Technology is radically changing the global retail landscape, with rewards programmes at the centre of that transformation.
Here at home, Shoprite, through its rewards programme, is at the axis of this retail makeover. Furthermore, the Covid-19 pandemic has accelerated the digital transformation of SA’s retail sector.
But what do customers benefit from these developments that include precision retailing?
My cousin Yazeed is a regular pragmatic chap. Not surprisingly, he is sceptical about rewards programmes even if they are linked to technology improvements.
“You see, those retail rewards programmes, promoted through smart cards, are meaningless and make some amongst us feel important as they fatten our wallets,” said Yazeed.
“Show me, even with bad debts, one person who doesn’t have more than five of those rewards cards. The only role they play is to provide us with a false sense of affordability and creditworthiness and get us to be imbeciles.
“They are just smart cards that force you to buy recklessly, but they need to be cut to pieces like those expensive credit cards and thrown into a bin.”
Explaining the benefits of retail precision regarding rewards programmes was not going to be easy, I thought to myself.
“Look, Yazeed,” I said, pointing to an article quoting a retail fundi.
“I am pleased to have been part of the successful transformation of Shoprite’s retail model, utilising technology to enable greater precision in matching our retail offering to customer preferences,” Christo Wiese, Shoprite’s former chair, was quoted as saying.
Wiese recently said Shoprite’s capability in this regard was in line with international retailing lead practice.
I could tell Yazeed was neither making sense of this “mumbo jumbo” nor particularly interested.
“Shoprite Xtra Savings Rewards Programme is meant to offer a data-driven retail environment that enables customer profiling and the ability to tailor services to meet customer needs,” I proudly stated.
Yazeed kept quiet. He was not following the logic.
I needed him to understand that retail precision was important to shoppers and retailers to maintain and grow their profitability.
In 2018, Shoprite — SA’s largest retailer — expanded management capacity and employed new talent to future-proof the business and lead innovation in customer experience, e-commerce, analytics, supply chain, financial services and sustainability.
This was the first step towards ensuring precision retailing was delivered to millions of Shoprite’s customers.
The following year, customer data assisted Shoprite to adjust and revise 57 merchandise categories. Without data, that would have been a pipe dream.
In 2020, Shoprite’s growth was increasingly data-driven to extend its pricing and promotional leadership and refine inventory management.
In 2021, its homeward pivot is showing signs of paying off as the group on Tuesday reported an 8.1% increase in sales of merchandise. In rand terms, this growth equates to an additional R12.6bn in sales on 2020’s restated base. The total was a record R168bn in sales for the year.
Shoprite’s core supermarkets in SA reported strong sales growth of 9.3% from a high base.
The segment’s R133.9bn in sales was a combined effort from Shoprite and Usave businesses, which increased sales by 8.8%, and Checkers and Checkers Hyper businesses, which increased sales by 10.9%.
Those are huge numbers that are not easy to replicate by other local retailers such as Pick n Pay, Spar and Woolworths.
“This growth is a testament to our loyal customers and the relentless commitment of our team who ensured we delivered unsurpassed value, either in-store or digitally, throughout the year,” Shoprite CEO Pieter Engelbrecht said on Tuesday.
“There is no doubt the digitally-led future being ushered in for many as a result of the Covid-19 crisis is already a day-to-day reality for Shoprite. However, from an IT perspective, with the adoption of our single system of record a few years ago, the team has become increasingly collaborative and innovative.”
But how has Shoprite prepared for this future?
Years ago, Shoprite ensured it would remain the top grocery retailer in SA. But the road was fraught with challenges and losses.
Before 2018, Shoprite invested in enterprise resource planning (ERP), which unfortunately negatively affected its profits. That year, the grocer lost more than R1bn in sales.
For the past few years, Shoprite has been implementing an ERP system in SA based on software from Germany’s SAP. The company spent billions on this software solution.
The ERP system and software integration enabled Shoprite to do things it would not have been able to do in the past.
That said, 2018 was a transformational year for Shoprite, and the IT re-platforming was an imperative and represented the culmination of years of planning. It is now making the retailer competitive.
Shoprite has signed up 20.3-million Xtra Savings Rewards Programme clients in the 53 weeks to July 4. The rewards programme will fuel customer spending. This is an excellent achievement by Shoprite.
In that regard, it is way ahead of its main rival, Pick n Pay, which has 8.5-million active Smart Shoppers, who swipe their rewards cards for 75% of all sales.
Clearly, the Xtra Savings Rewards Programme, launched by the Shoprite supermarket chain in October 2020, is ahead of its competitors and setting the trends.
It seems Shoprite’s investment in digital infrastructure, particularly the integrated ERP system, has enabled real-time oversight of the entire business.
Shoprite seems to have learnt a considerable amount about its customers’ shopping patterns and preferences in a short time. This is an exciting initiative and a significant first step in its digital transformation towards a more straightforward, smarter Shoprite.
The system has been transformational in how Shoprite manages, views and uses information, and will prove more significant as it starts using it more critically.
That said, this will help the retailer to create a truly differentiated customer experience by leveraging customer data and advanced analytics, enabling it to be more precise in managing inventory, making merchandising decisions and offering a more personalised customer experience.
The retailer’s brick-and-mortar footprint remains key to its ability to drive growth and expansion into new channels as it uses its improved technology-driven insight to make informed retail decisions.
Furthermore, as part of its focus on precision retailing, Shoprite’s on-demand grocery delivery service Checkers Sixty60 is now SA’s top grocery app with more than 1.5-million app downloads.
Checkers Sixty60 and Checkers relentlessly innovate to respond to customers’ demands for hyper-convenience.
The mobile app delivers groceries and drinks at the touch of a button and offers the same value for money for which Checkers is renowned. Users can track the status of their order and delivery in real-time. The on-demand grocery delivery app has scaled rapidly, operating nationwide from 233 stores, which serve as micro-fulfilment centres.
These innovations are Shoprite’s effort to innovate to simplify the customer experience across physical and digital interactions. They stand the retailer in good stead.
To diversify its revenues, Shoprite launched its mobile virtual network operator (MVNO), called K’nect Mobile, offering competitive rates and several other rewards to customers.
In terms of diversification, it seems Shoprite’s future is to grow and monetise its ecosystem of value for customers. It can deliver significant benefits to its customers and workers after launching a new ground-breaking digital business hub, ShopriteX.
ShopriteX combines data science, technology and innovation with its operational strength to provide increasingly enhanced customer experiences.
“The next era of growth for us is about precision retailing,” said Engelbrecht. “ShopriteX will use our rich customer data to supercharge a ‘Smarter Shoprite’ and ultimately fuse the best of digital with our operational strength across the continent.
“Through a culture of innovation and start-up-like pace, our teams are making grocery shopping more personalised for customers while removing friction from the retail experience.”
It seems Shoprite’s hunt for profits is betting on data-driven retailing.
On the downside, this development could mean retrenchments for Shoprite workers. But job losses can be avoided by retraining till operators so they can perform other necessary functions. This will enable them to be fit for the future of new retail.
Finally, it seems Shoprite is setting itself up to win in the long term through precision retailing, which is in its infancy.
• Lourie is a former correspondent for Thomson Reuters, Business Report, Fin24 and Finweek magazine. He is also the founder and editor of techfinancials.co.za.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.