Integrated annual report
for 52 weeks ended 27 December 2015
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Intellectual capital

In a highly competitive retail market, it is imperative that we create and improve products and services which appeal to our customers.
In 2015…
What we did well:
rapidly, sales in the fourth quarter were double for the same period in 2014.

The Private Label space in our Food business is very exciting, we recently launched Marketside into Fresh, Bakery and Butchery and the Equate brand into Health and Beauty.
Massbuild’s first two Price-Lock campaigns saved customers R7 million in discounted pricing over the duration of each campaign. Sales lifted an average of 35% per campaign, showing customer satisfaction with this approach.

Makro’s R100 promotions were very well received, and enjoyed 19.3% growth, saving our customers over R100 million.
The improvements we made:
Makro Pick up lockers have been extended to sites in the Cape and KwaZulu-Natal. Makro Commercial functionality (B2B) is showing a great response after it went live in 2015.

Massbuild is initiating a SAP online project in Builders Warehouse to improve their offering to trade customers.
The challenges we’re facing:
Online shopping in the markets we serve has been relatively slow, however we remain committed to providing an online offering and are developing the supporting systems to support omni-channel as it ramps up.

 

 

MASSMART DEFINES INTELLECTUAL CAPITAL AS HOW WE PASS ON BENEFITS TO OUR CUSTOMERS.
 

eCommerce / online

In order to remain relevant to a rapidly evolving and digitally connected Customer 2.0, Massmart must understand and stay in touch with the technology innovations impacting retail formats, and the increasingly complex omni-channel paths to purchase. We recognise that smartphone penetration and declining costs of bandwidth are creating a digitally-connected customer that will be ubiquitous in every market segment we serve. Put simply, the internet and mobile phone have created new dimensions in retail that enable us to raise the bar on convenience, service, choice and communication.

To take advantage of the opportunity to win, serve and retain customers in new ways, we must become literate in the new dimensions of retail, acquire new competencies and adapt existing assets, in order to retain and advance our leadership in the categories we trade, and market segments we serve. To this end we have spent time in various Walmart markets around the world to understand the context, trends, best practices and competency gaps impacting retail operations like ours, in order to inform our strategic choices. We have identified the need to evolve our formats to synthesise the physical and digital elements of retail, in ways that create compelling new value propositions for customers, and to align with their expectations of a digitally-augmented shopping experience; and new standards for convenience, choice and service.

Whilst the strategic choices and directions are clear, online shopping adoption in the markets we serve has been relatively slow. Consequently there is no urgent need to drive an online shopping agenda. We therefore have the time to develop important foundation competencies and implement new systems in a phase of omni-channel readiness. In support of this, all of our operating Divisions have brought strong focus to the acquisition of these competencies, and the development of supporting systems required to prepare their operations for omni-channel.

Highlights in the 2015 financial year included:

  • Total online sales of R183 million;
  • Visits to DionWired site are up 13% and the average basket size is up 12%;
  • Makro online sales are growing rapidly. Sales in the fourth quarter were double those for the same period in 2014. Their Pick-up lockers have been extended to include sites in the Cape and KwaZulu-Natal. Commercial functionality (B2B) is showing a great response after it went live during November 2015;
  • Masscash are trialling a store-based online ordering capability; and
  • Massbuild are initiating a SAP online project in Builders Warehouse to improve their offering to trade customers.


Highlights

R183
million
  65%   13%   11
million
  12%   14
Total Group
online sales
  Increase in
online
sales
for Makro
  Increase in
visits to
the
DionWired site
  Number of
unique visits

to Makro online
  Increase in
average
basket size
on the
DionWired site
  Makro Pick-up
lockers as at
December 2015


Private Label

Shared Private Label has always been an important focus for our business, as can been seen from the growth numbers across our Camp Master and Garden Master brands, as well as small exercise equipment under the Trojan brand. We strive for brand excellence whether through product innovation, world class social media or website platforms off which our customers can not merely view product range, but also engage directly with us. With our Campmaster and Trojan health repair centres we are unrivalled in the space of post-purchase customer care.

The Private Label space in our Food business is very exciting right now with the recent launch of Marketside into Fresh, Bakery and Butchery and the Equate brand into Health and Beauty.

Shared Private Label has a dual role: it excites and delights our customers with an outstanding brand encounter; and it allows our business to leverage our strength in terms of joint buying, expansion of brand footprint and ultimately being able to bring our customer more-for-less. We are continually searching for new products, brands and initiatives that both fulfil our customers’ needs and give Massmart Private Label a sustainable advantage.

Camp Master raised a total of R250,000 for the Rhino Action Group Effort (RAGE) through the sale of vehicle mirror socks at selected Massmart stores. Camp Master matched the contributions from Game, Makro and Builders’ customers to reach a grand total of R250,000, to aid RAGE’s anti-poaching initiatives and help create awareness about the need to combat rhino poaching.

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EDLP

The “Price-Lock” campaign was initiated in Massbuild
12 months ago following insights from the UK market. The concept is to choose about 50 products, negotiate with suppliers to hold their cost prices for at least six months, and then in turn hold the reduced selling price for the full six months. Customers were asked about promotional campaigns which lasted longer than the traditional one to three weeks and feedback was overwhelmingly in favour of an extended period of promotional activity. Customers felt that the extended campaigns gave them more time to prepare, and also enabled them to budget for a project that they might be busy with for a period of months.

The first two campaigns saved customers R7 million in discounted pricing over the duration of each campaign. Sales lifted by an average of 35% per campaign, which pointed to the customer satisfaction with the long-term campaign. The Price-Lock campaign also enabled Massbuild to strengthen their EDLP philosophy of being best-priced on a basket of goods.

Makro R100 promotions

The 2015 R100 promotion ran during July and August. There were 313 R100 deals across a number of categories. Food deals drove by far the most baskets and also units per basket. 11% of sales were from new launches, with the majority coming from General Merchandise, which accelerated growth in the category. The R100 deals accounted for 27% of all baskets in Makro over the period, up from 15.5% during 2014.

  • 1.65 million baskets contained a R100 deal during the 2015 promo
  • 19.3% R100 deal sales growth recorded
  • Saving to our customers of over R100 million

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