Grocery retailers are taking the fight to Clicks and Dis-Chem with longer aisles of bath and hair-care products and vitamins as companies push for growth by winning market share in SA’s weak economy.
During a recent investor call, Dis-Chem said it was happy with its latest performance but noted it faced increased competition from grocery retailers selling supplements or health food items.
“It’s relatively obvious that there are many more retailers selling some of the commoditised health-care [and] nutrition lines. Whether you walk into a Woolworths, Spar, Shoprite, [or] into a Pick n Pay ... some of the aisles have been repurposed and are carrying some self-medication lines.”
Giving the difficulty in getting constrained consumers to spend more, SA firms are forced to grow by stealing customers from peers.
Many consumer-facing groups including Spur, Woolworths, building retailer Cashbuild, Distell and school group Curro have warned in the past two weeks, when releasing their financial results, that tough times are ahead.
Sasfin analyst Alec Abraham said: “Without economic growth, the only way to grow is to steal someone else’s lunch. That’s not only true for the SA retailers but for other industries too. [Either] steal market share or grow exports, to benefit from economic growth in other countries.”
While Clicks and Dis-Chem have an advantage of having in-store pharmacies and in-store nurses to attract customers requiring script medication, many of the basic personal care items and over the counter painkillers and flu meds are now also in retailers.
Shoprite in particular is well placed to compete with Dis-Chem and Clicks as it owns the MediRite pharmacy group and its own private label hair and personal care and medical products.
“I think Shoprite management have realised that there is plenty of opportunity in that space for them to capture. They already have better distribution so why not leverage off that into pharmacies,” said Gryphon analyst Casparus Treurnicht.
He said if Shoprite set up its MediRite pharmacies outside Checkers stores as a standalone business, it will become very competitive.
“The MediRite business has a few lessons to learn still, but this will get fine-tuned over time.”
Treurnicht thinks there will be “plenty of disruption in this space” and that Shoprite might undercut pharmacy groups’ margins by selling cheaper products.
Competition is also intense in the baby products sector.
Dis-Chem bought Baby City in 2020 and Clicks opened a few large standalone baby goods stores while Shoprite launched its own baby goods range in Checkers stores, including large items such as prams.
Treurnicht said while certain items such as specific supplements or a memory foam cushion may only be found at Dis-Chem and Clicks, as retailers broaden their health-care and baby ranges “people will realise they first need to check if Checkers has products in store before making the trip to pharmacy retailers”.
However, Abraham believes Clicks, and to a greater extent Dis-Chem, have an advantage over grocery retailers by stocking a better selection of products.
“It’s a balance of store network, availability of competitors and range that will determine Shoprite’s success in this endeavour, and the results may vary widely between regions.
“For instance, in Sandton wealthier customers who want a wide range of products may not consider Checkers over Clicks or Dis-Chem, but in a small town, lower-income customers with a more basic personal care or health product requirement may consider Shoprite from a convenience point of view.”
childk@businesslive.co.za
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