All’s right at Shoprite
Whitey’s retirement, while an end of an era, will unlikely mean radical changes in local retail, writes Colleen Goko
here is little that James Wellwood “Whitey” Basson hasn’t seen or done during 40 years in the retail business.
At the height of racial tension in SA, in the decade of the Soweto Uprising, Basson was the head of operations at Pep Stores, an office he held until late 1978.
Pep Stores was one of a few South African corporates which made an early decision to focus on the low-income market despite the politics of the day. Black consumers could go to Pep and dress their children from head to toe for less than a rand. Basson’s key role in the young organisation — founded in 1965 — was to extend its brand and reach.
His time at Pep revealed Basson’s ambitious nature. Having tasted the fruits of success after acquiring his first business Half Price Group and turning its fortunes around through integration into Pep, Basson felt ready to start a new venture in the food retailing business.
With Pep’s blessing, he did just that and 37 years ago acquired an eight-store Western Cape grocer named Shoprite from the Rogut family. The legend as we know it had begun. From a business with a value of just R1m, Shoprite now has a market capitalisation of R114bn.
Basson changed the game. Apartheid had fractured the nation along the lines of racism as well as wealth distribution. His street smarts did not discriminate. The formal retail sector in townships and rural areas was underdeveloped by
Tyears of neglect. The government of the day also made it extremely difficult for black business minded people to begin their own formal and legal enterprises.
Consumers in those regions relied on local spaza shops for their needs and goods. The offerings were usually not fresh and prices could vary. The market was ripe for the introduction of a formal player offering good service and products at reasonable prices. Dominant players in grocery retail had ignored this demographic before apartheid and were slow on the uptake even when it ended.
Shoprite, under Basson’s guiding hand, snatched the carpet from under the feet of the major retailers. Pick n Pay, OK Bazaars and Checkers were focusing their strategies and attention on middle and upper-income consumers. With the country just finding its feet, that target market was feeling the pressure. OK and Checkers were soon swallowed up into the Shoprite Holdings group.
With the changing consumer landscape, Basson understood that the only way to become one of the biggest players in the sector was through aggressive acquisitions and to have exposure to as many segments of the market as possible. But he and Shoprite never lost focus on their core market.
Basson was also a pioneer in introducing a centralised distribution centre, which allowed the group to stabilise supply lines when supplier service levels dropped. More tellingly, he was the only food retailer ambitious and hungry enough to expand into territories elsewhere in Africa.
With SA open for business to the rest of the world, after the first democratic elections, Shoprite was quick to open its first store in the rest of the continent — in Lusaka, Zambia. This at a time before the “Africa rising” narrative. Shoprite now has operations as far north as Nigeria and Ghana.
As Shoprite chairman Christo Wiese says, Whitey’s charismatic leadership and calculated risks spearheaded the group into a leading food retailer on the continent. Other retailers have tried to mimic the strategy but it has been too little too late.
The retail landscape has changed since Basson was first appointed Shoprite CEO. The news of his impending retirement at the end of the year, while signally an end of an era, will unlikely mean radical changes in the local retail landscape.
While shopping centre developments have been increasing rapidly in SA, Shoprite will likely continue to dominate. Since the 1960s, the number of retail developments in a decade has been increasing by an average of 36%.
A Euromonitor report says Shoprite led South African grocery retailers in 2015 with 19.4% market share. Its expansive retail network across grocery retail channels such as supermarkets, discounters and hypermarkets gives it a competitive advantage. Shoprite is also positioned as a low-priced retailer, so in tough economic times, consumers continue to be attracted to Shoprite by the promise of low-priced products.
The company’s first-quarter trading update of the 2017 financial year points to exactly that. The group reported strong double digit growth across most of its divisions. Group revenue grew by 15.7% compared with the prior year. Its South African supermarkets increased revenue by 12.4% — greater than the 12.1%
Shoprite has never lost focus on its core market