Discounters in South Africa

PROSPECTS

Price-conscious and low-income consumers remain the key target of discounters

With South Africa’s economy struggling many consumers remained price conscious and so looked for the most affordable options when grocery shopping. This helped support the rapid rise of the discounters channel in the country during the review period, with retailers targeting underserved populations and low-income households in particular.

Discounters offer additional services to the community

While low prices are the key attraction of discounters outlets, these stores also offer a range of other services to help support the local community and attract additional business. For example, U-Save and Boxer Punch stores offer customers the ability to access a range of additional services including cash withdrawals, bill payments, mobile top-ups and the ability to collect government social grants in store.

Discounters turn their attention to smaller format spaza stores

Discounters is a consolidated channel with only two players present in the form of U-Save and Boxer Punch, operated by Shoprite and Pick ‘n’ Pay respectively. Having initially pursued a rapid expansion plan both companies are now being drawn towards smaller format stores which can help them gain access to townships and informal settlements.

COMPETITIVE LANDSCAPE

U-Save store network continues to expand despite challenges

Shoprite Holdings Ltd continued to account for most sales within the discounters channel in 2019 thanks to the popularity and reach of its U-Save chain. Despite the tough economic environment the company added a significant number of new stores to its network in 2019, with it looking to benefit from the growing demand for affordable products.

Worker’s strike impacts value growth in 2019

Despite continuing to open new outlets U-Save’s performance in current value terms was adversely affected by strikes within its distribution centre in Gauteng. This is where the majority of its stores are located and it thus resulted in a temporary inventory shortage.

Box Punch sees strong growth but limited store footprint likely to stifle its development

In a reversal of U-Save’s fortunes, Boxer Punch saw no new outlets opening in 2019, but it did see strong current value growth. The chain did benefit partly from disruption in U-Save’s sales in 2019, although it also benefited by a 20% expansion in its private label range.

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