Tuesday, June 26, 2012

Profit or Loss? Customers write your bottom line

Pick n Pay is South Africa’s second largest supermarket chain. From the store’s inception in 1967 until 2009, it was considered a paragon, an example of how to do business. Since 2009, however, it has been losing market share but nobody seems to have a definitive reason for it. I can’t tell you what kind of errors in strategic decisions Pick n Pay’s management made—but I can tell you why Pick n Pay has lost roughly R144,000 in annual sales: I quit shopping there.
I have to agree with business analysts that the real decline began in 2009, but for me, I knew there was trouble when I first started shopping there in 2004. Frankly, I expected Pick n Pay to be little different from its American counterparts—to be an Africanized Safeway—and I was disappointed. Naturally, there had to be some cultural differences, but the differences I saw right at the beginning were differences that impact the consumer negatively…and that is never good for business.

On my very first trip to a Pick n Pay, breakfast cereal was on my list. When I got to the cereal aisle, several sections of the shelving was bare. This was bad enough but when I approached one of those shelves, I saw something that made me shake my head: a sign printed exactly for the purpose of apologizing for being out of stock. This was not a hastily hand printed or computer generated note, it was a professionally printed “tent” sign with space for someone to write in the name of the missing stock item. Why is this bad? Because it told me that this was a natural part of doing business in this store (and, I learned later, not this store alone): it was OK with management for them to be out of stock on staple items.

Frankly, I was shocked, both at the absence of the goods and at the cavalier attitude of the chain’s management as evidenced by those purposeful signs. “We can’t be bothered to keep enough inventory to keep our shelves full,” the management might as well have said. “We encourage you to visit our competitors for your needs.”

This has been a signature issue for me with Pick n Pay: lack of stock. Some stores are worse than others, some have gotten worse with time. I will no longer buy fresh fruit and veggies at most Pick n Pay stores because it is not fresh, the quality is poor, and in many cases, it is way too green for use. In early 2010 when I first move up to Joburg, I shopped at a Pick n Pay in FourWays that carried amazingly good fresh produce. But the last few times I have stopped in that store, it has declined there as well. Nowadays, I buy my fresh items at a Woolworth’s store (which also suffers from stock depletion but at least what they DO have in stock is good quality).

I cannot say if the problem with stock depletion on the shelves is lack of replacement goods in “the back,” ineffective stocking practices, or poor inventory control, but I can say that last year I confronted the manager of my nearest Pick n Pay Hypermart (a giant store with extra departments including a café, a pharmacy, garden department, housewares/furnishings and toy departments) about them being out of stock of their house brand beans and crushed tomatoes. I had been looking for the items for six weeks and they were constantly out of stock. I told the manager that if they weren’t in stock when I came the following week to do my shopping, I was not going to shop there anymore and that would cost him about R7000 per month in revenue.

When I returned, the items in question were in stock—but when I queried the manager as to the reason they had none, I was told it was the fault of the employee tasked with ordering new stock—even though his computerized inventory system told him the products were out of stock on the shelves, he just didn’t bother ordering any!

I suspect something a bit more nefarious was afoot—I needed the products for making Chili con Carne. The store-brand beans and crushed tomatoes are half the cost of name brands, so by forcing me to buy name brands, the cost of my chili was doubled—but the store’s bottom line is plumped by the sale of the more expensive brands. Whatever the reason, the store brand beans and tomato didn’t stay in stock long and soon we were playing “musical grocery stores” again, hunting for the stuff we wanted to buy.

If it was just beans and tomatoes, I could rightfully be accused of being petty—but it didn’t stop there. Bread—low GI white bread, specifically, eaten by thousands of diabetics and people watching their weight—would be gone from the shelves by closing time on Saturday and the shelves would be bare all day Sunday. Mundane things like dishwasher rinse—out of stock for 6+ weeks, although available in a different Pick n Pay store, so it wasn’t like the chain didn’t have any to stock. Maruchan noodle soups—the chicken flavour sells out instantly, but rather than order extra chicken because it is the most popular, the chicken flavour remains unstocked until the unwanted beef and shrimp stuff slowly disappears from the shelves. Minced garlic, capellini (angel hair) pasta, Barilla pasta sauces, sliced Colchester cheese, sliced cheddar cheese, capers (small), black olives, fresh cream, jumbo eggs, baby potatoes, fresh garlic, English muffins, fireplace matches, outdoor bug spray, Mitchum deodorant (unscented), Sprite Zero (2 litre)—if I really put my mind to it, I could double this list and still not cover all of the items I have tried to buy at the Pick n Pay stores near my house, only to find them out of stock, sometimes for more than a month at a time.

Part of the problem is that their stock forecasting is waaaay off base. They cannot accurately anticipate how much of anything the customers are going to buy, which means they cannot keep the shelves stocked. This, of course, assumes they do forecast stock.

Another problem is that they stock during store hours. This is disruptive and just plain stupid. American supermarkets stock shelves after hours and when the store opens in the morning, everything is in place. Trust me, you do not want to be the first shopper in the door at a Pick n Pay market on a Monday morning—the store looks just like it did at closing time on Sunday—the cupboards are bare.

When it got to the point that we had to hit three or four Pick n Pay stores to do a full week’s shopping, we changed our shopping habits. We go to Pick n Pay for the low GI bread and one or two other items that Woolworth’s doesn’t carry and we buy the rest of our food at the Woolies. Pick n Pay’s inability to keep their shelves stocked with the products I want to buy has cost them R7000 per month or R84,000 because I now spend the money at Woolworth’s.

But that's not all of it—my husband and I are diabetic and suffer from certain other chronic conditions for which we buy medication and the pharmacy inside the Pick n Pay Hyper near our house has the best prices on meds. But some things are more important than saving money…like your life. I cannot count the number of times I have come home, unbagged my meds, started putting them in my little pill dispenser boxes, only to run out of something: they shorted me on my meds. On one occasion, they simply left out my husband’s blood pressure meds and, because he takes so many meds, he never noticed one pill was missing. Ten days later he was in the ER with symptoms that were eventually put down to stroke-level high blood pressure.

And every trip to the pharmacy, they are out of something. This is just inexcusable—we have been filling our prescriptions at this pharmacy for more than two years; our prescriptions are on file (physically) and are good for six months. They know I will be coming in around the tenth of each month because that is when I am nearly out of meds; they know my husband will be there about two weeks later because that is when he runs out of meds. They have the prescriptions on file—how hard is it to have enough to fill our prescriptions when we get there? And most of the stuff we get is ordinary, run-of-the-mill stuff: blood pressure meds, cholesterol meds, thyroid meds, insulin, pain meds—only one of the drugs on the prescription is uncommon and running out of it is understandable since you don’t want to keep a large stock of a perishable that doesn’t get prescribed with regularity. But insulin? What pharmacy runs out of insulin?? Or a prescription pain med that has been around more than 100 years? Or small insulin needles? What kind of pharmacy runs out of insulin, for mercy’s sake, twice in one month??

On 9 June we refilled my prescriptions: they shorted me on my blood pressure med and my insulin and gave me the wrong size needles—the ones that leave bruises the size of a 5 rand piece (a quarter) because they were out of the smaller ones. They told my husband they would deliver the missing drugs to the house. A week later, no delivery. Hubby goes to the pharmacy where the pharmacist says he was off sick and he left a note about my drug delivery but it appears nobody read it. Hubby collected my meds and left.

Three days ago we went back to the pharmacy to refill Hubby’s prescriptions. They were out of insulin again and still out of the proper-sized needles. This time they did deliver as promised, but that trick only works if somebody is home to accept the delivery. What happens if everybody is at work when the delivery comes? How many times a month should a person have to go to the pharmacy to collect the drugs from a single prescription, a prescription that is on file and can be anticipated, stock-wise??

So, we are done with Pick n Pay. What used to be a minimum of R12K monthly income to the chain is now going to their competitors. And I don’t care what the analysts assign as the reason for their decline, I don’t shop there anymore because I cannot buy what they fail to keep in stock.

And I am pretty sure that I am just the tip of a huge iceberg of dissatisfied, disgruntled, disgusted customers who are taking their custom to the competition and started doing so in 2009.