| Kippreport.com

The gift of giving: Is cutting the CSR fund the right move for retailers?

June 6, 2011 4:56 by kippreport

Following the price control scheme, the latest hit on UAE retailers comes in the form of instructions from the Ministry of Economy to stop charging commission on credit card usage, effective July 1 this year. The move was made in support of consumer rights and to boost economic competitiveness and growth in the UAE.

“This is strategic to reduce monopoly and exploitation, and will enhance market competitiveness,” said HE Sultan Bin Saeed Al Mansoori, Minister of Economy and Chairman of the Supreme Committee for Consumer Protection.
To combat inflation in the Emirates, this month the Government has asked supermarkets to subsidise the cost of about 400 products until the end of the year. Some retailers have lowered prices to the wholesale cost, while others have cut prices by up to half.

An article in The National this Monday said, “supermarket bosses have revealed how they will maintain profits while paying for the Government’s price control scheme — the extra cost will be classified as corporate giving.”

In other words, the price control will be offset by funds taken from the CSR or charity budget.

“The money will be taken from an amount we use each year for social work,” Husam Abdeen, a purchase manager with Al Ain Co-op was quoted as saying. “We are not worried about the cost [of the campaign] actually, because we look to spend money each year to give to the community and this will come from that.”

Abdeen told The National the price control campaign would have otherwise cost the company AED100,000 (US$10,262), which would otherwise have gone to the local community, traditionally spent on schools and community support schemes.

At Kipp’s headquarters, there’s been some debate on the validity of some of the retailers’ decision to cut their CSR fund to maintain profits for the end of the year.

Here are two main opposing points of view that have come up:

POV1

It’s a bit of a stretch to call this one ‘corporate giving’, especially when the Government has twisted the retailers’ arms to get the price down.

Yes, the price control seems like a band-aid solution to a deeper product supply wound. But trimming the CSR fund is hardly the way to combat the short-term loss, either. Retailers may say it goes back to the community anyway, but I hardly think the consumers who benefit from the cuts are the same groups of people on the receiving end of most of these charity projects.

Why not cut down on marketing and advertising even more (ie point-of-sale, brochures and pamphlets) or to pass on these marketing/branding costs to the brand owners? This is a ripple effect that should not have gone back to the community. Call me a bleeding heart, but I hardly think this does any good for consumer rights at all since you’re just giving to some what you are taking away from others within the community.

Granted, some supermarkets have been conscientiously cutting costs. Some are choosing to provide smaller unlabeled (and therefore cheaper) shopping bags; while others are cutting on operational costs by only manning a select number of cashiers.

Oh well, I guess we’ll expect to see less pomp and circumstance around Ramadan, Eid and Back-to-School marketing collateral, or least a toned down version this year because surely they would have cut down on that first before using the CSR fund to pay for the price controls.

POV 2

The price freeze launched by the Ministry of Economy is part of a campaign that aims to fight off inflation (a consumer-biased move, if I dare say so).

Essentially, by keeping food prices of staples significantly lower, it is the community that will benefit: not the grocery. As it is, smaller retailers find it difficult enough to slash prices as per the Ministry regulations.

Consider the words of one David Derrick, the retail general manager of Abela’s three shops: “Our retail prices are driven by the distributors, so I cannot really see how [supermarkets] are going to reduce or fix their prices.”

There can be no doubt that cutting prices are adversely affecting the retailers. But is utilising the CSR fund to combat potential loss justifiable? It is a tough call, but given the circumstance I am inclined to agree. Sure, dipping into the CSR fund to keep prices low is an unconventional interpretation of the cause; but there’s no denying that the end benefit still will be the society.

So which side are you on? What are your thoughts on this issue? Leave as a comment on the website, Facebook or Twitter.

Tags: advertising, brands, charity, charity fund, community, consumer rights, credit card, CSR, CSR fund, cut, cut costs, fund, gcc, marketing, Middle East, Ministry of Economy, point-of-sale, retailer, shops, Supermarkets, UAE