South African retailers head north

A Lastest News about Retail Trade and Electronic Commerce in South Africa

Posted on: 31 Mar 2012

Major South African retailers Pick n Pay, Shoprite Checkers, Massmart and Truworths are scoping the continent for growth.

One of the country's biggest retailers, Pick n Pay, has opened its first Mozambique store in the capital Maputo, with plans to open two more outlets later this year. It's looking for other opportunities too, to build on its existing presence.

Pick n Pay's focus is on countries where the group has identified significant opportunities; it's already achieved a strategic goal in terms of its Southern African operations. There's a fully integrated system across Pick n Pay, resulting in more efficient business processes. There are plans to roll out more distribution centres in the region.

Pick n Pay's strategy has mainly been through partnerships with local stores and through franchising, although in Zambia it operates its own stores.

The management appears to believe the most significant opportunities lie in the Southern African Development Community (SADC) region.

Consumer spending in Africa is expected to increase substantially within the next decade, as the continent doubles its population to two billion people by 2050.

Pick n Pay has operations in Zimbabwe, Botswana, Lesotho, Namibia and Zambia. In the year to March 2012 it plans to open a further two stores in Mozambique, two in Mauritius and one in Malawi.

Competitor Shoprite Checkers has 161 outlets in 15 African countries, excluding South Africa, giving it a significant head start over Pick n Pay.

However, Shoprite believes the best profits are to be found in West Africa, rather than in East or Southern Africa.

The Massmart group has also headed north and its priority is to expand operations in sub-Saharan Africa, including introducing its brands such as the DIY Builder's Warehouse for the building, hardware and tools markets.

Massmart already has 30 outlets in 12 African countries. A Builder's Warehouse will be opened in Botswana later this year and five stores, including Game and Builder's Warehouse stores, are to be opened outside South Africa this financial year.

Asked whether Pick n Pay's move was a response to US giant Wal-Mart's plans to expand in Africa via its new share in Massmart, Pick n Pay said it had embarked on its African expansion strategy years before.

Truworths, the Johannesburg-listed fashion retailer, is to open stores in Nigeria, Angola, Ghana and Mauritius over the next few years, targeting high growth and strategic markets.

Of its 543 stores, Truworths has 35 outlets elsewhere, apart from South Africa. This includes 17 in Namibia and 18 franchises in Botswana, Kenya, Tanzania, Zambia and Lesotho.

It also holds a 35% interest in Truworths Zimbabwe, which has 58 stores under the banners of Topics and Number One.

In Nigeria, Truworths will initially open two self-owned stores this year and possibly more. Nigeria is one of Goldman Sachs' "next eleven" countries with the potential to become economic giants, along with Egypt.

In Angola, where there's a language barrier for South African retailers, the Truworths group has opted for a franchise model where it will work with local partners.

South African companies appear to have a "first-mover advantage" after investing heavily in banking, telecoms, mining and consumer products.

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Posted: 31 March 2012

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