IT’S BEEN JUST UNDER a year since food retailer Pick n Pay announced its plans to take on the R20bn convenience retail market and its game strategy has now been revealed. The retailer is testing its convenience concept – known as Pick n Pay Daily – at its first such store, which was opened at the World Wear centre in Beyers Naude Drive, Fairland, north-west of Johannesburg, on 23 September.
It’s a market that Woolworths has catered to with roaring success, although its credit-laden consumers are taking the “flight to value” and buying down to cheaper competitors.
Woolworths has been afforded a lower rating (it’s trading on an earnings multiple of 10,4 times) than Pick n Pay (14 times), owing to its credit exposure and questions about its strategy.
Pick n Pay remains a defensive play, along with Shoprite (on a multiple of 14,9 times) that investors favour in volatile times.
Pick n Pay Daily stores will be franchised and are an opportunity for the group to expand its black-owned store base. It’s in talks with BP to roll out its convenience concept to forecourts in the same way that Woolworths has done with Engen.
Woolworths Foods is going for larger-sized (1 110sq m) stores, which stock a bigger range of non-private label brands so as to encourage buyers to buy all their goods at Woolworths. Pick n Pay stores sizes are moving the other way – from large to small (which for Pick n Pay means between 700sq m and 1 000sq m) – which analysts warn may not be the right move, as the cost of maintaining such stores is higher on a per square metre basis. Should the group manage to keep product costs down – which Woolworths, with its premium-quality offering, isn’t able to do – Pick n Pay may succeed in capturing consumers’ favour.