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Pick n Pay’s Essay

What is your strategy to reverse Pick n Pay’s loss of market share? Pick n Pay lost market share in part because it opened materially less space than some of its major competitors. A significant proportion of its capex was invested in supply chain technology infrastructure in recent years, which by its nature doesn’t drive sales compared to stores. Our capital focus is now on new stores and refurbishment, which will drive sales and, in time, profitability. Over the past year we have refreshed, without substantively altering our strategy. Our overarching ambition is for the Group to become the “Retailer of choice for all South Africans”. This builds on Pick n Pay and Boxer’s brand strength and strong store portfolio. Importantly this refreshed strategy does not represent a major departure from the strategy that has been followed for the past five years.

We have seven themes geared to ensure that the business can grow sustainably and profitably. There is a balance of growth-driven priorities, focusing on space, customer, franchise and product, and those largely focused on improving efficiency such as replenishment and store operations. The “One Pick n Pay” initiative ties these together to ensure that the business works well as a unified whole.

Strategic priority: Grow selling space ahead of the market
There is substantial competition for retail space both within South Africa and in other African markets. Ensuring that Pick n Pay increases its overall share of trading space over the long term is an important strategic priority. Over the past three years our space growth has lagged that of our competition particularly into the faster growing lower income areas and small stores. This not only directly reduces our market share but also puts pressure on like-for-like sales growth. We will continue to develop store formats and channels that meet customers’ changing needs both in Pick n Pay and Boxer, in South Africa and beyond. Additionally we continue to build a pipeline of new sites, whether greenfield or through acquisition that will ensure we meet our aspirations.

Strategic priority: Build deep customer relationships
The launch of our customer rewards programme Smartshopper gives us a significant opportunity to get to know our customers’ shopping habits and preferences substantially better than we do today. Since its launch in March 2011 the programme has been a great success. After just one year we now have over five million active cardholders, exceeding our initial target by two million. This enables us not only to know and understand each customer a great deal better, but to communicate with our customers in a different and more engaging manner.

We have direct access to the vast majority of Smartshopper customers by either sms or email, which means that we can send targeted marketing communications directly to them. We can also ask for feedback directly from them. All of this translates into a very valuable two-way dialogue with our customers. As a result we are designing and executing marketing campaigns which are more relevant to our customers. We are extracting insights from their shopping habits data in order to tailor our product ranges and more accurately serve them. All of this will assist us in growing our sales volumes significantly.

Strategic priority: Revolutionise Pick n Pay’s product offer During the past 12 months we have invested considerable time and resources in building a single specialised category buying division. Prior to the establishment of this division, Pick n Pay’s sourcing activities were distributed across the operating regions. This led to fragmentation of the Group’s buying scale, with each buyer having a wide range of products to source. Our new specialised category buying division is made up of category teams each of which is responsible for the end-to-end profitability of a specific product category. They are tasked with developing a product range that meets all customer needs, sourcing those products at the lowest possible cost, constructing shelf layouts that help customers find what they are looking for easily, building a promotional plan that generates customer excitement, increased volumes and higher margins, and ensuring that Pick n Pay’s prices remain highly competitive. Included in their responsibilities is the task of improving our Pick n Pay branded offer.

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