The top executive brought in this year from the US to spearhead Walmart-owned Massmart’s online growth strategy in SA believes competition for market share will get more intense over the next three years as the country’s retailers expand their digital footprints off low bases.
Sylvester John, vice-president of e-commerce at Massmart, is confident the JSE-listed retailer will hold its own against competitors, saying that because online retail is in its infancy here it doesn’t matter who is leading the race now because the biggest changes in this sector are still to come.
“The reality is that whoever considers themselves in the lead today would be a competitor for us.
“The point I’m trying to make is that I don’t think anything is concluded yet [in terms of who is the most dominant in the online market] because it is so early.
“The real opportunity is what happens in the next three years, and that is where the opportunity is, in my opinion.”
In an interview with Business Times this week, John, who before taking up his new role had spent close to 10 years at Walmart’s US operations, says online retail probably makes up anywhere between 2.5% and 4% of retail sales, with expectations this could increase to 11%-12% within a decade.
He says he expects a lot of the changes to take place over the next 36 months as retailers compete for that extra 8% to 9% potential market share.
Although online retail penetration is still relatively low in SA, the “good news” is that it is now “moving very fast”.
John expects Massmart, which owns Game, Makro and the Builders brand, to “earn its fair share” of this potential 9% total market share.
He says Massmart already has a good base from which to work as more than 250 of its 423 stores across the Game, Builders and Makro footprint have “digital solutions already”.
However, he says more changes are needed to improve the experience of customers.
“The good thing is we are in a good position. Our websites are doing pretty good business and we've got a pretty good customer base.”
John could not provide the group’s latest online sales figure as Massmart is in a closed period ahead of the release of its interim results on Friday, but says that in the past financial year the group grew online sales almost 60% compared with the previous year.
Nonetheless, Massmart was “revisiting” all its websites as there were opportunities “for us to do better”.
The expected contribution online sales will make to total retail sales in SA over the next decade.
— IN NUMBERS: 11%+
“That is not just the look of site but more importantly the way the site functions.
“The effectiveness of ‘search’ needs to be better. And so we are doing a lot of work and you are going to see that unfold in the next few weeks and months.”
John says Massmart’s brands are “very strong” and it is important for the group to leverage that to accelerate its online penetration.
“Part of that opportunity also includes the learnings we have from Walmart that can help us accelerate the process.”
But though Massmart is strengthening its online strategy, its Game brand continues to struggle. The group reported last week in a trading update for the 26-week period ended June 27 that “earnings are expected to be adversely affected by the impairment of the carrying value of assets in Game of approximately R570m”.
It also reported that Game’s total sales of R7.6bn would be 7.6% lower than the same period last year.
The group’s Builders brand is faring far better, with Massmart reporting that it continues to see strong sales performance, with total sales of R7.2bn being 24% better than last year.
Makro’s total sales of R13.7bn increased by 13.5% over the prior year.
John, who officially started in his new role in February but arrived in this country in the third week of March, was previously part of the top team that drove Walmart’s online grocery strategy in the US over the past six years.
“I was one of the founding leaders brought together with five others to launch the US omni-channel strategy, when the US [operations of Walmart] decided to get really behind omni-channel, specifically online grocery, as the vehicle that we were going to use to deploy our entry into the space in a big way.
“We had an e-commerce business before that, but when we launched online grocery retail, that is when the growth for the group in the e-commerce space really started to occur.”
Though there are differences between Walmart in the US — where roughly half the business is grocery retail and the balance general merchandise — and SA, which sells wholesale food as well as general merchandise, John says the lessons learnt there can still be applied here.
In the US, over the past six years, John and his team ensured that more than 3,000 of the 4,700 Walmart stores in that country secured online platforms and hired staff to enable consumers to buy online from them.
The strategy initially focused on a click-and-collect model, which is particularly popular in the US and has since been expanded to include home deliveries.
This involved making physical changes to stores to accommodate the click-and-collect model, such as ensuring there was ample parking space for customers at the outlets to support pick-ups.
It also entailed configuring the outlets to present goods in a way that accommodated walk-in customers as well as the Walmart personal shoppers sourcing items for online customers.
“Then obviously there was the work that was done upstream, which included developing a new website and a new mobile application that would be the platform used to enable online grocery [shopping] and which was separated from the platform used for general merchandise.”
Key to the online operation in the US was a “mobile first strategy” as people in the main interacted with the company on their smartphones.
John says Massmart will be following that strategy in SA as most of its customers are also accessing the company's platforms on their phones.
“In many ways we have to meet the customer where they are.
“The South African customer is on their phone.
“Even on our website the vast majority of our customers are accessing [it] on their phones and this is not unique to Massmart,” says John.
“This is the reality. "
He says the market can expect to see some major improvements in the group’s mobile apps in the coming months.
This would be part of the strategy of “leaning very heavily into a multifaceted approach around being a really mobile first organisation, which is the same thing we did at Walmart in the US”.
John says Massmart is also working on speeding up the process of getting goods into the hands of customers, and that already about 41% of its orders are “actually fulfilled in one day, specifically at Makro”.
Other initiatives will include making sure the group’s stores can serve both online customers and the walk-in shopper in the best possible way as currently both are “shopping the same shelf”.
“This is not the most efficient reality.”
John says the group will be introducing Walmart technology to SA to help manage the needs of both the online and walk-in shopper in store.
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