BATTLE FOR THE BUDGET MARKET HOTS UP

Pick n Pay Clothing would seem to fill a ‘comfortable’ niche in clothing retail, and it’s looking to extend its reach. But it’s a tough business and competition is growing fierce

Pick n Pay Clothing is the Michael Bublé of clothing retail. At least, that’s according to Twitter user LipstickPainter. You can see the parallel: a brand that’s agreeable, undemanding and doesn’t really push the envelope. A comfortable go-to in a competitive market space.

In fact, Pick n Pay Clothing is all about comfort. The brand, launched more than 25 years ago in a Pick n Pay store in Pretoria’s Menlyn shopping centre, is centred on quality essentials such as leggings, jeans and easy dresses. “That’s really how we’ve built the business and that’s really what we’re known for,” GM Hazel Pillay tells the FM.

It’s proved popular enough. In the face of a cost of living crisis — and as the retail sector works its way back from the devastating effect of Covid restrictions — the Pick n Pay spin-off is growing its footprint. In the year to end-February it opened 24 company-owned and three franchise stores, bringing the number of standalone outlets to more than 300. Factor in the brand’s presence in hyper- and supermarkets, and it’s well on its way to the 500 mark.

In an effort to further entrench its position, the clothing operation plans to open 60-80 stores a year. While many have so far been in regional and super-regional malls, the company is also turning to smaller locations as it makes inroads into the value segment of the market. It’s trading in about 41 budget stores, 11 of which opened in the past year.

The aim is accessibility and broad appeal. “We’re not really catering to a very young customer,” says Pillay.

“The younger market wants to dress in a very specific way, maybe short skirts and cropped tops. We might have very little of that. We want a product for those who want comfort in their clothing, who want to feel confident.”

Pick n Pay Clothing is looking to sell “affordable, relevant and on-trend merchandise for the entire family”, and the point of entry to that market is mothers, since they “do most of the shopping for the family”, says Pillay. Within that segment the company is targeting “someone who is looking for a better-quality outfit at great value”.

You’d think, in this case, that most sales would come from supermarket clothing departments. After all, they offer convenience for shoppers who already know the brand. But the standalone stores generate two-thirds of sales, says Pillay, because customers there have more time to browse.

Pick n Pay Clothing faces stiff competition from Jet, Mr Price and Ackermans and, at the lower end of the value segment, Pep.

And the terrain is set to get busier. Shoprite will open its first dedicated clothing shop at the end of the month in Cape Town’s Canal Walk. The plan is to open 10 stores across the country in short order.

Already, the retail behemoth has “removed most of the clothing out of the hyper stores, bar some very basic items”, CEO Pieter Engelbrecht tells the FM. It’s a move towards a more specialised shopping experience, he says, because people are no longer comfortable “throwing a shirt among their chickens” in a trolley.

The group has moved into a series of adjacent businesses, including pet, baby and outdoor ventures. As part of a broader growth plan, it is also building a shopping centre in Cape Town that will house only its brands; another is being developed in Gauteng.

Engelbrecht has been assessing apparel and products for adjacent businesses for the past two years. “We are looking for areas where adjacent categories complement what we do, where we can utilise our existing supply chain better, where we can com

bine the buying and have spin-off from marketing,” he says.

It’s not a short-term view. “This is a long play in categories we believe we’re under-indexed in,” he says. Clothing offers “a unique proposition, we think there’s a gap in the market for that kind of offering”.

Does that mean Shoprite hopes to eat Pick n Pay Clothing’s lunch? “We’re not taking on Pick n Pay Clothing,” says Engelbrecht. “[Our products] will be of exceptional quality and at great-value prices. I suppose everybody will be a bit of a competitor — if you give very good quality at better value, then everybody will compete.”

Mazi Asset Management portfolio manager Shaun Bruyns, however, doesn’t see Shoprite’s value proposition being all that different from Pick n Pay’s. And it’s not going to be an immediate gamechanger; he believes the effect will begin to show only next year.

“It’s small to begin with, and hard to see that becoming material over the next three years. But they’ve got the financial wherewithal to stick it out and I would imagine, given their data analytical capability, they really know their customer well,” says Bruyns.

As it stands, the only clothing retailer that doesn’t have a value segment is Truworths, but that doesn’t mean the market is tapped out, he says. “Everyone is looking for value for money for as long as the consumer is cash-strapped and prepared to look around, if you’re getting good quality it is a growth segment.”

But it is highly competitive. “Historically, everyone did well because Edcon was just so bad,” he says. “It is a very tough space you have some formidable players. TFG has done a great job with Jet, Pepkor is unbelievable, and if you look at what Mr Price has done with Studio 88 and some other acquisitions, that space is hotting up. There are no really weak players there.”

To stay ahead, retailers need to keep pace with shifting demand. Post-Covid, for example, after consumers were forced to spend the better part of two years at home, there’s been a move away from lounge- and sleepwear “to more styled outerwear”, says Pillay.

“That’s also the catalyst for us, trying to get into better end-products and more style. We’re not moving into smart-wear per se, we’re not moving to a younger customer. But the customer we serve is looking for a holistic wardrobe solution, so there’s a little more opportunity to play in the ladieswear fashion segment.”

Pillay is pragmatic, however. “There’s no sense in trying to be very innovative and it’s not what our customer needs. In a year like this, pricing and value is critical. We want to aim to build a sustainable business and ensure participation of more jobs.”

On that count, Pick n Pay Clothing created 1,000 jobs in the past calendar year 581 in local manufacturing (local sourcing stands at 40%-43%) and the rest in store expansion.

In searching for South African talent, it found that “many [designers] lack the skills to run a business as a whole”, so it launched a mentorship programme, Futurewear. This links younger designers with established figures such as Gavin Rajah. They’re then monitored and mentored by Pick n Pay Clothing, and schooled in running a business.

Anecdotally, Pick n Pay Clothing and Jet are both doing well, says Protea Capital Management CEO Jean Pierre Verster

though it’s hard to be certain, given a lack of like-for-like numbers.

He believes Pick n Pay Clothing seems to have found a winning formula in combining value with a decent fashion proposition.

“It seems like they’re in a sweet spot with competitive pricing, but at the same time people have a positive view of the fashion offering,” says Verster.

“It implies they’re taking market share away from others, possibly Ackermans and Mr Price.”