Shoprite takes aim at Pick n Pay Clothing

The Shoprite Group will enter the clothing category in March in its latest incursion on adjacent categories to its core supermarket business.

This move will put it squarely up against Pick n Pay, whose clothing business is one of its growth engines.

On a recent investor call, Shoprite CEO Pieter Engelbrecht was tight-lipped on the specifics, but did disclose that the group would “start small” with “10 to 12 stores and … build slowly”.

He says the stock and premises for the first outlets have already been secured.

Engelbrecht says the group is prepared to walk away from this venture if it doesn’t obtain the requisite return, but it has been successful with several other entries into categories alongside supermarket retail.

Leverage

Clothing will integrate into its existing supply chain, with the group leveraging its extensive buying capability.

It used to stock clothing in its Checkers Hyper stores but removed this some time ago, barring some basics.

Engelbrecht feels clothing has been ‘premiumised’ and shoppers don’t want to put a shirt they’re buying “on top of their chicken” in a trolley.

The group has not said whether its clothing unit will target the middle- to upper-income Checkers customer or the mass market Shoprite shopper. The margins are undoubtedly better in the ‘Checkers segment’ so this is more likely – and this is squarely the Pick n Pay Clothing target market.

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Plus, Shoprite probably doesn’t want to get into a battle with Pep at the lower end.

PnP Clothing sales growth

For Pick n Pay, its clothing business is one of two growth vectors for the group over the next three years.

In the six months between March and August, Pick n Pay Clothing grew sales by 14.8%, with share gains “across all market segments”.

According to the Retailers’ Liaison Committee, it grew market share by more than 1% in these six months, with strong gains in comparable periods in 2020 and 2021.

Read: Pick n Pay Clothing launches online shopping [Aug 2020]

Pick n Pay Clothing currently has 302 standalone stores and in-store ranges in a further 181 hypermarkets and supermarkets.

It opened 28 standalone stores in the six months to end-August, compared with eight in the same period a year ago. It has 67 new stores confirmed for this financial year, which is a dramatic acceleration in rollout.

It is not uncommon for these stores to open in neighbourhood shopping centres where Checkers (not Pick n Pay) is the anchor grocery tenant.

One can be certain that Checkers has been following this trend closely in recent years.

Read:
How Pick n Pay wants to win
Pick n Pay’s secret weapon

Shoprite’s other ‘adjacent categories’

Clothing aside, the Shoprite group has already entered five adjacent categories in its Checkers business. LiquorShop, which spans both the Checkers and Shoprite brands, is the most successful and represents 7.2% of the group’s SA supermarket business’s sales. There are 570 LiquorShop stores across the country.

There is clear long-term potential with Petshop Science – the group has already opened more than two dozen of these standalone pet stores, which offer premium pet food and accessories, and should have “about 50” by June.

This idea was born out of the consumer data it got during the Covid-19 pandemic, says Engelbrecht – many South Africans got a puppy during this time.

He says the market size is about R3.5 billion and the group is obviously “under indexed”.

At the new Oceans Mall in Umhlanga, it opened a Checkers supermarket, liquor store, Medirite Plus pharmacy, Little Me baby shop, Petshop Science and a new Checkers Outdoor format. This last proposition is, Engelbrecht stresses, a long-term play.

Each of these efforts allow the group to “broaden” its retail reach and “can easily latch onto our existing supply chain and operational structures”.

Engelbrecht says in a “strip mall scenario”, all of its brands could be the anchor tenants.

He sketches a setting where it would have a Checkers, liquor store, Little Me, pet shop, pharmacy and a furniture outlet (OK Furniture?). “This brings a different angle to the multiple offers”.

This diversification comes as the group has exited African markets which did not provide an adequate return, or where it had a sub-scale operation. It sold its business in Nigeria after being present in that market for 15 years, and shut units in Kenya, Uganda and Madagascar.

It has said that it sees better opportunities for growth in its home market.

Importantly, most of these adjacent categories offer far better margins than core grocery retail – particularly of commodity items and staples.

Both Pick n Pay and Shoprite know this very well.

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