Sunday, October 20, 2013

What if Singapore had no NTUC FairPrice?

A friend invited me to a dialogue session hosted by NTUC FairPrice CEO Mr Seah Kian Peng. I was pleasantly surprised that Mr Seah actually took time off his busy schedule to converse with a small group of us who are keen to find out more about FairPrice and its social purpose.

It was a lazy Sunday afternoon, but I felt obliged to attend as I had accumulated many questions on FairPrice, some shared to me by friends, some by union members in the course of my work (I am an Industrial Relations Officer at NTUC Administration & Research Unit, an entity different from NTUC FairPrice, Income, LearningHub, etc - a clarification I often have to make to those unfamiliar with the Labour Movement). 

I have structured my blog posts with the burning questions that I had, and possibly what you have as well, and how my doubts and concerns were addressed.

Some Brief History on FairPrice

NTUC FairPrice was set up in 1973 (formerly known as NTUC Welcome) amidst the global oil crisis, providing Singaporeans with affordable prices for essentials.

While setting up NTUC FairPrice, large retail supermarts added pressure to suppliers to prevent them from supplying to FairPrice. This triggered a response from then Prime Minister Lee Kuan Yew, who officiated the launch of the first FairPrice outlet at Toa Payoh, "Any wholesaler who withholds popular or fashionable goods in great demand from this co-op supermarket, to give it to his pet retail network, will be bucking not only the labour movement but also the government."

Source: NTUC This Week

FairPrice is a social enterprise, which is registered as a co-operative, hence subjecting it to the Co-operative Societies Act. This includes the channeling of profits as dividends to members of the co-operative, which in this case includes Unions and their members. 

Moderating Cost of Living

Perhaps some of the most pertinent questions everyone would have of FairPrice are:

"If FairPrice's mission is to keep prices affordable, why is it that this item is cheaper at S**** S**** supermart?"

"If FairPrice aims to keep prices affordable, why is it catering to the high-end market (FairPrice Finest)"

As a social enterprise, NTUC FairPrice helps moderate cost of living in Singapore by adopting the following strategies: 

1) Housebrand items

FairPrice currently provides 2,600 Stock Keeping Unit (SKU) of Housebrand items that are at 10-15% cheaper than national brands. Housebrand items also attract further discounts if you are a Union or FairPrice member, subject to certain terms. The prices are lower due to cost-savings from advertisement and marketing.

On questions of quality of Housebrand items, it is interesting to note that the items are manufactured by reliable companies (FairPrice has a food hygiene department which inspects on food quality). Taking the example of FairPrice bread, it is actually produced by a company that also retails its popular brand of bread products at FairPrice.

2) Maintaining low price of basket of 500 Daily Essential items 

FairPrice conducts regular price surveys to ensure that the prices of the combined basket of 500 daily essential items are kept at the lowest price in the market. Yes, it is easy for another retailer/supermarket to sell a product at a lower cost than FairPrice, but if you add up all the 500 daily essential items as a whole, FairPrice guarantees the price to be lowest. 

Some items are also priced at least 20% cheaper than national brands and they are demarcated by a yellow dot (Lowest Price). Not forgetting the Senior Citizen discount on Tuesdays.

3) Removing uncertainty and anxiety during times of crisis 

During times of crisis, the lack of information and anxiety could result in people stockpiling food items and driving prices upwards. Hence, FairPrice is proactive in keeping a consistent supply of food items (rice stockpiling too), through contract farming and diversified food sources.

FairPrice embarks on contract farming locally and internationally, and currently has over 80 contract farms. Besides ensuring consistent supply, contract farming also promotes resilience for local farms too, by purchasing whatever they produce, despite the higher cost due to their lower economy of scale. Such local farms include SG Fish and Skygreens.

During the SARS epidemic (2003), the supply of vegetables were affected due to the closure of Pasir Panjang wholesale centre. FairPrice helped stabilise the prices of vegetables by importing from new sources and assuring Singaporeans that there is sufficient supply of vegetables. To prevent opportunists from profiteering, each person was allowed to only purchase a maximum of $10 of vegetables. FairPrice also helped pack and deliver food to those who were quarantined.

During Bird Flu (2004), FairPrice helped curb profiteering by traders and lead in dropping egg prices when normal supply was restored.

By being the last to raise prices and first to drop prices when supply stabilises, FairPrice achieves the social objectives of moderating prices. In order for FairPrice to do so, it has to be good at what it does and have the scale to be impactful. Just imagine if FairPrice only had one outlet, which other retailers would be pressured to follow FairPrice's price movement?

4) U pay the same for Product A at FairPrice, FairPrice Xtra or FairPrice Finest

FairPrice adopts a Uniform Pricing Policy, which means that you can purchase the same product for the same price at FairPrice, FairPrice Xtra or FairPrice Finest, and regardless of whether the outlet is in Orchard Road or at Bedok Reservoir Road.

Besides all the above mentioned, FairPrice also absorbed GST for 2.5 years when GST first introduced and when it was adjusted.

Enabling Local SMEs

When a new FairPrice is set up at the heartlands, some people might be concerned that the entry of FairPrice would crowd out the Mom and Pop shops. So how is FairPrice helping SMEs?

1) SME Suppliers Support & Development Programme (SSDP)

This programme helps local SME suppliers via shortened payment terms of 30 days instead of 60 day. FairPrice also shares data to enhance their capacity. FairPrice also promotes local produce via Tasty Singapore Fair.

2) Benefiting residents and businesses

A new FairPrice outlet actually provides tangible benefits to residents and businesses. Neighbourhood shops around the outlet benefit from increased human traffic. For shops selling similar items as FairPrice, they would feel the pressure even if the new entrant was any other retailer and supermarkets.

And in case you are wondering if FairPrice enjoys any special treatment in securing venues for its outlets, the answer is NO. It has to join in the open tender and bidding procedures, together with its competitors.

Corporate Social Responsibility

FairPrice publishes its CSR policy online and holds itself accountable to public.

In terms of employment, 90% of its employees are Singaporeans and Permanent Residents. The foreign workforce helps to manage the night shift operations as more FairPrice outlet goes 24/7 (so when you visit FairPrice in the wee hours and find a higher proportion of foreign workers, please be understanding). About 40% of its employees are above 50 years old, higher than the national average of 30%. It is also an equal opportunity employer and engages people with Special Needs.

The Management-by-Attachment programme sees all management staff spending two days a year at the stores performing operational tasks such as cashiering and replenishing stocks.

FairPrice Foundation receives an average 2 sponsorship requests a day to support various community and charitable events.

And there's the Share-a-textbook programme that collects used textbooks and channelling them to those who need them.

So what if Singapore had no NTUC FairPrice?

After hearing Mr Seah speak with passion and conviction in FairPrice's social mission and purpose in Singapore, I can't help but ask myself, what if Singapore had not NTUC FairPrice? How would prices be moderated, especially in times of crises leading to anxiety and food shortages?

It would be interesting to know how other countries cope with such situations. In some countries, citizens bear the full brunt of food price increases. In some others, governments subsidise the cost of essentials. 

Singapore's model is a unique one and I think there are plenty of merits to such a model. As a co-operative, everyone could hold shares in the social enterprise by being an NTUC member.

So next time when you have the choice of shopping at different supermarkets, you would know which to visit :)