Massmart job cuts were expected

It’s no surprise that SA unit of Walmart, Massmart, is in talks with unions to shut down its electronics and appliances subsidiary DionWired and wholesale division Masscash stores.

The group, which also owns Game, Makro, Rhino and Jumbo among others, swung to its first half-year trading loss in two decades last August, as low growth, high unemployment and a rising cost of living hurt South Africans’ spending power.

Its Massdiscounters division was the most affected. Masscash recorded a trading loss of R190.4 million (end-June 2019) across its African retail stores, from a loss of R4.1 million in 2018. Massmart shares sank to a 13-year low last year.

The group is expected to cut up to 1 440 jobs. Its website says it employs over 48 500 permanent and flexitime staff.

Saturated market

36One Asset Management retail analyst Evan Walker says the retail industry and cash-and-carry market is oversaturated. He predicts more retail closures in the next five years, adding: “I wouldn’t exclude anyone.”

Investment and market commentator Chris Gilmour believes Massmart’s mistake was entering the food market late.

While it tried hard with Cambridge Foods, it made a first-time loss with the latter last year “even though they are the most price-competitive chain in the country”.

Sasfin Wealth senior equity analyst Alec Abraham says SA’s low GDP has also been a major factor.

“The reality is that people do not have money, and that has been a function of the economy for the past five to ten years – not that you can’t try and pull out tricks to try and take market share away from each other.”

Massmart brand and communication executive Phumzile Siboza says it’s evident the group’s stores weren’t spared from the dire state of the economy.

She says 11 Masscash stores will be affected by the possible downsizing, emphasising however that no decisions have yet been taken regarding potential job losses.

DionWired no shock

DionWired’s possible closure comes as no shock, says Gilmour; its prices were not low enough and its marketing strategy not compelling enough to take market share from its competitors.

He says DionWired has been a victim of deflation in the consumer tech industry.