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CASE STUDY: SHOPRITE RETAIL GROUP UMBS JUNE 2009 1. BACKGROUND ON SHOPRITE The Shoprite Group (www. shoprite. co. za) is one of South Africa’s largest food retailers. It owns a whole range of brands with which it attempts to serve the South African food retail market. It has also succeeded to export its business model to the rest of Africa, the only South African retail company to have done so with considerable success. They were clever enough to develop a business model to fit the situation in Africa. They are facing stiff competition from Pick ‘n Pay (www. pnp. o. za) and Woolworths (www. woolworths. co. za). Until a few years ago, the brands Shoprite and Checkers were used interchangeable, to the extent that the market became confused with the situation. About 6 years ago, the Shoprite Group decided to separate the 2 brands, and to launch marketing and branding campaigns to raise the level of Checkers to be able to compete with both Pick ‘n Pay and Woolworths. For your convenience please study the following: • The following websites: o http://www. shoprite. co. za o http://www. shopriteholdings. co. za o http://www. np. co. za o http://www. woolworths. co. za o http://www. fastmoving. co. za o http://www. theretailer. co. za o http://www. euromonitor. com/Retailing_in_South_Africa These websites will give you interesting information on the local and international market trends. You need to understand the context of the retail industry and the issues that are prevalent in the industry in order to understand the strategies and activities of Shoprite. • They are by no means an exhaustive list, but do provide an introduction to both the company and the industry. 2.
HISTORY PROFILE 1979 The Shoprite Group of Companies was launched with the acquisition of 8 supermarkets for R1m. Acquired 6 food stores from Ackermans. Acquired Grand Bazaars with its 27 stores. Chain of 169 Checkers stores was acquired. Acquired Sentra, central buying organisation for 550 ownermanager supermarket members. The first Shoprite store began trading in Zambia. Acquired OK Bazaars – 157 super and hyper sized stores and 146 furniture stores. 1997 2000 2000 2001 2001 2002 2002 2002 2002 Opened first store in Mozambique in Maputo. Opened first supermarket in Zimbabwe.
Opened first supermarket in Uganda. Opened first store in North Africa in Egypt. Opened first store in Malawi Opened first store in Tanzania. Opened first Hyper outside South Africa in Mauritius. Acquired 5 stores in Madagascar. Listed on Namibian Stock Exchange. 1984 1990 1991 1995 1995 1997 2003 Markinor – Sunday Times Top Brands survey identifies Shoprite and Checkers, individually and combined, as SA’s most trusted supermarket. Rollout of the USave format. Opened first store in Ghana. Opened first store in Angola. Listed on Lusaka Stock exchange in Zambia. Opened first store in Lagos in Nigeria.
Acquired Computicket, South Africa’s leading ticketing company. 2003 2003 2003 2003 2005 2005 3. BUSINESS SUMMARY A GLOBAL PLAYER • • • • Moved strongly into Africa after 1994 to become Africa’s largest retailer Now operate in 17 countries Developed new formats to serve new markets Top 150 retailers in the world in $ sales INFORMATION TECHNOLOGY LEADER • • • • • Developed largest retail data warehouse Serves as platform for the total business Developed advanced staff scheduling programme Developed extensive inventory management programme for stores Store more than 22 terrabytes of information
DELIVER CONSISTENTLY STRONG RESULTS • • Revenue of R33. 5 billion in 2006 33. 5% compound growth of operating profit since 1980 DISTRIBUTION • • • • Centralised distribution to stores Developed network of own distribution centres Computer-based scheduling of deliveries Largest distribution centre in Africa SUPPLY CHAIN • • • • Fully automated replenuishment system Created visibility across the supply chain for both imports and exports Pioneered a forecasting asnd replenishment initiative for suppliers Refined the ability to trade internationally, especially in Africa . YOUR TASK FOR DEBATE AND DISCUSSION The retail industry in South Africa is strongly influenced by the strength of and trust in the respective brands. As stated above, about 6 years ago Shoprite decided to split the Checkers brand from the Shoprite brand and to position it as an alternative to the strong Pick ‘n Pay and Woolworths brands in the upper end of the market. Do you believe that Shoprite has developed the optimal positioning strategy for Checkers and that they add value to their consumers?
Do you think they have done enough to truly differentiate Checkers as a brand separate from the Shoprite brand? Do you think Checkers is doing enough to take on Pick ‘n Pay and Woolworths? What recommendations can you make to increase the success of Checkers you might perceive they currently have? Points to ponder upon (by no means an exhaustive list): • How do you see Shoprite’s strategy in general and do you think they are successful in their Checkers endeavour? Motivate your response.
What does the Checkers business model look like and how does this differ from the Shoprite business model? A brand reflects the “soul” of the company. Do you think Checkers and Shoprite is doing enough to prepare their people to reflect the “soul” of the respective brands? Motivate and • • • recommend what you think they should do differently, do more of, do less of, start doing, stop doing? Why do you think Shoprite is successful in exporting their business model into Africa while the other retail groups struggle? 4. ASSIGNMENT
In group context, write a paper of 10 pages maximum in which you advise prospective investors on investing in Shoprite, given their strategy with Checkers and expansion into Africa. Try to convince the investors group of the feasibility of your recommendations. The paper is due two weeks after the International Week. Deadline for submission is Monday 14 July 2009. Papers should be submitted in Word via the digital drop box in eleUM. The papers are graded by Johan Burger and Sonja Zaar. The paper counts for 50% of the final grade for the week.
The preparatory work for the paper can be done before the International Week. The making and fine-tuning of the paper can be done during and after the International Week. Subgroups Group 1 1. Luc Geisen 2. Ivo Heuts 3. Lenine da Rocha 4. Jos Stoots 5. Roger Storcken 6. Manon Wenmekers Group 3 1. Mark Bertrand 2. Erik Cremers 3. Sunhee Kim 4. Nicolas Lentz 5. Math Steevens 6. Ruud Visschers Group 2 1. Edwin Claessens 2. Jordi Ferrer Badia 3. Boy Lardenoye 4. Sander Neis 5. Marieke van der Wal 6. Angela Werner 5. ADDITIONAL STUDY MATERIAL
Students are encouraged to read the following to use as models in their analysis and presentation (all can be found on eleUM): • • • • The Delta Strategy Model Are you sure you have a strategy? The Profit Zone by Slywotski and Morrison (PowerPoint version) Alex Osterwalder’s model on the business model We trust that you will enjoy the case study and the company visit to Shoprite! Please contact me should you have any questions: Johan Burger Email Mobile Website Skype : : : : johanhburger@mweb. co. za +27 82 923 6070 http://www. linkedin. com/in/johanburger johanhburger