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Pick n Pay’s checkout: Cash or credit?

Shoppers will be offered the option of paying for groceries on credit at Pick n Pay stores.

Pick n Pay is putting up a fight in SA’s competitive retail industry by offering its shoppers the option of purchasing groceries on credit.

The grocery retailer will join upmarket retailer Woolworths in offering credit facilities that would be accessed by shoppers using a Smart Shopper card.

The Smart Shopper loyalty programme was launched in 2011, has over seven million members and has played a key role in helping to lift Pick n Pay’s bottom line, according to the retailer’s 2017 annual report. It also means Pick n Pay has a wide pool of credit shoppers to select.

The retailer is pulling out the stops to lure shoppers into stores by offering them favorable credit terms. Shoppers will be offered up to 55 days’ interest-free credit, budget payment options for big-ticket items and active users will be charged monthly store account fees of R10.

Richard van Rensburg, Pick n Pay’s deputy CEO, said the store accounts have been designed to exclude hidden fees and to offer shoppers “the lowest possible monthly fee”.

“The high cost of credit is a significant reason why customers have less disposable income for their grocery shop. Hidden costs such as initiation fees, administration fees, mandatory insurance fees and penalty fees exacerbate the cost of credit,” he says. Pick n Pay will not earn income from the credit granting process, as “we have negotiated a great offer from the credit industry for our customers”.

It anticipates that offering credit will drive more feet in stores and an increase in spending by shoppers.

Pick n Pay is in the middle of a turnaround strategy that plans to return the retailer to its former glory after years of neglecting investments in stores and losing market share to rivals Checkers, Shoprite and Woolworths.

Its turnaround, which still has around two to three years to go, has focused on retail basics such as improving customer service, cutting costs, revamping stores and hooking shoppers with lower prices.

Its foray into store accounts comes at a time when credit providers are batting to collect payments from consumers who remain increasingly hard-pressed due to rising living costs and the worrying state of the economy.

Pick n Pay has teamed up with credit provider RCS for the store accounts. It said RCS would be taking all the lending risk as the credit provider will be vetting the creditworthiness of shoppers, granting credit facilities and taking on potential bad debts.

Pick n Pay also enters a market fraught with regulatory requirements, with the National Credit Regulator (NCR) upping the ante on sanctioning credit providers that recklessly offer credit to consumers.

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Which ever way you look at it, Pick ‘n Pay will now be the leading leech retailer. they should be encouraging people NOT to buy on credit instead of encouraging it. This may be the right time to look at who else in the grocery market there is who will respect their customers, and not leech on them. Checkers? Spar? Most likely. Their prices are better too.

So PnP, how are you going to provide for all those bad debts? With higher prices of course.

Really, really bad move by PnP.

PnP why do you want to be a bank? Especially with stuff you cannot repossess and resell? Yip it is all about fees, another word for robbing the paying public.

Stick to selling food and leave money lending to the banks. You already have a bad name in the food industry so why make it worse by joining the banks? It is bad enough that they offer you money and then haul it in when you least expect it.

Exodus 22:25-27 “If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him. If ever you take your neighbor’s cloak in pledge, you shall return it to him before the sun goes down, for that is his only covering, and it is his cloak for his body; in what else shall he sleep? And if he cries to me, I will hear, for I am compassionate.”

Just the other day there was an article on moneyweb explaining how bad debt levels are amongst South Africans. Is it wise/responsible to allow/encourage this kind of behaviour? You be the judge, I certainly know where I stand on this issue. Won’t be buying any PnP shares anytime soon.

Selling food on credit is (a)unethical because only the poor will use credit and they will find themselves in debt for FOOD, and (b) a disastrous strategy for a food retailer because consumers will end up resenting the retailer (not RCI). Short term market share gains, but at the expense of the poor and the country, and in the medium term Pick n Pay will pay as consumers start to resent it. Anyone who builds a growth/market share strategy based on providing credit for food should be fired for bad strategy, and isolated for intentionally over-indebting the poor just to earn a short term bonus (this strategy will be reversed before long term share plans benefit. Disgusting in the extreme no matter what PR story they use to spin it.

This is a VERY bad move on Pick ‘n Pay’s side. Firstly, credit should not be used for everyday items, it should only be used for long-term planned items or unexpected medium-term emergency items. Secondly, allowing credit will artificially inflate their revenues, pretty much exactly like what happened at the Edcon stores. The chickens are coming home to roost on that one.

Robbing from the poor to give to the rich. The people who will buy on credit are the people who cannot afford to pay cash now. Why will they have the money next week? All they will do is buy what they cannot afford.
CPS (pension pay out people) offered loans and insurance policies. the government came down heavily on them. This is worse.
This is unethical and i will no longer shop at PnP.

South Africa is becoming a country where mindless stupidity is becoming a way of life. When I read something like this I realsie that there is simply no limit to executive stupidity in this country. Anyone with even the lowest levels of financial acumen knows that you NEVER lend people money to buy food. This is reckless lending of the worst kind and the relevant authorities should forbid it

Anyone with a bank issued credit card won’t bother with this offer from PnP, since it has a R10 service fee, and the same terms as a regular credit card. This means that PnP will be using RCS to scrape the bottom of the barrel in terms of creditworthiness, and targeting the poor, uneducated and desperate who’ve already been rejected by banks.

If they are really doing this to drive more sales, and the moneylending is incidental, they should commit to using the interest income earned to directly subsidise staple foods in their stores, or donate it to charity. Otherwise this disgusting move should be roundly condemned.

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