Lower margins on Co-op lines for Costcutter shops

Costcutter retailers are being advised to sell Co-op own-label lines at lower recommended retail prices (RRP) than Nisa, while paying higher wholesale prices (WSP).

Analysis of both group’s RRPs and WSPs on 398 key own-label lines showed that 146 lines were cheaper at Costcutter, compared to 103 at Nisa. A basket of seven popular items showed Costcutter to be nearly £1 cheaper.

Nisa’s margins were 5% higher on average, while its wholesale pricing was nearly 1% lower than the rival symbol group’s, meaning Costcutter stores that conform to the recommended pricing strategy make nearly £4,000 less in gross profit on every £200,000 of own-label retail sales. This is before any rebates or surcharges are applied. Click here to see the full Co-op own label pricing comparison.

Commenting on the preferable WSPs, Nisa retailer Amrit Singh told RN: “It means Nisa retailers can afford to undercut Costcutter in certain categories.”

• More recent news: Sales promised in Nisa rebate for Co-op own label

However, another Nisa retailer said the higher Nisa RRPs would harm shop owners that followed them. They explained: “Customers will eventually work out who’s cheaper and it will be the Costcutter retailer who will win.”

Rav Garcha, of Nisa Hockley in Birmingham, said it was Co-op’s RRPs, not Costcutter’s, that
mattered most. “Co-op’s pricing is often better than the RRPs advised to Nisa and Costcutter stores, so those with a Co-op nearby have to use a more tailored pricing strategy that gives very different margins.”

• More recent news: New Nisa format promises double-digit sales boost

A Costcutter spokesperson told RN: “We price competitively within the marketplace, and the simplified pricing structure we introduced last May means our retailers easily understand their margins all of which is then supported by a rebate of up to 6%. For our Co-op Own Brand range, we deliver a 30% blended margin across the range with some excellent star lines.”

A Nisa spokesperson responded to RN's findings: "Our partners know that when comparing margin on products, they need to view the margin opportunity across a whole basket of products and not on individual items.  In addition, Nisa’s independent partners benefit from more than just strong margins on a leading own label offer, our excellent availability, rewarding rebates and first rate retail advice and consumer insights are all part of Nisa membership.”