Carrefour, the multinational retailer backed by Majid Al Futtaim, has come under scrutiny for its multilayered rebate system in Kenya.
The Competition Authority of Kenya (CAK) has launched a fresh probe into the fees charged by the company, with rebates being standard practice among retailers globally.
However, Carrefour’s approach has caused concern among suppliers, who struggle to pass on the cost to consumers.
The CEO of the Association of Kenya Suppliers, Ishmael Bett, describes the rebates as “a noose on suppliers” and warned that margins could eventually erode to zero.
Carrefour’s rebate system employs two types of rebates: fixed and royalty rebates and progressive rebates.
Fixed and royalty rebates are monthly charges that are set by Carrefour, irrespective of sales.
Progressive rebates are chargeable annually, with the rate of application rising each year.
Listing fees are among the progressive rebates charged to suppliers for placing their goods on shelves.
While suppliers can choose or dismiss promotional discounts, they are required to offer thematic discounts that cover key shopping seasons like Christmas and Easter.
The CAK has already blocked Carrefour from charging rebates on Pwani Oil products pending its ongoing probe.
The retailer has been operating in Kenya for seven years and has caught suppliers off guard with its multilayered approach to rebates, squeezing their margins in the process.
The situation is causing grave concern among suppliers who feel that Carrefour’s approach is squeezing them out of the market.
“It’s like a noose on suppliers and each year, they tighten the noose further,” says Bett.
“The rebates are eating away supplier margins and this, in a way, is margin erosion. Our worry is that one day the margins could come down to zero.”
Carrefour’s rebate system has become a subject of intense scrutiny, with suppliers and industry players alike calling for transparency and accountability.
The ongoing probe by the CAK will hopefully bring clarity to the matter and provide a framework for future dealings between retailers and suppliers.
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