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Massdiscounters

Massdiscounters operates through two retail formats: Game and DionWired. Game is a discount multi-category retailer of General Merchandise, Groceries, Fresh Food and Liquor, operating throughout South Africa and in 21 cities in sub-Saharan Africa. DionWired sells technology and technological solutions in Multimedia and Hi-tech in South Africa.
2018 strategy
Roll out our new operating model and category management structure to enhance the customer value proposition
Simplify our systems and processes and continue with our investment in best-in-class IT
Focus on operating efficiencies in order to reduce operating costs as a % of sales
Optimise store trading sizes and introduce new layout stores to improve trading density
Expand our store footprint in key locations in South Africa and elsewhere in Africa
Focus on and develop our business readiness for the new SAP ERP IT implementation
The progress we made
  • Rolled out 100 in-store Money Centres with the capability to offer our customers money transfers, prepaid utilities, bill payments, bus and Lotto tickets
  • Successfully rolled out 12 new layout stores. Reduced the trading space of five stores to 2,800m2 to optimise store trading density while making it easier for customers to navigate our stores and find products
  • Significant progress has been made in the development of the new ERP system (SAP S/4HANA) which is expected to deliver improved customer-centric marketing; merchandising; sourcing and procurement; better informed inventory management decisions; and will offer a simplified omnichannel customer experience
  • Building strong and strategic partnerships with our vendors
  • Opened five new stores in South Africa and three outside South Africa. After closing three stores, our trading space increased by 2.2%
  • In November 2018 Game launched a Loyalty App, which leverages GK-POS to provide our customers with coupons, vouchers, unique offers and digital receipts
The challenges we faced
  • Our core middle-income customer in South Africa was impacted by the high unemployment rate, the April 2018 VAT increase, hikes in fuel prices and low consumer confidence
  • Slowing economies outside South Africa
  • Product deflation of 2.9%, mostly from Durable Goods
  • The challenge of the mid-2018 management restructure and relocation of the head office and commercial business units to Johannesburg caused staff uncertainty
  • Skills shortages and staff retention in specialised areas of retail
  • DionWired’s sales were below 2017 from a combination of factors including limited product innovation and severe stock supply challenges, especially in laptops
Our strategic focus for 2019
  • Increasing market share across all our major categories
  • Continuing to improve our Customer Value Proposition (CVP)
  • Expanding our store footprint in key locations outside South Africa
  • Simplifying our systems and processes as we continue to invest in best-in-class IT
  • A successful roll-out implementation of the new SAP ERP system in the second half of 2019
  • Leveraging the benefits of our new management structures and skills
  • Continuing optimisation of store trading density for new and existing layouts
Future outlook
Massdiscounters will continue to improve the quality of business through leveraging new management structures and capabilities. We will improve our CVP across all channels with a clear focus on aspirational younger families in LSMs 5 to 8. We remain focused on improving gross profit margins as well as optimising working capital levels. We will continue with the SAP ERP implementation and the go-live date is scheduled for the second half of 2019.

South African consumer confidence remains low and so we anticipate a difficult sales environment in 2019, although we are confident that our improved execution capability will manifest in slightly stronger sales growth. Outside South Africa our stores perform well in local currencies but our Rand performance depends upon the currency exchange rate at different times throughout the year.