Nakumatt chief defends pricing system after social media storm

A complaint posted on social media claiming that Nakumatt supermarkets had overcharged a customer thrust the retailer into a storm, attracting bad press and the threat of regulatory action by the Competition Authority of Kenya.

The supermarket chain, which is Kenya’s biggest by sales volumes, has defended its practices, attributing the erroneous pricing to laxity by some of its branch staff. The Business Daily spoke to the Nakumatt managing director Atul Shah about the pricing storm and other issues.

When did you first get complaints about apparent discrepancies in Nakumatt’s shelf and till prices?

The complainant was a Facebook user who bought milk at our Village Market branch. An internal audit established that although normal procedure was followed, the aisle attendant erred by placing the new price sticker over the old one. The new sticker could easily have fallen off due to the constant cleaning at the section.

How do you effect commodity price changes at your outlets?

The price change process commences once we receive an advisory from any of our suppliers, dictating the new recommended price for a product.

We receive approximately 200 price changes from our suppliers everyday. This large number of alterations is because we have on average over 60,000 products.

Once the list is sent, the procurement, finance and marketing teams feed it into the ERP system.

The approved price schedule is then broadcasted across the branch network and a formal email shared with the respective branch managers.

The morning after they are received, the new price lists are available for download. Printed stickers are then provided to aisle attendants by their supervisors. The process of updating till and shelf prices takes between 20 minutes and a maximum of eight hours.

This receipt system seems well-thought-out. What then went wrong and precipitated the backlash?

What happened is a one-off incident. Somebody must have forgotten to put the label, or the person who was there put the new label on top of an old one and it fell off. When you have 7,500 people working in the stores, there is a human error element to consider.

A label change is not robotic. The price may change on the system but somebody has to physically place an updated sticker on the shelf.

Shoppers are accusing Nakumatt of fleecing them, saying the discrepancies are simply an ingenious way to make money, assuming it happens in all your branches. What is your response to this?

Nakumatt shall never fleece any of its customers. Not under my watch. Today’s consumer is very aware; they are not stupid.

If this was a deliberate plan to fleece customers, it would involve a well-thought-out plan, which would involve everybody from myself to the cleaner.

Following the first case, several people have taken to social media to share photos of receipts, claiming that the price discrepancy problem was widespread. Are their claims legitimate?

People posted pictures saying they were cheated but they cannot explain what they were cheated of. We shared an email address asking for feedback and received over 200 mails, including job applications and business ideas.

None of these included any tangible examples of price disparities. They were saying that till prices and shelf prices were different with no evidence to back it up. The physical receipt will only tell you the till price. The receipt will not speak.

Mr Shah, my understanding of the matter is that some people were complaining about past events. Many of them may not have thought of taking a photo of the shelf prices as proof that a disparity existed. Aren’t you placing a heavy burden of proof on your customers?

If I show you a receipt today and tell you it was supposed to be eight shillings, how do I prove that it was supposed to be eight shillings?

We have gone back and checked all products mentioned and we have not seen any discrepancy.

We have a complaints desk, a suggestion box and a customer service desk. I am sure that if these events were happening on a large scale, people would have spoken up about it earlier.

You initiated an audit following the incident. Please share its outcome and any interventions that have been introduced as a result.

The audit we are talking about is not a system audit. We went to all branches and checked that all labels on shelves matched the till prices.

We have confirmation that the incident was not a system-wide error. The audit is, however, an ongoing process, happening as the prices are changed.

We have put people in charge and told them to take their jobs seriously since any lapse can land all of us in trouble.

We are also trying to set a system where suppliers send price changes to us on a bi-weekly basis, except for perishables like milk where price changes have to be effected immediately.

Daily price changes are becoming too much to handle. If every chain asks suppliers to do this, it could be implemented faster for the benefit of the industry.

You are also planning to introduce price checkers. What is the timeline for this project?

We expect that they will be in place by the end of the year. They will enable customers to pick up an item and scan it on the machine in order to know its correct cost.

We used to have them seven years ago but they were not compatible with our new systems so we removed them. Their usage was also very low.

We will need at least 10 in a standard store and more in bigger outlets like Mega. We estimate that 500 price checkers will cost us approximately Sh25 million.

The Consumers Federation of Kenya (Cofek) has threatened to take this matter to court. Have they been in touch?

We received the letter from Cofek with several demands ,which we have not responded to. My position is that if I have done anything wrong, let them do what they have to do. I do not see the need to defend myself. If Cofek says I am a thief, they have to prove I am a thief.

The Competition Authority of Kenya has also picked up the matter, asking any affected customer to come forward with evidence. What is your comment on this?

Unless they officially inform us that we did something wrong, we will not pre-empt their actions. They are currently seeking evidence of price discrepancies at Nakumatt. We welcome the process.

Do you think you have lost valuable customer trust over a matter you insist was not intentional?

We do not take the trust of our esteemed smart shoppers for granted. The recent social media bloat has certainly dented our reputation. It is not in our space to engage in social media activism when we can guarantee our customers superior service.

That is my focus going forward. I have no doubt that the truth shall prevail and ultimately set us free from the negative verdict in the public court. I have seen outright lies peddled and defamatory innuendos liberally shared.

Yes, the receipt incident went viral but for me any publicity is good publicity.