, such as Yochananoff, Half Free, Victory - and the list goes on.
But after we rolled over importers, manufacturers, agricultural workers – and of course politicians who are elected on promises to fight the cost of living, but once they have sat down in their seats preoccupied mainly with excuses, it's time for us to examine the position in which retailers are – and that, how to put it mildly? Not exactly good for our pocket, but very good for their pocket.
The day when prices rise sharply, which is only the first day of the month when all the products whose price increases have been postponed until weeks later will become more expensive, is a good time to draw a direct line between our emptying pockets and that of retailers.
Record private label sales arranged for Rami Levy a beauty of profit - https://finance.walla.co.il/item/3582922
A shelf in an Israeli supermarket: prices are rising and retailers are profiting (Photo: ShutterStock)
Prices are rising and reports are improving
Last week, the public among the retail chains published their financial statements for the first quarter. Ostensibly, they should have had a problem: a global economic crisis that developed into a slowdown that should reduce consumption, right?
So that's not really: most retailers (i.e., those whose numbers are visible) have made a lot of money from price increases, even though every time prices go up, they show up in the TV studios with a poor face, sharing in consumer grief.
Why are they benefiting from price increases? First, because retail chains' profit is a percentage of turnover. Suppose a retail chain earns, for the sake of calculation, 3% of its sales turnover. Now let's say prices have gone up 20%. In other words, we pay NIS 1,200 instead of NIS 1,000 at the checkout for the same basket of products. What happened to the retail chain's profit on our visit to the supermarket? That's right – it went from 30 shekels to 36 shekels.
Of course, this is a simplistic, even crude, calculation, but it reflects what happens to the retail chain's profits when we pay dearly for the same basket of products.
What else is driving growth in retailers' profits? Private label. In fact, this is exactly the same product sold to us under brand names, except that it bears the branding of the retail chain and not of the manufacturer. This saves the manufacturer marketing and advertising expenses - and we get a product that usually does not fall short in terms of quality from the "real" brand, but at a reduced price.
The fact that more and more Israelis have stopped blindly raking the brands they are used to into their shopping carts, and a large part of them have switched to private labels, is great news for retailers, especially Shufersal and Rami Levy, two chains in which the private label already accounts for over a quarter of turnover – and if it continues to develop at this rate, it will also reach a third. That is, even when we discover what seems to us to be wise consumerism, because of rising prices, they profit.
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Has anyone stopped shopping at the supermarket because of rising prices? At least for now, retailers are leaving more and more profits in their pockets (Photo: ShutterStock)
Now is the time to say that we all have an interest in retailers benefiting as well. Reasonable profit is not only their need, but can also be translated in our favor, for example in improving the shopping experience or improving competition between them: Imagine, God forbid, that a retail chain collapses, what will this do to prices in other chains, which will benefit from a lack of competition?
Only once the obvious has been stated, one can also criticize and wonder what makes retailers run to the television studios, every time they cover a wave of price increases, sit there with drooping faces and share in the grief of the consumer, who stares blankly at the increasingly empty pocket with each visit to the supermarket. It is true that in the event of a real crisis, one in which we begin to reduce our food purchases, they will also lose, but until then, they are an integral part of the celebration of rising prices.
- Rami Levy
- Private Label
- Cost of Living
- Rising prices