Woolies ready to take over
WHY WOOLWORTHS BOUGHT A CHAIN OF 150 ABSOLUTE PET STORES The retailer’s customers are more likely to own furbabies, and to spend lots of money on them.
By the time Woolworths announced its surprise acquisition of the Absolute Pets chain at the end of October, rival Shoprite Group had already opened nearly 60 standalone specialist Petshop Science stores across the country.
It would’ve been eyeing this adjacent sector for some time (Shoprite opened its first stores in 2021), and the outright acquisition of 150 stores offered instant scale in a market it needed to be in.
Retailers moving into adjacent markets is not a new phenomenon. Not only do these offer outright potential for growth, they also allow retailers to capture additional spend from their existing pool of customers. In Woolies’ case, they are very loyal!
Of course, it helps that these “adjacencies” generally mean higher margins (high single digits, often double digits) than pure grocery retail (low single digits). Why else does Shoprite operate 700 LiquorShops in South Africa? To date, Woolies has had some success with its WCellar liquor stores, and its push into this space is accelerating.
No-brainer
Pets is a no-brainer, and not just because the sector is worth over R7 billion annually.
Woolies Food customers are statistically more likely to own pets – and to spend lots of money on them – than shoppers at other supermarkets. Its Food unit is a R43 billion turnover business, while fashion, beauty and home is another R15 billion.
Can an expanded “pets” category boosted by Absolute Pets add R1 billion to turnover a year? More than likely.
In certain of its Food stores (like Lonehill),
pet food, toys, clothing, and accessories have commanded an increasing amount of space. Now, this spans an entire aisle. It has even introduced a limited range of premium pet accessories at its 30odd Country Road outlets in the country.
Obvious efficiencies
The majority of Absolute Pets stores are in shopping centres/neighbourhood malls that already have a Woolworths Food.
Expect Woolies to negotiate harder with landlords and drive down the cost of occupancy (Absolute Pets stores are currently likely paying higher rents per square metre than they ought to be). Expect the stores to be relocated near Woolies as these opportunities present themselves. And those centres without Absolute Pets stores will soon have them.
Certain items from the Woolies pet food and treats range will surely appear in Absolute Pets stores sooner rather than later. Specialist foods (think Hills, Royal Canin and so on) will still need to be stocked only at Absolute Pets as regulations prevent these from being sold in supermarkets. Toys and accessories can be sourced together and merchandised in either Woolies Food stores or Absolute Pets ones.
Standalone brand? Maybe not …
In the announcement of the deal, Woolworths was at pains to point out that the Absolute Pets CEO, Stephen Warner, “and the current management team, will continue to operate and lead the business under the Absolute Pets brand, with the benefit and support that partnering with the Woolworths Group provides”.
Realistically, it makes very little sense to operate Absolute Pets as a completely standalone business forever more.
It is by integrating the two units that Woolworths will be able to extract the most efficiencies and, therefore, value. Margins will get a boost.
Its WCellar business provides the template. Get ready for WPet, complete with remodelled, premium interiors and merchandising.