Global and local events, whether security issues, medical issues or omissions, have an impact on the cost of living. They widen the gaps between low supply and high demand and serve as a well-established excuse platform for any desire to raise prices.
Apparently, there are also effects that are supposed to benefit the consumer: in case the supply exceeds the demand, in the case of the discounting of raw materials or in the case of a drop in the exchange rate of the currency, which directly affect buying and production prices. When was the last time you heard from a farmer, manufacturer, importer or retailer that he had a good year, so he’s about to drop prices? Sounds like science fiction, right?
On May 8, earlier this week, the Central Bureau of Statistics (CBS) published a report indicating the effects of the war in Ukraine on various areas of local industry. 9% of businesses reported significant effects following the war, and 32% of those surveyed reported some effect The war It can also be deduced from the report that small businesses were affected to a greater extent than large businesses, and 34% of all businesses are afraid and do not know what the future effects and consequences of the current situation will be, how long it will continue and whether the war will end or worsen.
Sales are hurt, profit is not
Although we review and examine the effects overseas, the security situation in the country also affects industry and commerce, consumption patterns and leisure and recreation – and these change and cause instability in the economy. After more than a month affected by Israeli holidays and Islamic holidays, we observed changes in market supply and their effects on prices due to product shortages, delays and due to logistics and supply problems to points of sale.
Unfortunately, the formula to sell less and make more is part of the local trading culture. This is how the head of the retailer works: “If we need two tons of fresh poultry, but the expectation is that we will get half a ton – they will sell anyway, there is no reason for us to erode profitability.”
And there is not always a shortage of products. Working days, for example, are also an important variable. On the one hand, we are all confident that the holidays will bring prosperity and an increase in economic activity. On the other hand, this is only true for some areas. Thus the sale days are reduced due to the holidays, but the rent, taxation and salaries remain the same. So if we expect an increase in daily sales cycles, it is still less sales days. Therefore not every holiday is a blessing for every retailer, and even at the consumer level it is carefully said that not always the fact that we buy more, means that we also consume more.
Most food products often have a common denominator in the form of the main raw materials: sugar, oil, flour, salt, corn, cocoa and of course oil (and various fuels), which are responsible for transport prices, plastic materials and storage packaging. In addition, the raw materials are traded on the Commodity Exchange and are affected by fluctuations in the trading indices. Giant companies are usually backed by long-term contracts, and the daily fluctuations do not affect them directly, but in the future. However, the impact on the consumer is usually faster, because the events provide a reason for rising prices in an attempt to stabilize market prices and adapt them to a reality that may exist.
The public’s right to know?
On the other side of the happening we are exposed to many (and unfortunately, failed) attempts that come up daily in order to find solutions to the cost of living. Unfortunately, every limiting solution is born with a magnifying solution, so there will always be someone who knows how to profit from a new idea. This week, for example, a bill was tabled in a preliminary reading by MK Vladimir Bliac (Yash Atid) – a proposal whose main purpose is to oblige giant companies, which are defined as monopoly and not public, to present their financial statements to the public.
There is an offer here that does not comply with the laws of the world: a private company is a private company, and a public company is public, and each has its own rules, advantages, disadvantages, rights and obligations. It is not clear how a private body was required to present reports to the public. But even if this problematic is ignored, what can the public already understand from the reports? After all, any long-term investment can change the profit data and present a negative profit to the observer. The definition of a private company as a monopoly is also very limited (the idea came up with the decision of a barn company from 2016 to be delisted from the stock exchange).
Change in willingness to work
Another problem affecting the retail market is the problem of human resource shortages: despite the seemingly impressive figure with less than 3% unemployment in the labor market, supply is still 20% higher than demand.
The corona crisis has led employment patterns to a new culture. Positions in customer service jobs, collecting, operating, arranging products in stores or working at the checkout have become a need that is difficult to find an answer to. High employee turnover, unsuitable employee recruitment, etc., also add another burden to retailers: training and training costs, increasing salaries to attract more candidates, and the like. All of these lead to erosion in profitability, and they will end up in price increases and damage to the consumer’s pocket.
Our basic basket products have risen, and what has not yet risen will rise soon, even if for the time being retailers are still holding back and fear being the first to raise prices.
The prices of the essential oils have jumped from NIS 6.90 on average to NIS 8.90, the prices of fresh chicken have jumped by more than 25%, the fish and frozen meat have jumped and with them the frozen vegetables by more than 20%, and the prices of canned beans show a similar increase.
Leave fruit, take a snack
The more worrying phenomenon is the common prices in the fruit and vegetable category. How can a watermelon, which was previously offered to us in the price range of NIS 90 to NIS 1.90, now sell for NIS 13 per kilogram? Peaches sell for NIS 45 (in the am: pm chain) and cherries for NIS 100 (in the Saleh Dabah chain), Litz Sold for NIS 40 per kg at Shufersal Deal, and apricots and grapes you will find for more than NIS 50 per kg.
How is this price increase explained, which has reached a level that almost no family in Israel can afford? After all, this is not a state-of-the-art technology. It is also difficult to blame, in the case of most of the fruit, the costs of the containers on the cargo ships or the seemingly bad working habits of the port workers.
Moments after an Israeli family made a sincere effort to educate their children to replace Elite’s chocolate snack with fresh fruit, they had to deal with a reality where they could purchase sweets, but could not afford to purchase the healthy substitute for them.
We conducted a sample survey of the fruits of the season in order to understand and learn how much they cost us, what are the gaps between chains and how much we will pay this year more than the peak prices we knew in the past. One thing is for sure: while farmers are fighting retailers and blaming them for pig brokerage gaps, the only casualty is the Israeli consumer, who continues to pay dearly for plant-based food products – which were once part of the consumption basket even in low-income families.
The author is the CEO of the Institute for Retail Research
Source: Maariv.co.il – כלכלה בארץ by www.maariv.co.il.
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