Saturday, November 12, 2011

Kedai 1Malaysia: Pulling a fast one

FMT reported that the Secretary General of the Ministry of Trade, Co-operatives and Consumerism, Mohd Zain Bin Mohd chose to respond to my letter "Who is short-changing Malaysians - BN or PR" which was published on FMT yesterday. The title he referred to was actually the title of the same article on my blog.

I am glad to have caught the attention of the Ministry, who had taken time out of their busy schedules to visit my humble blog and then level a response against it. Obviously, they feel that my writings are more significant than the press conference Tony Pua, Nurul Izzah and Dzulkefly Ahmad gave in the parliamentary lobby. For this, I am truly flattered.

"Up to 50% off"

Let us have a look into his 'justification' of the Minister's remarks. Ismail Sabri Yaakob told reporters that products sold at Kedai Rakyat 1Malaysia (KR1M) would be "up to 50% cheaper" than similarly branded products and cannot be compared to house brands.

Such statements are common in a video store who is trying to get rid of unpopular DVDs. One would go in and see a large pile of DVDs of obscure titles in the centre of the room. There would be a sign "up to 70% off", but the ones you would actually want to buy would only be 10% off. This is certainly the impression the Minister is giving if we were to believe the Secretary General.

For those that do not know, KR1M was established in 2010 in order to "combat against rising costs". The Prime Minister, under his "Rakyat Didahulukan" campaign envisioned a store in which essential goods could be supplied at rates cheaper than currently found in the market. This initiative would venture to relieve the burden of inflation and directly benefit the rakyat.

The first KR1M store was opened to great fanfare at the Kelana Jaya LRT station. There are currently 6 KR1M outlets and 22 more outlets are slated to open in 2012. Who operates these stores? Mydin. Was there an open tender? No. So much for Najib's shout for economic transformation.

When the KR1M concept was announced in the first place, I honestly believed that we would be able to get a pretty good deal across these 250 items. The Ministry now admits that this is not entirely accurate, and some items are found to be MORE expensive than what can be found in the market. In short, they misled the public.

What discount? 

When the Minister made the "50% off" comment, what was the benchmark price used to calculate the 50% off? If you are talking about Cold Storage, Mercato and 7-Eleven, he is probably right. However, what percentage of the population would actually do their shopping at Cold Storage, Mercato and 7-Eleven?

Perhaps they used the Recommended Retail Prices (RRP) of the goods to benchmark their discounts. However, whenever I enter Carrefour, Tesco or Giant, there are giant signs that say "Promosi Hebat!" On this basis, is the public assured that the prices offered at KR1M are lower than such promotions? If not, what benefit is there to shop at any KR1M when one could just head over to their local Tesco as usual?

The KR1M Brand is not a house brand

What is the definition of a "house brand"? A house brand or a generic brand in which a range of products is sold under a single entity, in this case, Mydin. Furthermore, house brands tend to be cheaper because of the generic branding.

However the Ministry denies that KR1M products can be compared to other house brands, like Tesco and Carrefour as they are not of the same quality, accusing Tony Pua of not making an 'apple to apple' comparison. Then why not just sell me Dettol at a cheaper price than slapping a KR1M brand on it? Is the Minister unaware that generic labels are associated to be lower quality products than the larger brands?

The Managing Director, Ameer Ali Mydin also jumped to the defence of the products sold at the store, reaffirming that the products are better quality. In that case, can Datuk Ameer kindly explain why the store previously sold milk which tested positive for E.Coli and also have 8 items in stock which fails the standards stipulated in the Food Act 1983 and Food Regulations 1985?

If we can take Datuk Ameer's statement that "KR1M sells quality products at lower prices. It is not a dumping ground for products of lesser quality as alleged by certain quarters" seriously, perhaps he may want to have a check on his procurement department, otherwise there would continue to be a lack of credibility.

RM40 million for CAPEX?

Normally when we talk about renovation, the sum of RM75,000 to RM100,000 would suffice for a space which covers 2,000sqft. However, when the RM40 million subsidy was clarified not to subsidise the products but the cost of refurbishment, how can it be justified?

We also have contradictory number over the number of KR1M shops operational. On their website, one press statement mentioned 83 stores in operation as of November 2011 and 25 more to be set up, but only the 3rd store was opened in August 2011.

Another article mentioned there would be a total of 85 stores next year, a Star report in August that 25 more will open in 2011, and a New Straits Times report dated August 27 says only 22 stores are to be opened this year. To make things worse, their official store locator only indicates 6 stores open. So what is the actual number? I can't help but feel that we are being taken for a ride.

I shall take the store locator to be accurate, and giving them the benefit of the doubt, add in the additional 25 stores for this year. So Mydin has spend RM40 million to renovate 31 stores, which has a price tag of RM1.3 million per store. Anyone smelling corruption here?

Pulling a fast one

One has to ask, what is the point of this exercise? There are so many existing supermarkets and mini-markets who could benefit from the subsidy to bring their prices down. Setting up these stores may save consumers some money, but serve to drive the average Mom-and-Pop stop out of business. Why appoint Mydin to operate these stores at such an extravagant cost to the taxpayers? Why was the tender not extended to the likes of Tesco, Carrefour, Giant and 99Speedmart who already have existing mini-markets!

Since the Auditor General's report came out, it is clear that this government has a lot to explain and account for. Kudos to the Secretary General that he was able to give a more plausible justification than Khairy's absurd story that buying a RM10 million condo for the National Feedlot Project is a sound investment!

If one Ministry is willing to counter what I wrote, why not the other Ministries? Can the Ministry of Defence clarify over the Skudai 7th Brigade project or the supply of RM7.55 billion worth of amoured carriers from DRB-Hicom? Can the MACC explain why they could not catch anyone else from the PKFZ scandal or why they were so keen to investigate Petronas but not Sharizat? Can the Health Ministry explain how goods in KR1M could fail Malaysian standards?

It appears that stealing money from the taxpayers is the easy part. The difficult part is for the government to justify it once the damage is done.

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