Consumer Research Africa

Shoprite (SHP) – Precision retailing

SHP delivered good results for FY22, with record market share gains and HEPS growth of 10.0% y-y. Following in the footsteps of a founder who built the business over 39 years can be daunting, but the transition at SHP over the past six years has been impressive. Under the new leadership, SHP evolved from a traditional supermarket business to a tech-savvy retailer. It maintained its market dominance in SA and enhanced its GPM with an expanded premium retail offering. We think there is scope for further OPM and PBT improvement. It also morphed from a capital-intensive retailer to one with a leaner asset base.
Our visit to the Shopritex campus sheds light on the operation driving retail innovation in SA. SHP’s plans to sell data insights to suppliers can generate a new revenue stream, while also ensuring their suppliers maximise their sales and promotions in stores. Competitors are likely to follow as their loyalty programmes allow similar customer insights. However, with its 24.7m strong customer database, SHP could be the market leader and suppliers may only need to access its data and extrapolate the insights across the market.
We think SHP exploring niches such as Petshop and the Littleme baby store may not result in meaningful growth drivers. Baby care, for example, is catering for a shrinking market as birth rates in SA have fallen from 1.7m births in 2003 to 1.0m births in 2020. We argue that SHP may need to revisit expansion plans outside SA as it could reach maturity in its home market.