Shoprite keeps kingpin status

DESPITE PERENNIAL RETAIL MALAISE, COMPANY REMAINS RESILIENT BY EDGING COMPETITORS The retailer had a solid showing in a market that has seen competition intensifying more than ever.

Shoprite continues to maintain its front-runner position in SA’s grocery industry, edging its retail rivals that are reeling from moribund economic growth and lower spend by hardpressed consumers.

Its sales came roaring in during the six months to December 2017, indicative of Shoprite probably gaining new and permanent customers from its competitors.

Sales for its core SA supermarket business – which includes Shoprite, Usave, Checkers and Checkers Hyper – increased 7.8% while internal inflation fell to 0.4%. Even after factoring internal inflation, sales volumes grew 7.4% (2016: 3.3%).

“Shoprite is really taking market share from competitors. It must be an absolute nightmare to compete with Shoprite because they are so powerful,” said Cassie Treurnicht at Gryphon asset managers.

Shoprite has historically muscled in on its competitors – mainly Pick n Pay, Spar, Woolworths and Massmart – using lower food prices to assist the poor and aggressive promotional activity.

Shoprite’s competitive advantage against other retailers is its slick logistic and distribution operations in SA and the rest of Africa, which gives it the ability to source merchandise from suppliers at competitive rates, control costs and get additional profitability to reduce prices.

Shoprite’s internal food inflation has historically been lower than that of its peers Pick n Pay (3.6% for 26 weeks to August 2017), Woolworths (4.4% for 26 weeks to December 2017) and Spar Group 8.2% (six months to March 2017).

Ron Klipin at Cratos Wealth said the recent decline in the price of soft commodities, including maize and wheat, is also helping Shoprite to keep inflation in check, resulting in lower food prices. “The internal inflation rate could also be the result of Shoprite buying market share by reducing prices due to their massive buying power. We are seeing consumers buying products at lower prices.”

Treurnicht says Shoprite is taking market share from Pick n Pay, which has been in recovery mode the last four years. Pick n Pay’s sales and profitability are still challenged, but it plans to woo customers back offering them lower prices and enhancing their shopping experience through spruced up stores.

“Pick n Pay opens up stores in wrong locations while Checkers is better positioned.”

Shoprite also plans to take on Woolworths’ affluent consumers by opening new generation Checkers stores in affluent areas boasting more than 100 convenience food products.

Klipin said Checkers is making a start on this front “especially if you look at some of the stores aimed at higher LSM consumers”.

We are seeing consumers buying products at lower prices