Mitch Slape on his Massmart shake-up
Walmart sends in its man to turn around costly SA investment
● Massmart’s new CEO, Mitch Slape, hit the ground running when he took over the troubled retailer in September with the aim of transforming the company into the “strongest and healthiest retailer in Africa with the best long-term prospects”, he says in his first interview since starting work.
Among the interventions already under way are improving the group’s online shopping offering and using its buying power as a group.
In a sign of the new perspective taking hold at Massmart, the group aired its first ever TV commercial this week, full of phrases such as “every rand matters”, “unbeatable together”, and “powered by Walmart”.
Underlying this are big shifts in the way the group is now operating.
Slape goes on walkabouts in stores every week and has town hall meetings in the parking lot for head office staff, which are shared with employees throughout the group.
But it’s no small task. Speculation has been rife for years that the world’s biggest bricks-and-mortar retailer wants to exit Massmart. It bought a 51% stake in 2011 for $2.4bn. Since then, the value of its investment in Massmart has dropped about 80% as the local retailer has struggled with sluggish sales growth in product categories that rely on discretionary spending.
But Massmart’s share of the local retail market for household appliances is nearly 40% and its brands — Makro, Game, DionWired, Jumbo Cash & Carry, Cambridge and Builders Warehouse — are household names. It is also Africa’s second-largest distributor of consumer goods.
Game and Dion Wired are particularly problematic. Massmart’s hard goods and hitech merchandise offering has been hit by weak consumer demand, increased competition, more online retailers, and its own lacklustre execution of its online strategy.
Slape — a Walmart “lifer” set to reach his 25-year mark with the group in January — is the first Walmart insider to run Massmart.
Since arriving in SA, he has held more than 100 one-on-one meetings with managers, and every week arrives unannounced at stores to assess how they operate. He will reveal the company’s turnaround plan to analysts at the end of January.
“Coming to SA, I think there’s a tremendous opportunity for us to really supercharge this business with a closer relationship with Walmart in doing a lot of things I know Walmart does incredibly well, bringing those to the business and giving the team here exposure to do it,” says Slape.
New cost-control measures are being put in place. An “every rand matters” campaign aims to sensitise employees to decisions they make every day. “There are a thousand decisions that get made in businesses every day that the CEO or leadership team is not part of. We want to create an environment where our people know that they’re making the right decisions because there are guiding principles of how to drive efficiency, how to drive savings, and they’re focused on that.
“The way we talk about it is that if you spend a rand … our stores have to generate R50 in sales to cover that. It’s a rule of thumb that we’ve applied.
“As important is that every rand we spend in the home office is effectively a rand we can’t invest back into lower pricing or product innovation for the customer.”
A significant opportunity is in negotiating with suppliers as a group that leverages its combined buying power to secure better prices for customers.
“Up to now we’ve been having three or four relatively unco-ordinated conversations with our suppliers, so I think this is a big opportunity,” says Slape.
The closer relationship between brands is already evident in some promotional activity. For example, if a customer buys a braai at Builder’s Warehouse, they will get a voucher to spend at Game.
Slape has spent most of his retail career in South Korea, Mexico, India and Japan. “So I’ve seen very developed markets and seen markets that are still in the process of developing,” he says.
He has been through remodelling, refurbishing, refreshing and downsizing retail stores.
Between 2015 and 2019, when Slape was
Walmart Japan’s COO, the group reduced its number of stores from 438 to 322 and its selling space from 2,275m² to 1,885m².
In SA, Massmart is in discussions with landlords to reduce rents, and some reductions have already come through. “Fundamentally we are in a different reality and a different market,” says Slape, “and I think it’s the right thing to do, to have those discussions.”
Many analysts have called for Game to reduce the size of its operations or even call it quits, but Slape says there are no plans to close Game and in certain product categories — among them electronics, appliances and sporting goods — it is “incredibly dominant”.
“I think it’s got tremendous potential; we just need to get the business set straight.”
Whether Game retains its food component is under consideration. “Is it a foot-traffic driver for us that’s important enough that we would want to play in some way?”
Slape concedes that Game has lost its way in how it reaches the customer, and the product mix is being assessed. A similar assessment is under way at DionWired.
But Builders Warehouse, Slape says, is “a world-class retailer”.
Asked why the changes now under way at Massmart have not been implemented before, Slape says: “They have, in various ways over the years, but I think the difference is we just had not supercharged the effort.
“There are some great things happening around the world that we can bring here.”
Improving the group’s digital offering is one of the interventions.
“There’s no question that retail of the future is going to be online and we’ve got to be a bigger part of that. E-commerce is going to play a bigger role longer term, and we need to be crystal clear on our approach to food.”
Other retailers are reducing their exposure to Africa, but Slape says: “If we’re going to be the best retailer that we can be, we may need to add a few more components to our Africa strategy.”
Cultural shifts are also set to take place. “Above and beyond the pragmatic process of improving margins or costs … this really is about a culture shift in the business. It’s about getting people energised and working as one group-wide unit, understanding that our reason for existence is to save our customers money so that they can live better.”
Optimistic sentiments for a company that’s lost more than half its value in the space of a few years.
There’s a tremendous opportunity for us to really supercharge this business with a closer relationship with Walmart