SHP continues to lead the food retail market in SA, although the modest growth in its lower-income chains despite high space growth suggests there may be increased competition in that part of the market. Our calculations show that Shoprite and Usave’s trading density growth was lower than inflation over the past five years, implying a contraction in same-store volumes.
Sixty60’s expansion to sales of R18.9bn within five years of its launch is a remarkable achievement. We find that the average Sixty60 sales per store increased from R7.7m in FY21 to R27.2m in FY25. Sixty60 now accounts for 19.7% of the Checkers chain turnover.
Not all of the almost R19bn in Sixty60 sales is from market share gains, though, as a sizeable portion may be a shift from existing Checkers customers. We argue that while online retail can lower costs for non-food retailers, on-demand food retailing requires a local store network for execution. Food retailers must offset the additional cost of online fulfilment by attracting new customers and selling more products to existing customers. We calculate that Sixty60’s delivery costs may have been R1.7bn in FY25, amounting to 8.9% of online sales. After recoveries, the net delivery cost amounts to around 3.9% of online sales, by our estimates.
SHP has been successful in offsetting these costs with new business, but the continued rapid change in sales mix risks diluting SHP’s margins. Fortunately, SHP has the tools to manage this risk, and we think Sixty60 will eventually settle on a sustainable online/in-store mix that can deliver optimal profitability for the group.