Massmart CEO Mitchell Slape’s face lights up as he walks through a Game branch, but his optimism and smile are at odds with the chain’s performance as the retailer has bled more than R1bn over the past three years.
Game is the only brand left to blame for Massmart’s losses, with Dion Wired closed down and Cambridge’s loss-making grocery brands awaiting competition authority approval before being sold.
Investment analysts have wondered why Massmart doesn’t just close Game, which lost R1bn in 2021, and focus on the much better performing brands — Builders and Makro. In the financial press, Game has been called "a disaster" and "a drag" on the company’s results, with the parent company even nicknamed "Messmart" by one financial writer.
In some sense, Game’s big-box size and bright pink colour are stuck in the eighties, an outdated concept, especially as Naspers-owned online retailer Takealot is selling appliances online without the high rents.
But Slape has supported Game from the word go, even after a brutally honest assessment of its weaknesses in 2020 when he admitted it attracted a reputation for poor customer service, which he then set out to improve.
He recently gave Business Day a tour of the new store in Canal Walk in Cape Town.
All the Game stores have been redesigned to have better and brighter signage and clearer layouts to help customers find their way to popular sections that include baby, electronics, outdoor equipment and sporting goods.
Slape, who says he is "as anxious to make money as anybody else", has a simple theory: If Game looks better, offers good service, has simpler stores and an attractive product selection with an intense focus on low prices, it will start to make money. "I think the bigger part of getting to a profit position is just restoring Game’s retail credibility."
Times are tough, but people are still buying general merchandise
— Mitchell Slape
Massmart is closing eight of the 15 loss-making SA Game stores after it failed to find a buyer for Game, which it said it would sell in December. The future of the other seven is not clear. There are about 100 Game stores that Slape believes can be saved, as, he says, people after all still need fridges and washing machines, and parents will still buy kids bicycles or toys for birthdays. Game sells 60% of SA’s sporting goods.
"Times are tough and customers are prioritising where they buy, but people are still buying general merchandise," he says.
Slape contends that the retail brand was allowed to reach a "state of decline" for years and that’s why touching up every store and improving the signage has been so important in convincing customers to come back. He wants Game to be known for low prices, with a daily 10% pensioners’ discount and a commitment to being the cheapest destination to buy nappies, which could guarantee two years of visits by parents.
Intense price focus
Promising to be the cheapest means "if you find it anywhere cheaper, we’ll give it to you at the new price and pay you 10% of the difference".
The intense price focus comes from parent Walmart, the largest shareholder in Massmart and the world’s largest grocer.
"Walmart is all about product and price and value," says Slape, who worked for the US retailer for more than two decades.
Shoppers are indeed coming in to buy the cheaper nappies, sales figures show. The front of every Game store is dedicated to bulk deals and the chain offers a 90-day price guarantee on some items, so consumers mulling whether to buy a big-ticket item have time to decide without having to pay more when they return. Credit terms are clearly marked above appliances and large products so people can understand their monthly costs as some consumers need in-store credit.
E commerce
Massmart and Game are investing heavily in e-commerce with last-mile delivery firm acquisitions, SAP software upgrades and bringing in a Walmart e-commerce expert from the US. It believes its store footprint is an advantage that online-only competitors do not have. About 60% of e-commerce consumers in SA prefer to collect at the shop to avoid pricey delivery fees. This is similar to what clothing retailers Mr Price and TFG report.
Game faces tough competition from Takealot, which has been losing money for years as it focuses on becoming the dominant online retailer. It is funded by parent Naspers’ other investments. Game’s e-commerce ambitions may face further uphill from Amazon’s reported entry into SA in 2023.
Slape believes e-commerce may one day work in Africa. However, stores on the continent are often rented in dollars while sales are made in fluctuating local currencies. In some places, including Nigeria, companies also face the challenge of repatriating their profits.
Walmart paid R148 a share for Massmart, with the counter now trading at R36.34, as a way into Africa. But Game is now shutting its 14 stores elsewhere on the continent, a far cry from its vision to expand.
Perhaps one day Massmart’s e-commerce investments will open doors to Africa.
Game has made some notable changes in the past two years after Slape and other executives presented the turnaround plan to investors in 2020. It is, however, losing more money than it did in 2019, when its losses combined with those of Dion Wired totalled R675m.
Getting rid of fresh food and expensive refrigeration equipment, and all the complexity of running a fresh food department, has helped the stores. Adding clothes into the space that once had cold foods means higher margins of about 40%.
But does SA need another clothing store when brands such as Mr Price, Pick n Pay Clothing and TFG are clearly dominant?
Game is not a standalone clothing store, explains Slape.
"Think about it as a total shop, and while you’re here, pick up a really great value T-shirt."
Game, like every retailer, is trying to attract customers to buy bigger baskets.
Slape, who candidly admitted people associated Game with bad customer service, has worked to change that.
When this reporter asked for help to find a particular light bulb for her lamp stand she had brought to a Game store, the customer assistant went so far as finding an adapter to plug in and test the lamp to ensure the light bulb was the correct one. Then he fetched her a trolley and offered further assistance.
With all Slape’s positivity about Game, there is one more reason why he says the business needs to be patient about results after Game sales were down year on year. He thinks with SA having had so much turbulence from lockdown, sale restrictions on trade, to riots and floods, he is now hoping for a year or two of smooth trade.
"Over these past two years we’ve gone through a bit of a complicated time in the country. And I think we’re gonna get a nice clean stretch of good unencumbered traffic and trading."
"And then we’ll be able to see what Game can really do."
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