Johannesburg - Massmart would walk the tightrope between the needs of low-income consumers and high-income earners as South Africa’s retail landscape changed owing to limited credit access and spiralling living costs, it said yesterday.
Chief executive Grant Pattison’s interpretation was that the Walmart-controlled group had a good understanding of the differences between high-income earners and low-income consumers and the group’s strategy would be to respond to this pattern.
“We have come to understand that low-income consumers do not have access to credit any more, not like they used to.
“They are looking for good quality and reliable low price-point products and we serve that through our low-income channels,” Pattison said.
He said the same should be done for high-income consumers who were looking for top quality products. “It is quite a challenge at the moment, it’s almost like dealing with two consumer brands within one company.”
Pattison’s observation was backed up by the retailer’s results, which showed that the Massbuild division, trading as Builders Warehouse and servicing mostly upper-end consumers, increased sales by 11.9 percent while Massdiscounters sales came under pressure.
Despite a weak trading period last year, Massmart said it was forging ahead with more initiatives, including piloting soft discounter supermarkets in Nigeria and opening more low-income home improvement outlets.
Massmart will invest in new format stores in east and west Africa and also launch a new e-commerce offering at its brands, which include Game and Makro.
For the 53 weeks to December 29 last year, Massmart improved sales by 9.8 percent to R72.2 billion. The gross profit margin of 18.46 percent was slightly lower than the 18.65 percent recorded in the prior year.
Sales outside South Africa rose by 16.6 percent and contributed 7.7 percent to total sales.
Headline earnings increased by 29.9 percent to R1.33bn, or by 19.9 percent over 52 weeks.
Chris Gilmour, an investment analyst at Absa Capital, agreed that the local retail landscape was changing for the worse.
He said retailers should look for growth elsewhere in Africa. “That is where a lot of economic activity is happening and South African retailers should be looking out for opportunities there.”
The retailer’s Massdiscounters division, which includes Game and DionWired, grew sales by 8.6 percent while comparable store sales were up by 1 percent, with product inflation of 0.5 percent.
The retailer noted that as the economic landscape was changing, so was the customer’s landscape. “The change in technology to tablets and smartphones, for example, is changing the spending patterns in many of the general merchandise categories, including digital cameras, laptops and toys,” the group said.
Pattison added that Massmart was looking into increasing its tablet and smartphone merchandise and reducing stock such as cameras, laptops and toys.
Massmart stock rose 4.3 percent to R116.82 yesterday. - Business Report