Abolishing the cashback system and shifting to a net pricing model could negatively affect distributors and producers and may ultimately lead to higher consumer prices, Vakhtang Sadzaglishvili, director of the distribution company Sharm Trading, said at a parliamentary commission session studying pricing.
According to Sadzaglishvili, cashback is not only a financial mechanism but also an important marketing tool that helps distributors manage the competitiveness of products on retail shelves.
He said that under the current model, cashback – which in the company’s case amounts to about 40% – allows distributors to offer discounts and maintain stable pricing in stores.
“The abolition of cashback will have a negative effect for us. Part of this budget goes directly to discounts. If we move to a net model, we will lose this opportunity, and retail chains will independently decide at what price to sell the product,” Sadzaglishvili said.
He added that without cashback distributors would lose an important marketing instrument, which could lead to declining sales and weaker financial results.
During the meeting, it was also noted that the 15% markup proposed by retail chains under the net model may be misleading. Lawmakers said that if a retailer buys a product for 6 GEL instead of 10 GEL but keeps the same retail price, the actual margin could reach up to 55%, potentially affecting consumers.
