Makro’s current fresh offering is underwhelming, and a plan launched a decade ago to aggressively enter the fresh food space with Game ended up failing.
The announcement this week by Walmart’s local subsidiary that it will open Walmart-branded stores before the end of this year is a curious one. Not only does Massmart already operate the Game, Builders, Makro, Jumbo and Shield brands, it is not at all clear how different the Walmart proposition will be to its existing Makro one.
The retailer says these stores will offer “fresh groceries, household essentials, apparel and technology” alongside what will presumably be a core general merchandise offering.
A push into the fresh grocery space is ambitious. Makro’s current fresh offering is underwhelming, and a plan launched a decade ago to aggressively enter the fresh food space with Game ended up failing.
It added fresh food to its existing grocery offering across most of its then 100-plus stores (with the exception of those where exclusivity agreements with rivals prevented this, or where the size of the outlet made it difficult to make space for fresh foods).
The offering initially attracted new customers into its stores, who then tended to cross-shop its general merchandise categories. However, its fruit, vegetable, meat, bakery and frozen offerings were fairly basic, and it also had limited selection when comparing the rest of its grocery ranges to rivals.
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Then CEO Guy Hayward said in 2015, “You can do your full household shopping [at Game], but you won’t have four choices of tomato sauce, for example. Because we can’t compete on convenience or quality, we will compete on price.”
This simply didn’t work (nor did it make much sense). Consumers want choice. But a far bigger problem than that was because of this limited range, Game ended up working with fewer suppliers than rivals like the Shoprite Group, Pick n Pay and Spar, which meant more limited buying, and therefore, discounting power.
Game also operated separately from the Makro wholesale business, which further hampered its buying power. Massmart announced Game’s retreat from the fresh food sector in 2020, under a plan to reset the then severely loss-making business.
In 2022, it shut just over a dozen underperforming Game stores and has continued to slowly trim its footprint. At the end of July, Walmart reported that it had 100 Game stores in South Africa.
A further wrinkle in this Walmart-branded store strategy is that Massmart has also said it will replace some Game stores in malls with small-format Makro outlets. That “pilot programme,” announced in April 2024, would see four stores converted.
It has since gone quiet on that plan, but landlord SA Corporate Real Estate confirmed the conversion of the Game store at East Point (adjacent to East Rand Mall) to Makro Express in a presentation to investors in April. Quite how Makro, Makro Express, and Walmart Supercentres are to compete for the same customer remains to be seen.
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Walmart’s biggest rival will be Checkers Hyper, which has an industry-leading fresh, grocery, and general merchandise offering. It added three new Checkers Hyper stores in the last year (and closed one), taking the total number to 40. It has confirmed the opening of one store in 2026.
There is not too much more ‘white space’ for these larger-format stores. The retailer’s astonishing success with its Sixty60 on-demand delivery offering has been supercharged by the addition of the general merchandise category in May 2024. This saw an additional 10 000 larger products added to the service.
Walmart will bring its omni-channel clout to its branded stores, but it faces a formidable competitor in Checkers.
It will also be up against Pick n Pay Hypermarkets, but this unit has had its own challenges over the last decade. Under the turnaround plan for the group being led by Sean Summers, it has managed to get this division growing again.
Hypermarkets has a far smaller footprint of Hypers than Checkers, at around 20. Massmart’s Makro has 23 stores in the country.
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A level of about 20 stores feels about right for Walmart Supercentres in the medium-term. That is, of course, if the Walmart branded chain is a success. It will almost certainly convert a few Makro stores to Walmart Supercentres in markets where this is appropriate.
The US retail giant operates Walmart Supercentres in all but two of the 10 markets it operates in internationally (excluding Southern Africa). The bulk of these markets are in Central and South America.
This article was republished from Moneyweb. Read the original here.
