
THIS ISSUE: 15 Dec - 13 Jan
Welcome indeed to another year, this one distinguished by having more twos in it than any other digit. As we reflect on the difficulties of 2021 and consider the trends which will shape the next 12 months, we remind ourselves that our retail sector is a global leader in innovation, and equal to any of the challenges our economy will throw at it. Enjoy the read.
RETAILERS AND WHOLESALERS
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Massmart Loan ranger
A tough start to the year for Massmart, with the announcement that its headline loss per share will be at least 40% heavier than the loss it reported in 2020. This as a result of the civil unrest and looting that so brutally bisected what was already going to be a difficult year for the business. The business lost around R2.5bn in inventory and damaged or destroyed assets, with an accounting loss of R650m after insurance pay-outs. Sales for the year grew just +0.9%, to R69.7bn, dragged thither by the continued impact of the prohibition on a business which has been known to make a bob or two on the sale of booze. What to do? For starters, parent company Walmart will extend the term of a portion of the R4bn loan to the business, replacing R2bn of the loan by subscribing for a perpetual fixed rate unsecured note, if you’re interested in that sort of detail. And Massmart will be selling 15 out if its 114 Game stores to raise a bit of extra and stop the bleeding.
Comment: It is to be hoped that 2022 will be the year that Massmart begins its turnaround. The alternative is not something to contemplate right now.
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Woolworths Supplies!
A big and, as it turns out, not uncontroversial step for Woolies, which has become the first major South African retailer to publish on its website a full and unabridged list of its Fashion, Beauty and Home products. “This is a significant step in our progress towards our Good Business Journey Vision 2025+ goals, and represents our commitment to a fully transparent, traceable and ethical supply chain across our operations,” explains Group Head of Sourcing Lawrence Pillay. Fair enough, but who’s on the list? It turns out the lion’s share of business goes to China, which houses most of the factories from which Woolies sources its impahla. Others are located in South Africa, India, Bangladesh, Mauritius, Pakistan, eSwatini and Madagascar – although no David Jones or Country Road merchandise comes from the motherland. Other significant goals include that all private label fashion and home products be designed to be reused, repaired, re-purposed or recycled by 2025, that energy usage comes from renewable sources by 2030, and that net zero carbon emissions be achieved by 2040.
Comment: A bold move, which paints a less flattering picture of Woolies’ procurement practices than it undoubtedly will in say three or four years.
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In Brief A wing and a prayer
In case you’d forgotten, Shoprite is forging ahead with logistics partner RTT, in a 50/50 partnership designed to advance technology, learnings and intellectual property, and to enable the continued development of the digital and customer experience in line with Shoprite’s e-commerce plans. Shoprite was reportedly well impressed by RTT’s role in the mercurial expansion of the Sixty60 business. “The JV will allow the Group the opportunity to continue enhancing our order fulfilment and last-mile delivery capabilities, whilst giving us the opportunity to grow our precision retailing efforts for our customers,” says CEO Pieter Engelbrecht. Unrelated, Pick n Pay has assured punters that their data is safe after MyBroadband reported that the data of customers who make use of the retailer’s delivery service including their photos, names and addresses was temporarily exposed on delivery partner Dawn Wing’s website. According to Pick n Pay, no banking details or other more sensitive data was exposed.
Comment: The Dawn Wing data breach highlights the security value of a JV such as the one Shoprite is establishing with RTT.
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International Retailers Little trouble in big China
Currently, Walmart delivers to 6 million lucky households in the US via its in-home delivery service. By the end of the year, it hopes to have quintupled that number to (sucks pencil) 30 million households, hiring 3,000 associate drivers to pick up the slack and building a fleet of 100% electric delivery vehicles to ensure they do so sustainably and without emissions. Added bonus: the vans will be recharged at Walmart’s existing 1,400 charging stations at stores and Sam’s Clubs in 41 of the 50 States. Meanwhile, in China, Walmart appears to be the victim of punitive minor legislative harassment after it allegedly removed from its local Sam’s Club app products sourced from the Xinjiang region where the embattled Uighur minority lives. In France, the acquisition of Carrefour by big-box retailer Auchan, shelved last year, might once again be on the cards, courtesy of the involvement of third-party buyout firms to add some steam to the bid. The two are currently battling for relevance in the face of online retail – teaming up would give them buying power and enable them to cur head office and supply chain expenses.
Comment: Walmart is not the first business (or government, or individual) to learn the cost of censuring China. But it may be the biggest.
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In Brief Strike one
An understandably slow news week from our suppliers, so here’s a quick roundup. Clover begins the year still embroiled in the strike, which kicked off in early December, with various unions, including FAWU and Giwusa, taking up cudgels on behalf of workers opposed to a 20% wage cut in 2022 and the closure of three factories, in the North West province, Free State, and in Gauteng. Clover had pegged its need to restructure on several lean years resulting from a difficult economic climate and exacerbated by COVID. Tiger Brands also begins the new year encumbered with the burdens of the old, namely a 900-strong class action lawsuit which Gauteng’s High Court ruled in December could be bought against the business for damages resulting from the Listeriosis outbreak of three years ago. Tiger Brands has committed to abiding by the legal process – which in this instance should be concluded within the first few months of the year. Finally, Investec has announced an acquisition of beneficial interests in IMPERIAL Logistics shares, and now own just north of 5% of the business.
Comment: A vote of confidence in a growing company in a thriving sector.
TRADE ENVIRONMENT
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Retail Trends Through a glass, darkly
A quick recap of some of the developments we at Trade Intelligence have observed over the last difficult 12 months as we consider the trends which are likely to shape the next 12. Shopper behaviour: Cash-strapped punters plan in advance, compare deals, up their basket sizes and abandon loyalty to both brands and retailers in search of bargains. Promotions: Retailers seek multi-brand promotions to drive footfall; space in broadsheets becomes a contested commodity; suppliers are more circumspect on promotional spend. Brand positioning: Market leaders can no longer demand a premium as the mid-to-lower LSMs lose buying power. Compelling marketing messaging is key.
Ranging: Retailers are giving increasing space to high-margin categories like hardware and home entertainment, putting the squeeze on groceries. E-commerce: Pickers and delivery staff congest the aisles as online spend grows. Shoppertainment is attempted as a means of luring punter back to stores.Comment: A tough year behind us and, in all likelihood, another one to come. We’ll keep you posted on the likely trends for the next 12 months as they come more clearly into view.

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“And now we welcome the new year, full of things that have never been.”
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