Massmart takes fight to Cashbuild with new stores

Massmart is expanding its hardware division which includes - Builders Warehouse to lower-income market.photo Supplied

Massmart is expanding its hardware division which includes - Builders Warehouse to lower-income market.photo Supplied

Published Nov 28, 2013

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Johannesburg - Retailer Massmart plans to intensify competition in the lower-end segment of the building material and hardware market as it unveils its new Builders Superstore outlets.

The retailer will this week open stores in two townships in Gauteng, stepping up competition for Cashbuild and Spar’s Built It.

Massmart, which already owns chains such as Game, Builders Warehouse, Makro and Cambridge, plans to open 60 Builders Superstores within five years. It said that it would first open 10 pilot stores in Gauteng before implementing a massive national roll-out.

Massmart said Builders Superstore would cater to the needs of lower-income homeowners and small contractors from the living standards measures (LSMs) 2 to 7.

The retailer’s Massbuild division conducted research which showed that customers in this segment are usually dependent on shared transport, usually travelling by taxi to get to stores and carry products.

“They aim to maintain or construct a ‘starter home’, and thus cement will be a big driver of feet,” it said.

Rivals Build It and Cashbuild have been operating in the lower-income segment for a number of years.

Out of its 200 stores in five countries on the continent, Cashbuild has 45 stores in townships and 54 in rural areas.

Meanwhile, Spar has opened about 17 Build It stores this year, bringing the number to a total of 298 stores.

Massmart chief executive Grant Pattison said what would set the Builders Superstore chain apart from its competitors was that “it will offer everything under one roof”.

He added that this would allow Massmart to aggressively compete in the lower-income segment of the building suppliers market, which he believed was under-serviced.

“A home builder will be able to get everything from this store, from the roof timber to bricks and cement,” he said.

Pattison said unlike Massmart’s Builders Warehouse brand, the Builders Superstore chain would serve people who owned government-subsidised houses and not necessarily bonded houses.

Analyst Jean Pierre Verster at 36One Asset Management agreed that with the entry of Massmart into this market, competition would heat up. He, however, pointed out that Cashbuild remained the undisputed leader in the low-cost building material retail market.

Cashbuild has led the field in this market, which does not focus on do-it-yourself and middle-income consumers but more on the basic needs of the RDP consumer or the owner of a very basic house which needs some finishing or some decorating.

He added that Cashbuild’s competitors had not really focused on this market.

“Cashbuild has been stuck at just under 200 stores for the last five years or so but have recently indicated that they want to be more aggressive in their store roll-out.”

It was interesting that the accelerated store roll-out of Cashbuild would happen at the same time Massmart would pilot its Builders Superstore outlets in the same market, he said, adding that more competition would be good for consumers as building material prices might go down.

Verster said this could put pressure on the profitability of Cashbuild seeing that it was focusing on this market, unlike Walmart-controlled Massmart, which can afford to be aggressive on pricing and not focus on seeing returns on their investment in the short term because of the size of this new format relative to the size of their total portfolio.”

Massmart lost 0.66 percent to R145.50 while Cashbuild gained 0.55 percent to R61.04. - Business Report

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