Woolies ventures wide
CHARGE INTO PETS, LIQUOR AND NEW CLOTHING FORMAT The biggest opportunity is ‘growing existing customers’ share’.
Anew standalone unit inside the sprawling retailer, Woolworths Ventures, will give the business the edge on the four high-growth adjacent categories to the core that it is targeting.
These are pet, liquor, its smaller format clothing outlets known as W Edit, and food services. The last is a catch-all for its in-store coffee stands, standalone Now Now takeout, and W Café efforts.
CEO Roy Bagattini says this unit, with new processes and capabilities, will allow it to be more agile, flexible and entrepreneurial in how it pursues opportunities in these new categories.
Translated: this decision has been made to ensure that none of these new growth businesses will be bogged down in a nearly R50billion-a-year Food juggernaut or the R16 billion fashion, beauty, home (FBH) one.
Its core businesses in South Africa (Food and FBH) have their own priorities. To expect executives and managers in those businesses to prioritise new ventures would be asking a lot. They know that, for example, improving size availability in the clothing business will make a far bigger impact on their bottom line right now than these new initiatives.
So, it comes down to focus. These new businesses will be able
to focus on the specific opportunity in front of them without worrying about the rest of Woolies (the “core” business). Bagattini describes it as a potential “game changer” for the group.
Eye on the prize
Bagattini says the group’s “biggest opportunity is not in acquiring new customers; it is in growing the share of wallet of our existing customers”. In the Food business, he points to “VIP” customers, who do the bulk of their grocery shopping at Woolies. This segment only comprises 10% of its base.
For the remaining 90%, Bagattini says for every additional 1% of their grocery spend they shift to
Woolies, this translates into R1.5 billion in additional sales.
This is why the majority of these adjacent categories are so important. He is unashamedly aggressive – Woolies aims to be “the leader in end-to-end pet care”. Its acquisition of Absolute Pets ought to receive regulatory approval by the middle of this year. Liquor remains an opportunity – one need only look at the sales growth at the Shoprite Group’s Liquorshop business and Spar’s Tops. Although late to the party, Woolworths will continue to open W Cellar stores alongside its supermarkets in areas where it makes sense.
Some centres already have one
or two established liquor stores, but it still sees space for W Cellar.
W Edit
W Edit, its slimmed-down clothing and beauty offering, is perhaps the only one of these four that isn’t focused on Woolworths increasing its share of wallets from its existing shoppers. This format, which is about 10% to 15% the size of a normal Woolies store, “get us into places we couldn’t put a Woolies”, says Bagattini.
He says this allows the group to “access a whole new customer”. This format allows it to effectively compete against Pick n Pay Clothing, Shoprite Group’s Uniq and other operators like Miladys.
The offering in each store is based on the data it has on its shoppers. Because of the smaller stockholding in each store, it can also rapidly remove or introduce ranges.
Woolies aims to be ‘the leader in end-to-end pet care’