Massdiscounters: Creating sustainable growth in a challenging retail environment

In recent months The SA-Mag has focused on Massmart’s business, as the retailer looks to build a strong and sustainable presence across South Africa. This month we take a look at the Massdiscounters brand, featuring Game and DionWired.

Massdicounters580As indicated, Massdiscounters operates two retail formats: Game and DionWired. Massmart originally acquired Dion some 20 years ago and purchased Game in 1998, which at the time encompassed 26 stores.

Massdiscounters merged the 2 entities a year after the latter acquisition. At that time, both operated similar, competing formats and the decision was taken to close or convert all Dion stores to Game where this was facilitated by impending store lease terminations. A core of ten Dion stores was retained in Gauteng until those leases came up for renewal, and in 2008 all these stores were closed or converted to Game.

Game is a discount retailer of General Merchandise and predominantly non-perishable groceries for home, leisure and business use, operating throughout South Africa and in 13 major cities in sub-Saharan Africa.

Historically the business was regarded as a discounter of General Merchandise, however Massmart undertook a format renewal – and with the introduction of Foodco, Game is now considered a multi-category format.

By the beginning of 2013, the company reported that it operated 94 Game stores in South Africa and 13 elsewhere in Botswana, Ghana, Malawi, Mozambique, Namibia, Nigeria, Tanzania, Ugandav and Zambia.

Massdiscounters thus describes Game’s business focus:

At Game our positioning offers customers the widest range of branded products, at the best price, for a given set of product specifications. We ensure that customers are assured of the best value at every logical price point. The Game trading model is promotionally-driven, with 5 million copies of our weekly promotional leaflets distributed in South Africa. By working closely with our suppliers and benchmarking ourselves against competitors, we are able to offer our customers well-priced products representing great value.

Currently 20 Game stores provide a food offering under the Foodco sub-brand, providing further everyday value to our customers. Over the next few years, we intend to roll out Foodco to most Game stores.”

The company’s 2012 Annual Report indicated that expansion, very much in keeping with other divisions of Massmart, was a big focus for Game during the year:

Management’s attention was focused on the opening of new stores across the Division. We opened 7 Game SA stores, our second Game store in Nigeria and DionWired extended its footprint with a further 5 stores in South Africa. In addition, 20 Foodco stores are now operational. This was the highest number of stores opened in one year by Massdiscounters.

During the year, we rolled out our differentiated food offering, Foodco, which provides a narrow, but relevant assortment of items. This roll-out extends to both new stores and the conversion of existing stores. We managed to achieve this while stabilising and improving the supply chain for perishable and fresh goods. The Foodco format has enjoyed broad customer acceptance and we have seen much success, particularly in stand-alone locations and sites that cater to the value-seeking consumer.

LiquorMart was included with the Foodco format renewal to complete our offering and increase foot traffic to our general merchandise stores. We now have six LiquorMart stores, which are performing in line with expectations. Liquor licence approvals by the authorities remain a challenge, particularly in Gauteng.

From a Game SA marketing perspective, we continued to focus on annual events, whilst improving relevance of regular campaigns and communication with our customers. The proven “What’s the Big Deal?” birthday event for Game ran during the period and utilised multiple communication mediums in innovative ways, including using an unprecedented 23 TV channels at the same time. In addition to the weekly distribution of the Game leaflet into over five million homes, awareness of the campaign was also achieved through the use of bulk SMS messages, a mobisite, weekly emailers, daily Facebook activity, advertising on 10 radio stations and in-store signage.

In Game Africa, our strategy has been redefined with a targeted approach per country, based on individual market demands, local product and media opportunities. Initiatives creating in-store excitement and shopper entertainment proved particularly successful.

By contrast, the DionWired brand is a relatively new concept. In 1993, the Dion brand was purchased and encompassed 20 stores in total. These were consequently rebranded to Games stores in 2000 and the Greenfield DionWired concept stores were launched in 2006.

By the start of this year, the DionWired brand was operating 18 stories, selling middle- to upper-end electronics and appliances across South Africa.

Massdiscounters describes the DionWired range of products as “an easy, exciting and interactive shopping experience, offering the latest in-home entertainment, computing, video and digital photographic equipment and appliances.”

Whilst mindful of its price positioning, DionWired’s main aim is to offer the widest range of world leading brands including: Apple, Smeg, Miele, Marantz, Bose and Onkyo – all of which are targeted at the higher end of the South African consumer market.

As this sophisticated market has grown, DionWired has adapted and sells complete technological solutions, whilst its service offering includes a dedicated team of in-store Tech Smart service centres, available for advice and repair services.

By the end of 2012 the business reported that DionWired achieved sales growth of 37.9 per cent with sales deflation of 15.1 per cent, therefore achieving real growth of 53.4 per cent. The brand also grew its footprint, by increasing to 18 stores nationwide, while introducing a pilot online trading initiative.

Commenting on its efforts last year, Massdiscounters made the following observations in its Annual Report:

We increased the footprint of DionWired to 18 stores by opening 5 stores during the year, in some of the higher LSM retail locations in South Africa including Nicolway, Blue Route, Tygervalley, Canal Walk and Boksburg. This is now a national brand with wide customer acceptance.

DionWired successfully trialled their regional online shopping in Gauteng. The pilot met our objectives of proving the case for online shopping and providing critical information about this new channel. We finalised and tested data processes, security, payment gateways, call-centre management, and logistics relating to and, effective July 2012, have launched it nationally. We now plan to redesign the Game website.

The positioning of DionWired was supported through advertising on premium TV channels, creative use of print media and consistent in-store execution.”

Perhaps the best measure of the success of Massdiscounters strategy is that the growth of Game and DionWired have taken place against a backdrop of economic uncertainty and reduced consumer spending power.

At the time of writing, Massdiscounters reports that it continues to increase market share and is responsible for just shy of 10,000 employees. Time will tell if its strategies continue to create sustainable growth at the present impressive rate.