Loading...
See More

Retail competition to increase imports

Aug 28 2011 09:54 Letitia Watson

Company Data

PICK N PAY STORES LIMITED [JSE:PIK]

Last traded 57.35
Change 0.19
% Change 0.00
Cumulative volume 250741
Market cap 27.95bn

Last Updated: 19/09/2014 at 04:26. Prices are delayed by 15 minutes. Source: McGregor BFA

MASSMART HOLDINGS LIMITED [JSE:MSM]

Last traded 124.21
Change 0.21
% Change 0.00
Cumulative volume 125243
Market cap 26.97bn

Last Updated: 19/09/2014 at 04:24. Prices are delayed by 15 minutes. Source: McGregor BFA

SHOPRITE HOLDINGS LIMITED [JSE:SHP]

Last traded 145.60
Change 0.33
% Change 0.00
Cumulative volume 617631
Market cap 83.41bn

Last Updated: 19/09/2014 at 04:26. Prices are delayed by 15 minutes. Source: McGregor BFA

Related Articles

Woolworths stock jumps after profits rise

Massmart profit takes a knock

Shoprite gears up to take on Walmart

Edcon boasts rise in sales

Shoprite beats profit expectations

Pick n Pay uses Franklins cash to revamp

 
Johannesburg - Competition in the retail industry will force an increasing number of retailers to buy their products more cheaply overseas. But this can be to the detriment of local suppliers.

South African retailers currently buy around 97% of their food and grocery products in South Africa, but in recent years the trend has been to increase imports.

“The volumes of a supplier like Tiger Brands have shown slower growth in recent years than those of a retailer like Pick n Pay, indicating that Tiger Brands is losing market share compared with foreign suppliers,” said Abdul Davids, head of research at Kagiso Asset Management.

Local players will probably face an even tougher battle when Walmart is fully integrated into Massmart Holdings [JSE:MSM].

Walmart follows a global procurement model, which means that it buys products where they are cheapest. As the world's biggest retailer, it can spread its purchasing worldwide to get the most competitive prices. Davids reckons South African retailers are just too small to compete with the scale of Walmart.

This will naturally put pressure on them to source cheaper products elsewhere as well. Shoprite has massive distribution centres to shore up stocks, but Pick n Pay Stores [JSE:PIK]is lagging in this respect.

The rand's exchange rate also plays a large role in the procurement of foreign products. Buyers benefit from a strong rand when they buy foreign goods, but when the rand weakens it makes the products of local suppliers more competitive.

“If, for instance, you examine the stock levels on Shoprite’s balance sheet in its latest results, it appears that the company has used the strong rand to stock up,” said Davids.

In announcing its results in the past week, Massmart said it would focus much more strongly on house brands.

According to chief executive Grant Pattison the plan is to procure foodstuffs for these brands locally. “We will procure products not manufactured here offshore.”

Shoprite Holdings [JSE:SHP] chief executive Whitey Basson, in announcing the group's annual results earlier this week, said that Shoprite also wanted to expand its house brand offering, but that local procurement for house brand products was difficult.

According to Gilmour, local suppliers have limited capacity and ability to manufacture house brand products – largely because Woolworths, the largest house brand products retailer, has cornered this capacity.

More than 90% of this group’s grocery offering is locally sourced and the group has established relationships with local product manufacturers to meet its demand.

NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Small Business

New forms of digital technology are changing the very ways in which entrepreneurs run their businesses.
 
 

6 life hacks you simply have to know

A few simple tricks can make your life so much easier!

 
 

For chic geeks...

Device lets disabled people talk through their nose
It’s THIS easy for someone to steal your ATM pin!
This is why you should install iOS 8
17 photo illusions that look so real

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...