Makro Strategic Focus Areas - 2019/2020 Supplier Toolkit May 2019 - Trade Intelligence
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Corporate Retail
Makro Strategic Focus Areas
2019/2020
Supplier Toolkit May 2019
CONTENTS
MAKRO STRATEGIC FOCUS
Pg 3
RESEARCH REPORT
PRODUCTION
LEAD ANALYST
Maryla Masojada
RETAIL ANALYST
"Makro saves customers time and money
Kerry Elliot so they can fulfil their aspirations of living
RESEARCH TEAM better lives and running better businesses."
Kate Shirley and Carey Leighton
Massmart
CLIENT SERVICES
info@tradeintelligence.co.za
EDITORS "Through our widely-recognised,
Nick Paul and Katia Benedetti differentiated retail and wholesale
PHOTOGRAPHY CREDIT formats, we have leading shares in the
Trade Intelligence Trade Photo
Library (unless otherwise stated) General Merchandise, Liquor, Home
Improvement and Wholesale Food markets.
ENQUIRIES Our key foundations of high volume, low
info@tradeintelligence.co.za cost and operational excellence enable our
+27 (0)31 303 2803
price leadership."
@TradeTatler
Guy Hayward, Massmart Group CEO
tradeintelligenc
e tradeintel
www.tradeintelligence.co.za
Copyright © 2019 Trade Intelligence. All rights
reserved. Copyright subsists in this work. No part of
this work may be reproduced in any form or by any
means unless directly quoted as source.
Any unreferenced reproduction of this work will
constitute a copyright infringement and render
the doer liable under both civil and criminal law.
Copyright © 2019 Trade Intelligence Trade Intelligence | Makro Strategic Focus Areas and SWOT | May 2019 2
06 | MAKRO STRATEGIC FOCUS AREAS AND SWOT 2019/2020
MAKRO STRATEGIC FOCUS AREAS
Masswarehouse comprises the 22 store Makro taking advantage of the low food prices afforded by the
warehouse club trading in food, general warehouse model has escalated in recent years. The
merchandise and liquor in South Africa; Massfresh, key for Makro is to maintain a balance between
which houses the Group’s fresh produce and fresh introducing an increasingly ‘retail shopper experience’
meat operations including The Fruitspot, and and the low operating cost associated with the big-box,
Wumdrop, a final-mile delivery service specialising no-frills warehouse club model that keeps this business
in delivery of small to medium packages in so uniquely positioned and profitable.
partnership with independent
Makro has five strategic drivers. These are
drivers. The focus of this report is on the Makro
underpinned by the Group’s strategic focus area of
business.
The Makro trading proposition is Big on Life, Big improving and growing the South African business
on Value. This is in line with the Massmart through Group economies of scale and the growth of
Group common revenue streams.
commitment to “Save customers money, so they can Massmart Group’s strategic focus areas are
live better”. complementary to Makro’s; group strategy is applied
What is significant about the Makro model is that it
sells general merchandise primarily to retail where appropriate within both the Masswarehouse
customers, while much of its food and liquor is sold to and Makro business units.
wholesale customers. However the prevalence of
retail customers
Focus Areas Strategic Objectives
To grow market shares in general merchandise in the retail and
01 | Grow Market Share commercial segments and in the food and liquor retail and hospitality
channels
02 | Accelerate To implement SAP Hybris ecommerce and fulfilment platforms to
Ecommerce accelerate growth in ecommerce sales to retail and commercial
customers
03 | Enhance Customer To retain focus on the customer value proposition by offering the
Value Proposition best balance between price, quality and quantity
To continue to invest in ‘our’ people, through training and
04 | Invest in our People development, and by offering leadership opportunities and talent
acquisition
05 | Increase margin To maintain lowest cost operator model through Group economies
through Efficiencies of scale, process optimisation and environmentally responsible
stores
Copyright © 2019 Trade Intelligence Trade Intelligence | Makro Strategic Focus Areas and SWOT | May 2019 3
01 | GROW MARKET SHARE
Strategic Objective: To grow market shares in the general merchandise retail and commercial channels, and in
the food and liquor retail and hospitality channels.
Makro achievements and intentions
Focusing on Makro intentions in the grocery retail (food retail) market:
• Retail food is now 54% of the Makro business (56% • Makro has achieved significant organic growth with
of South African Massmart Group business, the addition of two new stores over the last 16
showing months (Riversands in November 2017, and
+3.2% growth in FY2018) Cornubia in March 2019). The Riversands store’s
rental annualisation contributed to Group occupancy
• General merchandise sales growth +4.5%
costs increasing by 10.1% (comparable +6.4%) but
despite deflation and pressure on discretionary
it has unfortunately struggled with shopper access
spending
caused by incomplete national road infrastructure
• Growing market share through better customer
• Makro reports that strong market shares in
understanding is a key driver. Makro has been
durable goods, food and liquor were maintained
focusing on further refining its customer
segmentation using improved customer data
analytics. The intention is to better understand the
Makro customer informing more focused service,
"We will continue to grow our retail market
targeted shopper marketing and ultimately growth in
market share in each shopper segment shares and maintain market shares in the
Top-line customer segmentation is as wholesale channels by offering a clear
follows: customer value proposition comprised of a
Makro Customer Segmentation
combination of value, range and availability,
Customer Segmentation and by allowing customers to shop with us in
Retail Customers shopping for home use – a true omnichannel manner."
predominantly an upper LSM, but
price- sensitive consumer Massmart.
Commercia The core volume-driver of the Makro
l Customer business – commercial customers are
serviced by Customer Relationship
Officers (CROs). CROs continue to
play a strong role in Makro’s
acquisition, servicing and growth of its
commercial customers, focusing on
optimising customer groups into:
Commercial Own Use
A broad spectrum of commercial
entities purchasing a variety of
products for
own-use, such as restaurants,
offices etc.
Commercial Re-sale
A broad spectrum of commercial
entities purchasing products for resale,
from franchise stores, to traders to
tavern owners
Marketside is a Group private label
Copyright © 2019 Trade Intelligence Trade Intelligence | Makro Strategic Focus Areas and SWOT | May 2019 4
06 | MAKRO STRATEGIC FOCUS AREAS AND SWOT 2019/2020
02 | ACCELERATE ECOMMERCE
Strategic Objective: To implement SAP Hybris ecommerce and fulfilment platforms to accelerate growth
in ecommerce sales to retail and commercial customers.
Context: Ecommerce gives Makro the ability to offer endless aisles to its retail and commercial customers, whilst
ensuring valuable space in store is not taken up by slower-moving lines. Makro is the most advanced of the divisions
in terms of online strategy and the translation of this into a physical B2B and B2C engagement and trading
platform.
Makro online is ‘delivered’ in one of three ways – Click & Collect from the store,Click & Collect from Makro pick-
up lockers or nationwide delivery through Wumdrop.
Makro achievements and intentions • As part of the staggered Group roll-out, the SAP
• Although Massmart quotes that online sales grew Hybris platform was launched in Makro in early
+22.4% in FY2018, the gross merchandise value of February 2019, replacing the original third party-
online sales actually grew +26%, when including hosted platform. It came with the expected early
sales from the Marketplace seller portal. Makro teething troubles but should significantly improve
Marketplace facilitates the endless aisles concept, customer-centric marketing, merchandising,
where third- party sellers are able to list and sell sourcing and procurement and inventory
products that are not available in store. The seller management for better margin and a simplified
determines the selling price and Makro facilitates the omnichannel customer experience
transaction between the seller and the Makro
customer. Makro.co.za retains a selling commission. • Click-and-Collect is now 33% of online sales
(Note: This number is not included in annual results • Makro has expanded its locker network by +160% to
financial turnover due to IFRS 15 legislation) 191 sites nationwide. Makro’s Click & Collect locker
service is offered in partnership with various
• Online has reportedly delivered improved YoY
forecourts (Shell, Sasol and Engen in Gauteng, Cape
margins through better logistics and fulfilment
Town and KwaZulu-Natal), and select McDonald’s
management and relevant product mix
and office parks. The intention is to position lockers
• Commercial customers contribute 32% to Makro’s in safe and convenient locations for customers who
online sales are unavailable to accept a delivery at home or work,
"A strategic focus area is to make use of or would prefer to collect an order after normal
trading hours
technology in the areas of analytics, store
operations and ecommerce to support our
strategic goals, and to support our people to
better serve our customers."
Massmart
191 locker sites in SA Drive-Thru is a Click-and-Collect option
Copyright © 2019 Trade Intelligence Trade Intelligence | Makro Strategic Focus Areas and SWOT | May 2019 5
03 | ENHANCE CUSOTMER VALUE PROPOSITION
Strategic Objective: To retain focus on the customer value proposition by offering the best balance between
price, quality and quantity.
Context: The Makro proposition is to save customers time and money so they can fulfil their aspirations of living
better lives and running better businesses. To deliver this promise, there is significant focus on price and special
deals (“more for less”; “big on value” inter alia), as well as mRewards, private label and relevant branded
merchandise ranging.
Makro achievements and intentions
mRewards Private label
The Makro card, required by shoppers to shop at Makro, is • Private label now contributes 9% to total group
an important part of the Makro customer value proposition. sales (19.7% of home improvement, 13.9% of
It also enables the recording of every sales transaction, general merchandise and 5.6% of food)
giving Makro access to a wealth of data to better • Improving private label sourcing and brands to offer
understand its customer. The key is the extraction customers good quality products at low price points
of insights through analysis of this data, something which is part of the Massmart Group intra and inter-
Makro acknowledges it has not yet cracked, but which has divisional collaboration work. Similarly, private label
been a main focus since 2017. The appointment has always been a strong part of Makro’s offering of
of Andrew Stein to focus on the extraction of value from ‘more for less’, ‘big on quality, big on value’, inter
Makro data, should see increasingly effective data alia, and ultimately, saving customers money so they
analytics, which is intended to facilitate better product can
ranging decisions, improved customer relationship live better and trade more profitably. The Walmart-
management and informed, targeted marketing Massmart private and confined label brands which
campaigns. The mCard app, introduced in 2017, is a are showing up in Makro as well as other divisions,
gateway to the mRewards loyalty rewards programme. It are known as ‘Great Value’ and ‘Marketside’
offers customers a convenient platform on which to store
Makro card data, earn cash rewards, and place
orders. The rewards system is based on cash rewards as
opposed to a points-based system.
• The mRewards loyalty programme membership base
has increased by +58% to nearly 200,000 users
since launch in 2016
• Makro reported strong sales from its themed
promotions e.g. Easter, Black Friday and festive
gifting promotions
• Money centres with the capability to service
money transfers, prepaid utilities, bill payments,
bus and Lotto tickets are now available in all
stores
• Makro plans to continue improving its customer
value proposition through:
− Further refinement of the rewards programme
with mCard
− Implementing hand-held payment devices
to faster process queuing customers
− Enhanced mobile technology which will allow
customer relationship managers to take orders
‘on the road’
"Data is just the ticket to the game. We have it!"
M Brand is a Makro specific private label
Doug Jones, Makro
CEO
Copyright © 2019 Trade Intelligence Trade Intelligence | Makro Strategic Focus Areas and SWOT | May 2019 6
06 | MAKRO STRATEGIC FOCUS AREAS AND SWOT 2019/2020
04 | INVEST IN OUR PEOPLE
Range Strategic Objective: To continue to invest in ‘our’
• With price, quality and quantity of product identified people through training and development, and by
as key to delivering its customer value proposition, offering leadership opportunities and talent acquisition.
Makro is working to optimise its range based on
customer segmentation and shopper profile per Makro achievements and intentions
store. This will be made possible through the • The business has created permanent jobs for nearly
effective analytics of sales data. Fundamental to 2,000 temporary staff, bringing the total number of
success will be achieving optimal allocation between new permanent jobs created to 4,500 over the last
the core general merchandise range and the four years (including new stores)
complementary fresh / food range to balance and
• The Massmart Corporate University exists to enable a
drive the optimal margin basket
robust, flexible and diverse workforce. Massmart sees
Note: For more information on Makro private label, please refer to the Makro it as “a chief vehicle for disseminating organisational
Ti Private Label Trade Profile.
culture and fostering the development of job skills,
leadership, creative thinking and problem solving”.
Through this virtual institution Massmart aims to:
− Build a strong talent pipeline
"Makro remains focused on making life
− Retain key talent
easier for our customers. We will do this − Facilitate best in-class training and
by offering products and brands that our development solutions
customers know and trust." − Align the learning agenda with business
strategy
Massmart − Maximise return on learning and
development investment
Convenience meals is a means to grow margin People is a strategic focus area for Makro
Copyright © 2019 Trade Intelligence Trade Intelligence | Makro Strategic Focus Areas and SWOT | May 2019 7
05 | INCREASE MARGIN THROUGH EFFICIENCES
Strategic Objective: To maintain lowest cost operator model through Group economies of scale, process optimisation
and environmentally responsible stores.
Context: Makro performed relatively well despite a constrained economic environment and deflationary categories
(product deflation was 0.2%, caused by deflation in durable goods and food commodities). Total sales increased by
+5.4% and comparable sales grew by +3.7% in FY2018. This translates to a real volume growth of approximately
3.9%.
Through good margin management and expense control, Makro’s operating margin was well managed, but the
Masswarehouse result in the second-half was severely impacted by negative adjustments for inventory and cost of
sales in Massfresh, which caused the Masswarehouse division’s trading profit to be 12% below last year. This is
particularly significant given that Masswarehouse contributes in the region of 50% to Massmart Group’s trading profit.
Group economies of scale Process optimisation
Makro achievements and intentions Makro is clear that continued process optimisation is
essential for optimal store ROI, cost control, better
• Delivering structurally lower operating costs by
improving Group and divisional resource utilisation servicing of both suppliers and customers and ultimately
is the driver behind the build of the Massmart margin generation through increased efficiency. The
Group services model traditional warehouse club, no-frills Makro format aims to
drive costs down whilst providing a platform for a high-
• Intra-group collaborative negotiation, procurement,
volume, high-margin sales offering
logistics, private label and IT will continue in order
to reduce cost duplication and inefficiency Masswarehouse achievements and intentions
• The Massdiscounters and Masswarehouse DCs The intention is for increased efficiencies to be
were transitioned into Massmart Logistics during the obtained through:
year and will be treated as a Group asset. The
intended benefits are optimised DC utilisation, • Wumdrop, an on-demand fulfilment service, has
improved cost recoveries, reduced stock holdings in been incorporated into the Makro outbound
stores, inter alia delivery network, aimed at an improved online
shopping experience and decreased delivery time
• Makro reduced its cost-base through improved
operations, lower costs and reduction in • The Fruitspot remains a significant player in
waste Massmart’s supply chain in achieving efficient
distribution of fresh cut fruit and vegetables to Makro,
Game, Cambridge and Masscash stores, with
operations now established in Cape Town and
Durban
• Meat processing facility – Makro has opened a
large-scale facility in Johannesburg, serving all
Massmart divisions as well as multiple third-
party customers
"At The Fruitspot, we will stabilise and
grow the business by ensuring it becomes a
supplier of choice to the retail and hospitality
industry, and within the Massmart Group."
Massmart, in relation to Masswarehouse
The Fruitspot is a shared Group resource
Copyright © 2019 Trade Intelligence Trade Intelligence | Makro Strategic Focus Areas and SWOT | May 2019 8
06 | MAKRO STRATEGIC FOCUS AREAS AND SWOT 2019/2020
Environmentally Responsible Stores
Makro is focused on building and operating its stores in • All new and revamped stores are to be fitted with
an environmentally responsible manner to reduce its standard condensate harvesting technology, heat
environmental footprint and reduce costs where possible. reclamation and thermal storage systems. Older
stores will be retrofitted with a variety of energy
Makro stores are integrating renewable and management technologies and systems
other energy-saving technologies, such as:
• The recent opening of the Cornubia store marks some
• Daylight harvesting key milestones in this regard:
• Energy-efficient lighting − Refrigeration units with excellent insulation
and high-speed doors to keep products cool
• Heat reclamation using less energy. The refrigeration system also
• Air conditioning and condensation produces condensate water, which is harvested
harvesting and reused elsewhere on the premises. A hi-tech
Makro achievements and intentions thermal storage system produces chilled water
for the store’s air-conditioner
• Makro stores operate South Africa’s longest
running post-consumer e-waste recycling − Other eco-friendly features include motion
programme. sensors in offices and storage areas that shut
This programme, now in its 10th year, has seen a down lights when staff members step out
total of 1,117 tonnes of e-waste collected since its − 100% LED lighting
commencement, with 169 tonnes collected in − Solar port parking shades to keep cars cool
2018 while generating electricity for the store to use
• Through the continued implementation of water- − Various VAS in the form of: an online drive-thru,
harvesting infrastructure to capture rainwater and money centre, an in-store Vodacom shop, a tech
refrigerant condensate, Massmart has reduced its desk for repairs, Mugg & Bean, a mobile pay
municipal water use by an estimated 22 million point and customer Wi-Fi
litres across 88 Makro and Builders stores
Enviromentally responsible ‘Off the grid’ stores
Copyright © 2019 Trade Intelligence Trade Intelligence | Makro Strategic Focus Areas and SWOT | May 2019 9
Disclaimer
These materials and the information contained herein are collated by TI* referencing a
wide range of public domain data sources, face-to-face interviews, retailer presentations
and financial reports, and are intended to provide general information about the South
African consumer goods trading environment and selected retailers, and are not intended
+27 (0) 31 303 2803 as an exhaustive treatment of such subjects.
info@tradeintelligence.co.za Whilst every effort has been made to ensure that the information published in this work
www.tradeintelligence.co.za is accurate, your use of these and the information contained herein is at your own risk.
The information is not intended to be relied upon as the sole basis for any decision
which may affect you or your business, and TI makes no express or implied
representations or warranties regarding the accuracy of the information herein.
TI will not be liable for any special, indirect, incidental, consequential, or punitive damages
or any other damages whatsoever, whether in an action of contract, statute, tort (including,
without limitation, negligence), or otherwise, relating to the use of these materials and the
information contained herein.
TI expressly disclaims all implied warranties, including, without limitation,
warranties of merchantability, title, fitness for a particular purpose, non-
infringement, compatibility, security, and accuracy.
* TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence
Copyright © 2019 Trade Intelligence. All rights reserved. Copyright subsists in this work. No part of this
work may be reproduced in any form or by any means unless directly quoted as source. Any
unreferenced reproduction of this work will constitute a copyright infringement and render the doer
liable under both civil and criminal law.You can also read
