There is no question that Walmart will transform retailing via Massmart
It is one thing to read about international retailing, but quite another to experience it firsthand. I visited South Africa several times on safaris, but never to specifically focus on retailing. On my around the world tour delivering IMS Retail University workshops, I had an opportunity last week to visit a number of retailers in Johannesburg. While Walmart was only recently approved as the majority shareholder of Massmart, they are already making waves in retail. If you are a South African based retailer trying to compete, life is going to get very interesting very fast!
Massmart – A case of retail expansion through investment
Let's be clear upfront. Massmart was and is a South African retailer. To be more precise, Massmart is a holding company that owns a number of retail brands in South Africa including:
- Massbuild: Builders Warehouse, Builders Express, Builders Trade Depot
- Masscash: Jumbo, Shield, Cambridge, CBW
- Masswarehouse: Makro
- Massdiscounter: Game
- Masselectronics: DIONwired
The "Mass" prefix is not an understatement. Massmart is the largest retailer of general merchandise, liquor, home improvement, and wholesaler of basic foods. Massmart operates over 300 stores in South Africa, and a dozen in other African countries. It is the third largest distributor of consumer goods in Africa … and now Walmart owns 51% of Massmart.
Makro … The whale of a mass merchant hypermarket in South Africa
As a foreigner visiting South African retail, Makro makes an immediate impression, especially its sheer size and range of products. From the outside, a Makro store looks even larger than a Walmart supercenter. And one thing is for sure, both the parking lot and store are filled with people. The quantity and range of goods found is definitely unique for South Africa.
The store is so long you can't even get a proper photo of the store front. They stock everything from trailers that pull behind your truck to paint, tools and DIY … and of course food, which is a huge traffic driver. The stores are literally setup so that you can drive up a truck and haul your stuff away. Makro is truly a one stop shop for South Africans. Massmart currently has only 15 Makro stores in South Africa. Watch for that number to explode across in major cities in South Africa.
Game … Definitely a Massmart game plan for reaching the Masses
I'm not sure how I would describe a Game store. It is definitely smaller than a Makro in size. Still a large format with a wide range of goods, including a lot of food. When looking at electronics, Game definitely carries the very low price point merchandise and stresses deals. They appear to have a smaller store footprint that enables them to fit stores in a lot neighborhoods and malls. Whereas, Makro definitely requires large standalone real estate requiring customers to be able drive to their locations.
The merchandising plan at Game varies from some formal vendor displays to mostly bulk stacks and goods loaded on pallets. Good luck finding any store staff to help you … this is retailing to the masses in bulk at guaranteed lowest prices.
DIONWired – The surprising Consumer Electronics specialist
On this worldwide trip I'm focused on technology retailing. The big surprise was Massmart's DIONWired stores. They have a very clean open format with clear sight lines. Very modern looking stores with fixtures and signage that could compete anywhere in the world. Definitely a CE specialist assortment with higher quality merchandise than either Game or Makro.
In the Massmart collection of retailers, DIONWired would be the Best Buy or Dixon's. RSPs (Retail Sales People) staff the departments. The Tech area offers a variety of warranty, security, and install services. If South Africans are looking for more than a cheap PC, DIONWired offers a differentiated experience with value added support.
Incredible Connection – The alternative to the Massmart Monopoly
Where DIONWired operates about 15 stores in South Africa, the Incredible Connection has over 65 and is scheduled to open more. If the name sounds familiar to the US, it was at one time modeled after the Incredible Universe stores. Incredible Connection has truly been the consumer electronics specialist for more than 20 years in South Africa. They offer a wide range of consumer electronics including computers, TVs, and major appliances.
Not surprisingly, Incredible Connection carries a full line of Apple products, as well as a wide range of PCs, including thin and light ultra-books like Samsung's latest offerings. Incredible Connection's tech bench services seem to be more complete versus DIONWired. Clearly, Incredible Connection is geared to compete directly with a DIONWired on both value and service. Another key differentiator over Game or Makro is the quality of RSPs on the floor.
Why Walmart is the whale poised to make tidal waves in South Africa
As part of South African regulations, Walmart can only own 51% of Massmart. That's more than enough to have an immediate and powerful influence on South African retail.
- Walmart's immense size enables negotiating best prices with suppliers
- Massmart has already locked in substantial annual contracts for fresh produce
- Walmart brings the potential of more than enough capital to open many new stores
- Walmart has access to many local brands which cover a wide spectrum of the market
- Massmart can leverage Walmart's technology, logistics and systems expertise
There are three photos from my shopping experience in South Africa which summarize Walmart's new presence and influence. The first is a shot of the checkout line at Makro.
I counted more than 50 cashier stations to handle weekend traffic. Look at the people lining up for checkout on a Monday. And, look at the size of those carts! There's a lot of paper and office supplies being purchased on those carts … why not throw a PC on top?
While Walmart hasn't introduced the big yellow smiley face to South Africa, they clearly have introduced their version of "price rollbacks" to Massmart. Every one of the Massmart stores had their version of the red arrow pointing down to price drops.
The notorious red arrow with a familiar Walmart-esque asterisk pointing the way to lower prices in Game's home electronics aisle.
Massmart's DIONWired displayed that same red arrow and asterisk in their computer aisle. The slogan of Low Prices sounds very much like Walmart's. And, the "Now for longer" definitely signals competitive pricing long term, even if not permanent "roll backs".
Differentiate or Die … Walmart is a whale shaking up South African retail
For long standing specialist retailers like Incredible Connection, Walmart has the capacity to transform retailing almost overnight. Not with just one or two brands, but with many Massmart brands. There are already 3 Massmart retailers selling technology clearly advertising lowest price. It's proven almost impossible to out maneuver Walmart on price in stores. Online retailing is a story for another day.
At the end of the day, it is the consumer's vote with their wallet or credit that counts. Clearly in today's economy, a large number will vote on price. If the Incredible Connection is to survive, it must avoid the "race to the bottom" and differentiate itself on store experience, quality staff and services.
Results Count ... South Africa is literally a retail experiment unfolding before our eyes.
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Sources:
- Photos: Courtesy of Chris Petersen
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