Shoprite is and has been the clear market share leader in SA groceries for many years. Though Pick n Pay appeared to be on a turnaround with its Ekuseni venture under new CEO Pieter Boone, that has largely fizzled out — apart from the bottom end, where Pick n Pay’s Boxer chain is more than a match for Shoprite’s Usave.
Boxer is the closest SA has in terms of being a discounter like the German discounters Aldi and Lidl, which have been so remarkably successful in recent years worldwide. Like Aldi & Lidl, Boxer has a limited assortment of goods on the shelves, which makes replenishment much easier than in a full-line supermarket. A typical Boxer will have about 5,000 products, or stock-keeping units (SKUs), on its shelves, compared with a full-line Pick n Pay supermarket with about 18,000 SKUs. Aldi & Lidl carry about 3,000 SKUs.
The picture is distorted considerably at both these discounters, as they also carry a wide range of general merchandise, selling everything from basic clothing and electronics to appliances and garden equipment. This greatly differentiates the German discounters not just from most UK supermarket offerings (where most SKUs are food) but also from SA discounters, which tend not to have this differentiating factor.
Though general merchandise products tend to be higher value than most of the food SKUs, this doesn’t automatically result in naturally higher profit margins on these products. That is because they tend to be slower moving than food SKUs, though Aldi and Lidl try to ensure that if a general merchandise product doesn’t sell quickly, it is taken off the shelves quickly.
This is just one area in which the German discounters differ markedly from their SA counterparts. SA discounters such as Boxer and USave tend to be highly focused on commodity-type foods such as mealie meal and bread, and carry few if any general merchandise-type products.
Changing rapidly
Another big differentiator between them is that the SA discounters tend to be found only in and around townships, not in fancy shopping malls or upmarket areas. This is because of the very specific demographics that they target: low-end, extremely price-sensitive shoppers who want predominantly the basics.
Aldi and Lidl may have started out like that but their appeal is changing rapidly and their store locations reflect this. They tend not to be found in shopping malls, preferring the lower rentals in edge-of-town locations. But they no longer appeal predominantly to an impoverished demographic. An increasing number of middle and upper-end shoppers are being attracted to their stores in search of consistent, good bargains.
Aldi, with a market share of 9.9% in Kantar’s latest UK grocery market share ranking, is the UK’s fourth-largest supermarket chain, having recently displaced Morrisons. Lidl isn’t very far behind, on 7.4%.
Both chains have grown exponentially in the past decade; 10 years ago, Aldi’s market share was 3.1% and Lidl’s was 2.7%. They are the only two supermarket chains to have shown consistent growth over the past decade, and market leaders such as Tesco and Sainsbury’s have gone backwards as the discounters have taken market share from them. Ten years ago, Tesco held a 30.4% share of the grocery market. Now it’s 26.9%. Sainsbury’s held 17.1% a decade ago and now it is 14.8%.
SA’s discounter segment offers similar explosive growth, though for very different reasons. While Aldi and Lidl are increasingly appealing to a very wide demographic, Boxer and Usave appeal to a low-end segment of consumers that is growing rapidly, due mainly to an economy that is struggling to grow. Aldi and Lidl have universal appeal, whereas Boxer and USave can thrive only under challenging economic conditions. But as long as these conditions persist in SA, they will remain extremely relevant.
• Gilmour is an investment analyst.
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