South Africa’s Largest Retailers, From Steinhoff to Woolworths explained by professional Forex trading experts the “ForexSQ” FX trading team.
South Africa’s Largest Retailers, From Steinhoff to Woolworths
When you look at the list of the largest African retailers, it seems obvious that retail groceries and supermarkets are niche with the largest potential for retail growth. According to the Euromonitor, the popularity of retail supermarket chains continues to rise among the largest portion of the community of low- to middle-income consumers. It’s not surprising that the largest African retail chains are mostly grocery store and supermarket chains.
The South African Hub
African retailing was mostly about South African retailing prior to 2014, which is where nearly all the continent’s bustling commerce activity takes place. Cities like Johannesburg and Durban have mega malls that are over 37-acres large which is roughly half the size of the Mall of America in Bloomington, Minnesota. Considering the lack of globalization, African retail companies (in particular their food retailers) are large in comparison to other retailers around the world.
Although it hasn’t always been the case, retailing in South Africa is expected to grow, according to Euromonitor. However, that growth might be affected by economic instability and additional labor disputes within the mining industry. As a mature market, South Africa has limited retail expansion opportunities compared to other African countries where organized activity by retail chains is either limited or nearly non-existent.
Economic, Infrastructure and Other Factors
Because the African retail industry lacks infrastructure, supermarket companies like ShopRite Holdings are finding big success in markets like South Africa. They’re accomplishing this by investing in local distribution centers, which cut costs. This allows ShopRite to supply products to a larger portion of the population.
As the African economy continues to improve and expand, retail groceries continue to drive the industry. Furniture and housewares stores are also expected to see an increase in profitability as more consumers become able to afford the items sold at these types of retailers. In a nation that is home to some of the poorest countries in the world, the retailers expected to prosper in the short term are those that supply basics to the emerging middle class. The World Bank listed 122.7 million Africans in that middle-class range in 2014, which is 30 percent higher than it was 13 years before.
Billionaire Population Expected to Grow
In contrast to the extreme poverty found in many African countries, it is predicted that the number of billionaires in countries like Nigeria, Ghana, Kenya, and Mozambique will almost double by the year 2030, according to Bizcommunity. This increased wealth presents a significant opportunity for luxury retailer brands and designer goods. Global management consulting firm Bain & Company predicts an 11-percent growth in this upper echelon of retail consuming. The sale of luxury goods is predicted to increase by more than 30 percent by 2019, according to Euromonitor.
Internet retailing has been increasing steadily in Africa, seeing double-digit growth in past years, partly due to the rapidly increasing sale and use of smartphones and other mobile devices. As virtual retailers expand into the African markets, the orientation of African consumers toward mobile technology should motivate more than one retailer to put emphasis on developing m-commerce. It’s possible they’ll skip the development of online Internet shopping websites altogether.
The growing promise of profitability to virtual retailers, in general, should encourage retailers to expand in more established markets like South Africa, as they establish the infrastructure necessary to expand into other African countries.
The Most Significant Retailers
One of the greatest boosts to South African retailing was the 2013 corporate buyout of Massmart by Walmart, the largest U.S. retailer.
The $2.4 billion deal gave Walmart access to over 50 million new customers, according to BusinessDayOnline. With this foothold in the African retail industry, Massmart leaders launched a pilot store in Nigeria in 2014 that was designed to directly compete with Africa’s largest domestic retail chains: ShopRite, Pick n Pay, and the SPAR Group. There’s no guarantee that Walmart will successfully challenge these hometown favorites especially considering Walmart was forced to close approximately 50 under-performing stores in Brazil and China in 2015 and 2016.
In international markets outside the U.S., consumers have proven fiercely loyal to local brands, independent retail sellers, and local markets that are as much about social connections as consuming. The arrival of “foreign” retailers is not just about selling different goods, it’s also about creating a different consuming culture. Even if African consumers are willing to do that, Walmart/Massmart will have to compete with other international retailers like France’s Carrefour, which has already made it clear that it intends to do the same.
Positive Retail Trends
The current positive retailing trends in the African retail industry are expected to continue to grow for the biggest African retail companies, due in part to the expansion of the African retail industry which will provide employment opportunities and stimulate the African economy overall. However, this may be offset somewhat by international retailers that struggle with difficult (or impossible) supply logistics. These retailers may choose to import products from established global suppliers instead of African product producers.
The inability of local independent sellers and entrepreneurs to compete with a global supply chain is a familiar story throughout the U.S. after Wal-Mart muscles its way into a small town. Not everyone considers this to be a bad thing for consumers. How (or if) the plot will change in Africa will depend equally on consumer desire and the ability of the African retail industry to respond to it.
Each year a “Global Powers of Retailing” report is compiled by Deloitte Touche Tohmatsu and STORES Magazine, ranking retailers from all over the world according to total revenue. In 2013, the 16th annual list was released, ranking 250 retailers from 32 different countries.
Largest South African Retailers
This 2013 Global Powers of Retailing list reflects the revenue that was generated in the fiscal year 2011 for each of these South African retail companies, which was a year of recovery from the global retail recession. This list is arranged according to the revenue ranking assigned to each of the South African retail companies when compared to the revenue of all retail companies worldwide.
2013 Largest Retailers in South African and Revenue Rankings
Ranking #72- Steinhoff International Holdings Ltd.
Steinhoff International is a German international retail holding company that is based in South Africa. It moved its headquarters to South Africa IN 1998, attracted by the low production costs, and went public on the Johannesburg Stock Exchange that same year. It deals mainly with the sale of furniture and household goods. As of Aust 2016, it held retailing activities in 30 countries, counting 6,500 retails outlets belong to 40 different brands and employing about 90,000 people. It’s South Afraicn brands include HiFi Corp, Pennypinchers, Timbercity, Pep, Ackermans, Shoe City, Incredible Connection, and Unitrans.
- Steinhoff Corporate and Investors Website
- Steinhoff Retail Brand Consumer Websites – HiFi Corp – Russells – Incredible Connection – PennyPinchers – TimberCity – The Tile House
Ranking #110 – Shoprite Holdings
Shoprite Holdings is Africa’s largest food retailer. It operates 2,653 outlets in 15 countries across Africa and the Indian Ocean Islands The company is headquartered in the Western Cape province of South Africa. Its primary business is food retailing to consumers of all income levels, with the goal of providing all communities in Africa with food and household items in a world-class shopping environment but at the lowest possible prices. As of June 2016, some 76% of the total adult population of South Africas shopped at one of the retailer’s supermarkets. The company employs nearly 138,000 people of 212,000 work outside of South Africa.
- Shoprite Corporate and Investors Website
- Shoprite Consumer Website
Ranking #155 – SPAR Group
This supermarket chain is a Dutch multinational retail chain and franchise brand with about 12,500 stores in 42 countries worldwide. It was founded in 1932 by Adriaan van Well. Through its affiliate organizations, Spar operates in most parts of Africa as well as European countries, parts of Asia and Oceania. It is headquartered in Amsterdam. In July of 2014, Spar Group South Africa opened its first supermarket in Angola. In August 2014, the group acquired 80% of the BWG Group, which had outlets in Ireland and southwest England. This helped make it sour to the number three position in South African retailers.
- SPAR Group Consumer Website
- SPAR Group Jobs Website
- SPAR Group Investors Website
Ranking #171 – Pick ‘n Pay
Pick n Pay is the second largest supermarket chain store in South Africa. It was established in 1967. It can also be found in other regions of South Africa, such as Botswana, Mozambique, Zambia, Zimbabwe, Lesotho, and Namibia as well as Mauritius. The supermarket behemoth was founded by Jack Goldin, who was born in Obeliai Lithuania but moved to South Africa when the Nazis invaded his home town. Raymond Ackerman purchased three Pick n Pay supermarkets (in Cape Town) from Goldin and today, Ackerman’s son Gareth, who currently serves as CEO of the company
- Pick ‘n Pay Consumer Website
- Pick ‘n Pay Investors Website
Ranking #197 – Woolworths Holdings Limited
The Woolworths Holdings Limited (not to be confused with the now-defunct American W.F. Woolworths chain) is South African chain of retail stores and one of the largest in the country, modelled after Marks & Spencer of the U.K. The first department store opened in The Old Royal Hotel in Cape Town in 1931 and was founded by a gentleman named Max Sonnenberg. It operates through both corporate and franchise stores throughout South Africa and neighboring and coutnries. Various stores formats include full-line stores, food stand-alone stores, food and homeware lifestyle stores, and stores offering textiles such as and clothing, footwear, and homewares. In-store cafes offer organic teas and coffee as well as light meals, while some stores also offer tapas bar restaurants. In 2015 Woolworths was acclaimed the best store for customer care in accordance with the South African Customer Index.
South Africa’s Largest Retailers, From Steinhoff to Woolworths Conclusion
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