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.

Our progress during the year

Held the highest market share in laptops, and maintained dominant market shares in televisions and large appliances
Began the alignment of the assortment to the CVP by exiting underperforming categories (e.g. music) and piloting high-margin strong performers (e.g. clothing basics) during the second half of the year
Collaborated on sourcing with other Massmart divisions during Black Friday promotional period and achieved double digit sales, margin growth and saved costs
Focused on relieving the impact of high occupancy costs throughout the portfolio and reducing marketing spend
Grew online transaction volumes by 25% and conversion rate by 18%, driven by higher product listings and fulfilment expansion to 19 donor stores
Revived the implementation of SAP S/4HANA, which will go live in the first half of 2020
Achieved 46% improvement in trading densities of seven resized stores
Opened four new Game stores, two in South Africa and two in rest of Africa (Nairobi and Walvis Bay); and closed two DionWired stores
Filled critical leadership roles and created permanent jobs for 436 temporary staff.

The challenges we faced

The middle class South African consumer had less disposable income due to job losses, salary freezes and increases in taxes, petrol and electricity prices
In the rest of Africa, US dollar-denominated leases continue to place upward pressure on occupancy costs, while volatile customs regimes resulted in supply chain unpredictability and high cost of goods sold
Social unrest resulted in temporary store closures in outlying stores in South Africa and the rest of Africa
Loss of relevance of the premium-electronics retail model resulted in declining sales in DionWired, while premium rentals and a relatively high-skilled workforce kept costs high.

Our strategic focus going forward

Ensure the successful integration to the Massmart Retail business unit
Continue to rebuild Game’s brand identity to what it used to be and to win with key growth segments such as millennials and young families
Continue to improve range relevance by reinvigorating the groceries proposition, strengthening ownership categories (e.g. multimedia), and introducing new solution offerings with high margin potential
Improve stock availability through improved planning and accelerated replenishment
Improve margins by launching the Every Day Low Price (EDLP) proposition in select categories, reducing promotion participation and introducing high-margin extended services
Deliver on the EDLP proposition and operate as an Every Day Low Cost discounter, including introducing digital innovations in supply chain and store operations and instituting lean store practices
Successfully transition to SAP S/4HANA to significantly improve our stock availability, ecommerce order execution, pricing and promotions execution and inventory and Goods Not For Resale spend management, amongst others
Review our Africa portfolio strategy
Reimagine Game’s future stores through format renewals.

Future outlook

Our aim is to return Game to profitability by restoring sales growth, recovering margins and operating as a low-cost discounter. This requires that we go back to basics with a focused range, reliable stock availability and disciplined margin management. Concurrently, we are reimagining Game’s future stores through revised future store formats.

2019 strategy

Restore sales growth by revitalising the customer value proposition (CVP), improving assortment relevance and increasing stock availability

Recover and expand margins by lifting promotional and every day margins, reducing cost of goods sold and introducing high margin categories and services

Drive efficiencies to reduce operating costs and improve supply chain effectiveness

Rebuild a strong and healthy organisation driven by leveraging the benefits of Massmart’s evolved customer-centric operating model and upgrade to the latest SAP ERP system

Reimagine retail with data-driven commercial decision-making and customer-centric digital innovation