Makro (Massmart Holdings) remained the only warehouse club available in South Africa in 2021, as businesses prioritised the expansion of smaller retailing formats. Following substantial financial loss due to COVID-19 in 2020, the brand’s recovery was mostly driven by an easing of restrictions across retailing.
The review period was marked by the accelerated adoption of e-commerce services, leading to the channel fast-tracking digital strategies in response to the rising demand for convenience. In line with this trend, Massmart continued to heavily invest in online capabilities, a move that initially translated into a strategic partnership with Uber, the leading e-hailing company in south Africa, but has since evolved by developing its first party logistics capabilities.
The competition between warehouse clubs and hypermarkets intensified in 2021, as the former relied more on B2C sales due to a slow recovery in wholesale. As a result, Makro repositioned its store to target consumers from hypermarkets and non-grocery specialists by reiterating its position as a one-stop shopping destination as opposed to convenience stores, with the latter increasingly favoured.
The performance of warehouse clubs will benefit from a further easing of restrictions, with the resumption of offices, tourism and hospitality activities being beneficial for wholesale offers. Revenue growth will also be supported by an improvement in economic activities set to boost employment rates and subsequently disposable incomes and spending confidence.
Makro is likely to remain the only warehouse club in South Africa over the forecast period due to slow investment in large retailing formats during the early phases of recovery. Nevertheless, the brand will continue striving to improve its business model to consolidate its position, a move that will align with Massmart’s long-term restructuring plans that consist of developing an integrated operating system that will leverage its core strengths and provide further growth opportunities.
Digital platforms are expected to remain the major threat to the performance of warehouse clubs, as online browsing becomes the first point of contact between consumer and retailers. The trend will be consolidated by the emergence of super apps and online shopping centres that will grow to become the ultimate one-stop shop for tech-savvy consumers.
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Warehouse clubs are chained outlets that sell a wide variety of merchandise, typically situated in out-of-town locations, with a selling space of over 2,500 sq metres (and invariably over 4,000 sq metres in total size). Customers have to pay an annual membership fee in order to shop. The clubs are able to keep prices low due to the no-frills format of the stores and large volume SKUs. Example brands include Costco, Sam’s Club (Walmart), and Atacadão. Excludes sales attributable to membership fees and business-to-business sales. Also excludes cash & carry and warehouse outlets (which are typically oriented towards businesses, rather than consumers). Note: Local variants, such as atacarejos in Brazil, are included in this channel.
See All of Our DefinitionsThis report originates from Passport, our Warehouse Clubs research and analysis database.
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