Pick n Pay Cold: Adapting to the changing demands of retail

The challenges of Southern African economies has put pocket spending power under pressure and raised the stakes when it comes to retail competition. In the face of the present circumstances, Pick n Pay, one of the region’s largest supermarket chains, was able to report profits over the festive season in Namibia.

The company, South Africa’s second largest supermarket retailer, reported positive growth during the holiday season but has confirmed a slowdown in festive season sales. Norbert Wurm, Managing Director of Pick n Pay Namibia, believes the ability to still make a profit during tough economic times boils down to keeping price increases below inflation.

“With the economic slowdown we are grateful that we were still able to show positive growth during this festive season, albeit somewhat slower than in comparison to previous years. We believe this is as a result of our continued effort in keeping cost increases to our customers at below inflation levels and focusing on a fresh quality offering. As a result of the pressure on disposable income, consumer spending has changed somewhat in that consumers are contemplative about each dollar they spend, seeking out specials and promotions to stretch their monthly income,” said Wurm.

“It is interesting to note the high demand for bargain deals as well as fresh food offerings, which is an indication that consumers are making considered and healthy choices, despite tough times. Understanding and meeting the ever-changing needs of our consumers is how we are there for our consumers, even during these tough times,” Wurm added.

The news from Namibia is encouraging news for an organisation which has had its share of challenges in recent months.

However, a positive mindset and shrewd business plan are starting to reap rewards.

In October of 2016, Moneyweb.co.za ran a story outlining the retailer’s plans to turnaround its fortunes.

“The plan to restore Pick n Pay back to its former glory days remains on track, with the grocery retailer making gains on its sales growth, margin improvement and efficiencies in its operations.

“The turnaround strategy has been two-years in the making, with Pick n Pay’s management working on stage two of its next phase of growth.

“Although Pick n Pay’s management – led by CEO Richard Brasher over the past three years – has stabilised business, it’s not yet out of the woods.

““Our ambition is to make people still shop with us. Customer confidence has taken a battering but they still get up in the morning and they still need to get shopping and therefore it is our job to make sure that the shelves are full, staff a are great and they can get what they want,” says Brasher, the former chief of UK’s grocery and general retailer Tesco,” the article stated.

Part of Pick n Pay’s strategy involved closing down underperforming stores; whilst looking at ways to improve supply chain and purchasing processes and refurbishing existing stores.

“The rest of the focus, says Brasher, will be on the basics of retail: improving customer service with more tills open during peak times, better technology at stores and faster scan rates times at tills.

Pick n Pay grew turnover by 7.2 per cent to R37.4 billion, which Lentus Asset Management’s chief investment officer Nic Norman-Smith says is not exciting but “reflects an increasingly tough retail environment.”

“Much of Pick n Pay’s resilience rests on the performance of its South Africa operations, where it has rolled out more stores, and has been aggressive in promotional activity and discounting goods while containing a rise in expenses,” the Moneyweb.co.za article continued.

In the meantime, the company has continued to invest in its future, spending R775.8 million during the period that was used to open 74 new stores in all formats such as Pick n Pay and Boxer Superstores, which typically focus on lower-end consumers.

Pick n Pay’s success in Namibia over the festive period was encouragement for its aims to expand across the African continent and to that end, the business has opened stores in Zambia, Namibia and Zimbabwe in recent times, with Ghana mooted for this year and Nigeria earmarked for 2018.

Another area of ambition lies within the online retail sphere and in October 2016 news came through that Pick n Pay was developing an online warehouse in Isando, Ekurhuleni, Gauteng.

The announcement came off the back of Pick n Pay’s reports that online turnover grew 33.7 per cent year-on-year in financial results for the 26 weeks ended 28 August 2016.

The group reported particularly strong growth in the Western Cape region which benefits from its dedicated online warehouse, situated at the Brackenfell Hypermarket, ‘which has driven sales through a strengthened and tailored range, better availability and improved productivity’.

The company was set to open the new online facility in January 2017.

The group added that it also brought the delivery arm of its online business in-house during the period. “This has lowered the cost of running the service, and improved overall customer delivery,” it said.

At the same time, Pick n Pay said it is on track with its 2015 plan to create 5,000 new jobs per year by 2020. A further 2,100 new jobs were created in the first half of this year, it said.

The issues Pick n Pay has faced are typical for retailers in a changing world at present. Future success may well be measured on how such businesses react.