Econet Asks Its Suppliers To Cut Prices By 20% Starting ‘Today’

Tinashe Nyahasha

30 April 2020

So this happened:

It’s difficult for everyone

As much as we understand the argument given by Econet in this letter, the story is not that simple. They are asking suppliers to cut prices by a hefty 20% in an environment that they themselves admit is characterised by inflation and deterioration in the value of the currency.

In business, a business that doesn’t increase its prices is effectively lowering its prices and margins. To then go a step further and actually reduce pricing and by 20% at that is near impossible. Where did Econet get the number 20? Out of a hat right? What makes them think their suppliers have enough margin to cut prices this way?

Desperate times

This letter by Econet does not make sense at all and when you see such a letter being drafted by people you know to be cleverer than you, it tells you how bad things have become.

I don’t think Econet’s idea will work. Reliable suppliers will not be able to accept this and remain reliable. Econet will start getting inconvenienced or some suppliers will just drop out. Econet will get ‘other’ suppliers- not B class but D class suppliers who will do worse. End result: they will be left with a higher cost structure than before their big idea.

Still, I wish them and their suppliers all success.

Economy, Telecommunications

11 comments

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Imi Vanhu Musadaro

30 April 2020 22:36

Firstly, is that document legit? Otherwise, it’s as good as we are discussing mythical beasts.

Supposing it is, maybe they know their suppliers inflate prices. Just like how surgical gloves were overpriced, just because Strive made a pledge. But, I would think that they would engage suppliers individually, as not all products yield the same margins.

It is also hard to ask suppliers to give you a break, whilst you aren’t also giving your customers a break.

Reply
1. Tinashe Nyahasha
  
  1 May 2020 01:30
  
  Document is legit.
  
  Yes it is the blanket 20% cut request that doesn’t make sense. If they know their suppliers inflate prices then they didn’t care all along? Why tolerate such leakages when you know they exist?
  
  Reply
  1. Imi Vanhu Musadaro
    
    1 May 2020 02:28
    
    It’s easy not to care about leakages, when you pass the buck on to someone else. Many organisations do that. It’s only at times like this that they start scrutinising their expenditure.
    
    Reply
    1. Tinashe Nyahasha
      
      1 May 2020 11:07
      
      Sadly true
      
      Reply
Anony

1 May 2020 12:23

Go ffff off Econet. You’d think with all the money they make they would be in the business of promoting their supply chain but no, in these tough times they even want relief really. It’s not like suppliers are getting their things easier or with a 20% reduction. Nxaest

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Anonymous

1 May 2020 14:23

Dark times are looming ahead. Covid-19 has made business difficult. The economic situation and how value has been eroded in Zim has compounded these effects. @Nyahasha, Econet is good at keeping it’s business afloat. Suppliers who understand this will heed the request and comply. If Econet goes bust, it’ll be a sad story not just for Econet, but Zim as a whole I’m afraid.

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Jack

1 May 2020 15:29

When staff are evaluated on how much money they save above all else you get such crazy actions. As the author rightly points out they will lose serious suppliers and get chancers. There will be many meetings where they will try and use their size as a bargaining chip. Companies were there long before they did business with Econet and will be there long after they stop. Kindly thank them and show them the door.

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Tengai Moyo

1 May 2020 19:39

It’s not explicit but sounds rather implied: Dear current suppliers, drop your prices with us (or…else)

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Anonymous

1 May 2020 21:11

If that letter is a fact
I want you to look at it in this perapective:
What if they are trying to make a negotiation not to necessarily have a 20% discount but to negotiate to a certain percentage? Its a strategy too in business.

I think a jounalistic article should express an opinion based on different schools of thoughts. You have concluded your article based on one perspection. Truly, the fact might be that you do not know the strategy behind the writing of the letter. Perhaps what you said is right, however, there may be so many reasons why that request to suppliers was made. After all, that is a request not a demand

Reply
Anonymous

1 May 2020 21:17

If that letter is a fact
I want you to look at it in this perapective:
What if they are trying to make a negotiation not to necessarily have a 20% discount but to negotiate to a certain percentage? Its a strategy too in business.
Emotion, luck and magic have no place in a successful negotiation. It takes an iron gut, homework, street smarts and unblinking discipline. These keys will unlock your ability to get the best deal possible under any circumstances (https://www.entrepreneur.com/article/203168)

Reply
Anonymous

2 May 2020 16:36

Most of their suppliers can make the cut if econet agrees to make payments on time and early, they normally take too long to process payments and suppliers factor this delay in their pricing.

Reply