By Stephanie Jacob
The Mydin hypermarket chain was among the businesses which used the public’s annoyance to raise its own brand perception and image – by offering a promotion in which it promised to not raise its prices as a result of GST for the whole month of April.
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While both businesses and consumers adjust to the goods and services tax (GST), some companies are looking for ways to use it to their advantage, to boost their brand perception and give something back to their customers.
One such business is Mydin Mohamed Holdings Bhd – operator of the Mydin chain of hypermarkets – which has promised that their customers will pay the same prices throughout the month of April 2015 post-GST implementation, as they did on March 31, 2015.
Mydin is the largest local hypermarket and supermarket chain in Malaysia with 90 outlets nationwide. It has 18 hypermarkets, 16 emporiums, 47 mini markets, three bazaars, eight convenience shops and six franchise outlets.
The Mydin chain traces its beginnings to a humble wooden store in Kota Bahru, Kelantan where Mydin Mohamed opened Syarikat Mydin Mohamed and sold toys and other general items.
From there, Mydin’s sons helped him grow the business and they expanded into Kuala Terengganu and eventually into Kuala Lumpur where it opened its first store on Jalan Masjid India. From there the chain grew its presence across peninsular Malaysia, eventually becoming Mydin Mohamed Holdings.
Mydin is one of the large hypermarket chains participating in the government’s Economic Transformation Programme’s (ETP) small retailer transformation programme (Tukar) which aims to help modernise local neighbourhood mom-and-pop sundry shops. It assists in helping these shops enhance its customer service capabilities and in streamlining its frontline and back-end office processes.
Early suspicion over the promotion unfounded
Ameer Ali Mydin
In conjunction with GST being implemented, Mydin said it wanted to offer some assistance to its customers and decided on a programme where it would not raise its prices. “Whatever you bought on March 31, 2015, if you buy the same things in April, the total amount you will pay will be the same. This means that the GST portion to be paid will be settled by Mydin,” said its managing director Ameer Ali Mydin, son of Mydin Mohamed.
On April 1, there was some early criticism from shoppers who thought Mydin was reneging on their promise of not charging GST because the receipts they issued indicated that tax had been charged.
However, Ameer quickly refuted the allegations and explained that it was a legal requirement to indicate the tax paid on its receipts, but in line with its promotion the hypermarket would absorb that cost rather than pass it on to the shopper.
To illustrate his point, Ameer provided two receipts from March 31 and April 1 which lists four identical goods. On those receipts it is clear that the amount paid by the shopper does not differ between the dates.
The only difference is the April 1 receipt indicates the amount of GST which is now required on the goods, which will be borne by Mydin.
Mydin’s reasons for offering the promotion
Ameer said the hypermarket chose to run its promotion for several reasons. Firstly, he said that as the largest local hypermarket chain in Malaysia, Mydin believed it needed to take the lead in addressing the rising cost of goods which would have likely led to its sales going down.
The sector in which Mydin operates is also one of the most competitive in Malaysia, with other big hypermarket or supermarket chains like Giant, Tesco and Aeon Big all vying for consumer affection.
Therefore, Mydin believed that if it took the initiative in maintaining its prices, its competitors would have no choice but to follow suit, given the intense levels of competition between the hypermarket chains in the Malaysian market.
The cost of Mydin offering this promotion to its customers is a RM15 million hit to its monthly revenue. It also worked closely with its suppliers to convince them to absorb a portion of the GST so as to avoid increasing prices.
It might be surprising to hear, Ameer said, but he found most of his suppliers very willing to work with Mydin to keep prices from rising. “We have a very good relationship with our suppliers, and we said that if the suppliers absorbed 2% we were willing to absorb the other 4% of the 6% GST. And seriously, we found that in these trying times no suppliers wanted to increase prices,” he said.
Will the promotion last beyond April?
Nonetheless, Ameer said he can only promise that the promotion will run for the entire month of April as it is costing Mydin a hefty RM15 million, which is coming at the expense of its monthly turnover.
Ameer added that while Mydin was still in negotiations with its suppliers to see if prices can be maintained or reduced for longer, it would be difficult to achieve given the current weakening of the ringgit against the US dollar
However, Ameer said that even if Mydin cannot sustain this particular promotion beyond April, it will continue to work with its suppliers and customers to increase understanding of GST, and promised to keep looking for ways to avoid significant price increases for its customers.
Yesterday: ‘Give us time’
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