School uniforms: the big rip-off
To what extent do exclusive contracts between schools and suppliers of school uniforms drive up prices, and could an open tender process, or a universal uniform, bring more competition and lower prices?
The seemingly mundane business of school uniforms is fast gaining a bad-boy image. And parents are not impressed.
For Tshegofatso Adoons, a mother of a grade three pupil, "back to school" usually translates into "fork out all your money". Her eight-year-old daughter attends a semi-private school on the East Rand and she can buy school gear from only one specific retailer in that area — "for an arm and a leg".
"As a mum, you often shop around for deals but with school uniforms we are captured by the school branding on the uniform, which we can only buy from one place."
A competition commission probe into uniform cartels began in 2015 after a number of parents complained about the narrow and expensive options of stockists available, and it is ongoing.
Parents’ complaints aren’t unfounded. Two pairs of grey trousers and two white shirts cost R89 and R59 respectively at Ackermans. Adoons says she paid R150 and R120 for one pair of each from one of the other suppliers approved by the school. "I had no choice, the school insists we buy from the stockist because of the specific branding on the uniform."
The preliminary findings show that in the R10bn industry, schools have failed to engage in open tender processes from suppliers.
The way it has worked for years is that often a school will tell a parent where to buy the uniform. But because there is no competitive bidding, parents end up overpaying.
The commission found that 70% of the schools it looked at don’t have "exclusive agreements" with uniform suppliers. Still, about a third of both private schools (183 of 573 schools) and the relatively well-off former model C schools (567 of 1,723) did have exclusive deals.
Paul Colditz, CEO of the Federation of Governing Bodies of SA Schools, says schools simply haven’t been aware of the implications of the Competition Act. Some, like Redhill in Johannesburg, have online platforms where they collaborate with stockists to provide relatively affordable clothing.
Nonetheless, the retailers deny they collude and say contracts are necessary to plan properly.
Grant Walker, a director of McCullagh & Bothwell, a 121-year-old supplier of school uniforms that has agreements with 25 schools, says everyone would be worse off if uniforms were standardised and exclusive contracts cancelled. The firm has agreements with elite private institutions such as Kingsmead, Roedean and Hilton College, as well as government schools such as King Edward VII and Parktown Boys.
Walker says mass supply is the name of the game. If two suppliers were to split the contract for a medium-sized school, prices would rise and not fall. "We don’t make the rules, we just supply the market," he says.
While he admits that more suppliers could bring prices down in the short term, fewer orders over the longer term would mean higher overhead costs. In McCullagh & Bothwell’s case, a school that wanted to cancel its exclusive deal would have to give a year’s notice to allow stock to be sold or buy up the remaining stock.
He says relationships are based on goodwill. "We have one school we have been supplying to for about 100 years without any written contract."
Tembinkosi Bonakele, the competition commissioner, says there are many smaller businesses that could compete for the uniform business, if it were opened up to greater competition. "If the school uniform market is opened up to competitive bidding, uniform costs will certainly go down and the quality of the clothing items will improve."
Bonakele says vigorous competition creates "massive incentives for companies to improve efficiency, product superiority and introduce competitive prices".
That is what parents are asking for: options. Currently the average price of a boy’s navy blue high school blazer is R875 at McCullagh & Bothwell, R695 at Hermers and R830 at Attache.
Walker rejects the idea that suppliers operate as a de facto cartel. He says a number of large retailers, like Edgars and Woolworths, compete for parents’ wallets.
Colditz says that in practice, not every retailer wants to hold large quantities of school stock — particularly in smaller towns.
While uniforms have been a feature of schools for decades, policymakers are grappling with how to make it less costly for parents without ditching uniforms altogether. In May 2015, the department of basic education issued a circular saying uniforms should be more "generic", so they can be obtained from more than one supplier. This appears not to have hurt speciality retailers, however.
Faizal Hajat, director at schoolwear stockist Economic Outfitters, says his firm hasn’t seen a major sales drop, other than because "people have less disposable income".
The commission’s final report is expected in a few months.