Fu­elled by suc­cess

Pit stop buy­ing grow­ing coun­try­wide

Finweek English Edition - - INSIGHT - ANDILE MAKHOLWA andilem@finweek.co.za

THERE WAS SOME fan­fare when Pick n Pay ven­tured into fore­court re­tail­ing in 2008, tak­ing over out­lets be­long­ing to oil group BP. It was ex­pected the re­tail gi­ant would quickly sur­pass Wool­worths, which en­tered the mar­ket in 2000 in part­ner­ship with En­gen. How­ever, Pick n Pay seems to have lost mo­men­tum. It’s thus far con­verted a mere eight BP Ex­press out­lets into Pick n Pay Ex­press stores and is non­com­mit­tal about the num­ber of out­lets it plans to add over the next cou­ple of years.

By con­trast, Fruit & Veg City and oil group Chevron have con­verted 50 tra­di­tional garage stores at Cal­tex sta­tions into a com­pelling fresh-food for­mat – Fresh­stop – in just two years. By year-end 2012, Fresh­stop plans to have dou­bled the num­ber of its out­lets.

Absa re­tail an­a­lyst Chris Gil­mour says Pick n Pay prob­a­bly stalled on fore­court re­tail­ing to fo­cus on its ma­jor chal­lenges, such as build­ing dis­tri­bu­tion cen­tres, op­ti­mis­ing SAP and ex­it­ing Aus­tralia. He says the down­turn might have also trig­gered the slow­down in open­ing out­lets be­cause con­ve­nience of­ten takes a back seat when con­sumers are un­der pres­sure.

How­ever, Gil­mour says fore­court re­tail­ing is a great op­por­tu­nity for su­per­mar­ket re­tail­ers in a mar­ket tra­di­tion­ally dom­i­nated by fast food chains. Fa­mous Brands op­er­ates a net­work of 321 out­lets in all the top six fuel re­tail­ers. “Con­ve­nience is the name of the game – part of a global phe­nom­e­non,” says Gil­mour. “Wool­worths has been very suc­cess­ful and Pick n Pay has the po­ten­tial to be the big­gest.”

Pick n Pay Ex­press GM Vaughn Lin­den agrees. “There’s value in of­fer­ing the cus­tomer a con­ve­nience for­mat to sup­ple­ment the cus­tomer’s shop­ping ex­pe­ri­ence… In­ter­na­tional trends over the past 10 years have shown the small for­mat and fore­court stores are a growth area for the busi­ness and that all lead­ing in­ter­na­tional re­tail­ers have a multi-chan­nel pres­ence.”

A typ­i­cal Pick n Pay Ex­press out­let has an av­er­age trad­ing floor space of 150sq m. Its prod­uct line is just over 1 500 items, rang­ing from a lim­ited range of gro­ceries – with the fo­cus on fresh – and a range of fresh flow­ers, fruit and veg­eta­bles, meat and deli prod­ucts as well as con­ve­nience and take­away meals. Though all eight out­lets are fran­chised and lo­cated in the West­ern Cape and Gaut­eng, the group doesn’t put a num­ber to its roll­out plan.

Says Lin­den: “Con­ve­nience re­tail­ing is a key fo­cus for Pick n Pay and we in­tend rolling out a num­ber of these stores over the next few years.”

Wool­worths – the first su­per­mar­ket chain in SA to test the con­ve­nience for­mat at En­gen sta­tions – cur­rently has 43 fran­chised out­lets coun­try­wide. The group says the model has been well re­ceived by cus­tomers due to the qual­ity of its of­fer­ings, in ad­di­tion to stores be­ing open around the clock. It doesn’t charge a pre­mium.

Brian Cop­pin, co-founder and MD of Fresh­stop, says turnover has grown by 40% year-on-year af­ter the con­ver­sion, and the chain has seen a 12% in­crease in foot­fall, while the con­ve­nience store re­tail­ing sec­tor re­ports con­stantly de­clin­ing turnovers of mi­nus 6%.

Cal­tex has also seen a hike to its top line num­bers. Bring­ing Fruit & Veg City on board has re­sulted in an av­er­age in­crease of 8% in fuel vol­umes at con­verted sites, says Teresa Booth-Oliveira, prod­ucts GM at Chevron South Africa.

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