Shoprite eyes a slice of high-end market
AS SOUTH Africa slides into recession and households have less and less to spend, Shoprite is adopting an unlikely strategy: pushing upmarket.
While the lower-income families that have long been its core customers cut back, the spending of wealthier classes remains undented by the downturn.
The discount retailer’s new boss is driving hard into the upmarket, higher-margin niche dominated by Woolworths.
Shoprite chief executive, Pieter Engelbrecht, said affluent areas and customers were where he saw growth in the market.
“A lot of those [wealthier] customers, two million of them, actually frequent our stores already, but not exclusively,” he said. “Our job is to get a better share of their wallets when they are in our stores and then impress them so that they come back again.”
Shoprite is doubling its offering of the kind of high-end convenience foods Woolworths has built its reputation on – from gourmet lamb shanks and oxtail stew to teriyaki-and-ginger-basted pork ribs. Its range would reach about 500 products by the end of the year, Engelbrecht said.
The mainly discount retail group is executing this strategic shift by expanding its higher-end Checkers chain of stores.
It plans to open 23 new outlets, mostly in wealthy suburbs, by June next year to bring the number of stores to about 230.
Shoprite’s core, low-income customer base has been battered by a year of high inflation, stagnant wages and unemployment reaching a 14-year peak. Higher interest rates and currency depreciation have further eroded consumers’ disposable income. SA has fallen into recession for the first time since 2009, data showed last week.
The group’s push upmarket has been driven by its own economics. It is grappling with an internal inflation rate – the rise in what it pays for its goods – of 7.4%, the highest level in years, but has not been able to fully pass this increase on to poorer consumers.
This has undermined its traditional mass-market strategy of low margins and high volumes. To continue to secure growth, it is hunting the healthier sales growth on offer at the higher end of the market.
While sales at Shoprite-branded stores have grown by 8.8% in the past 12 months, sales at Checkers have risen by 11.1%. — Reuters-BDLive