Friday, September 02
What should we make of the market research published this week that compares Czech shoppers to those of neighbouring countries? The headline story is that 41% of Czechs buy mainly on price. My first thought was "So few?". We are constantly told by the retail industry that "Czechs buy on price". The retailers say this directly in conversation, and through their marketing communications. When you get home tonight, you will find your postbox full of "letaky" , all with the message "We are the cheapest!" (They cannot all be the cheapest, but they all say it). The same message comes out through the billions of koruna spent each year on advertising by retailers. Yet if you wish to know whether your nearest hypermarket or supermarket stocks good quality seasonal fruit or vegetables from Czech farmers, you will be disappointed.
Perhaps equally surprising was the news that in Austria and Germany the number nominating price as the deciding factor was actually higher than in the Czech Republic. It is surprising for two reasons. Firstly disposable income in those two countries is much higher than it is here. Secondly, the quality and choice of goods in a German hypermarket is far superior to that found here. The implication is that a German retailer is more prepared to cater for the needs of customers who put choice and quality ahead of price - but will still compete on price.
While the research leaves many questions unanswered, it should confirm what many of us have suspected. More Czechs are willing and able to to pay a little more for better quality - yet most retail buyers seem slow to acknowledge this. When a retailer speaks of the Czech customer as a single entity, that is surely a mistake. Virtually everybody in even the richest European countries will look for the cheapest price. However those who have enough money to live on will not accept poor quality, lack of choice or unpleasant environment just to save on a few euros each week. The success of Tesco in the UK is based on this idea: Thanks to its buying strength and experience, Tesco will always offer a good price, whether you choose a cheap item or a luxury item.
Czech retailers seem to have told themselves that shoppers choose on price because they don't have enough money to pay for more expensive things. This research helps to show that this is not true. This is particularly relevant in the area of fresh fruit and vegetables. I was told by a senior retail manager that all the retailers in the Czech Republic import only second class fruit and veg. My observation is that this also true for the small Vietnamese-run shops. I recommend everybody to visit Globus in Schwandorf (two comfortable hours drive from Prague) and see the immediate difference in quality. Back in Zlicin, Globus competes with Tesco, Albert, Kaufland etc to offer the cheapest oranges. But none of them offer oranges of the quality you can buy in Germany. Why not?
Of course the biggest puzzle is this: Does the Czech consumer buy on price because he/she feels the prices generally are too high? if so, he/she is right. The other amazing thing about shopping at Globus in Schwandorf (or in OBI or its rivals) is that not only is the quality higher, the prices are actually lower. How can this possibly be? It breaks all the normal rules of economics. One reason is the rate of the Czech crown. I will not call it 'strength', the correct word is surely "over-valued". If you want the evidence, then go to Globus Schwandorf, and discover that they stock Pilsner Urquell. And then check the price. It will be between 10-20% cheaper than in any hypermarket in Prague. I always buy a case when I am there. OK the saving of 72CZK on 24 bottles is nothing. But the satisfaction of buying a quality product cheaper is something that everyone has felt since markets began.You don't need a market research study to know that this is how people will behave.