15 Mar 22 How the Shoprite Group is reinventing itself for the future
The Group’s latest financial results show that they have grown sales by 10% and profits by more than 25% – great insights here from the sublime innovation futurist, Jonathan Cherry, for anyone involved in FMCG foodbev retailing…
Ten years ago you would not have called The Shoprite Group ‘innovative’. Hell no!
Africa’s biggest supermarket business? – “Yes”.
South Africa’s #1 non-state employer (with now nearly 130 000 staff members)? – “Yes”.
Future-fit and leading the market in strategic transformation? – “No”.
Back in 2017, Pieter Engelbrecht took over from Whitey Basson as CEO of the Shoprite Group, who back then chose Joseph Brönn to lead as the Chief Business Officer; Brönn’s strategic mandate was to personally drive new projects in IT, data management and sustainability for the group.
Under their leadership, the Group repositioned the business’ mission to to be ‘Africa’s most affordable, accessible and innovative retailer‘, and set about making that idea a reality.
What’s the strategy?
The specific strategy that Shoprite adopted is a very clever one for a big retailer. In a nutshell, it has purposefully elected to innovate the business by pursuing what is best described as a ‘duel transformation’.
Duel transformations happen when the core business is incrementally improved over time (improving efficiencies and profitability); while at the same time riskier, new innovations and models are created and brought to market by dedicated, but separate business units, and allowed the space to find their own footing in the marketplace.
In Shoprite’s case, a lot of its cutting-edge innovations that it brings to market are being produced by a separate strategic business unit called ShopriteX – which is run under the very capable guidance of Neil Schreuder, Chief Strategy Officer of the Shoprite Group.
It’s clever because in big businesses a lot of innovation is killed early because it is seen as a threat to the ongoing success of the core business. Pull it purposefully out of the core business and you give fledgling ideas a chance to develop without the corporate immune system hunting them down and snuffing them out.
At the root of the strategy, Shoprite has nine key strategic drivers for the business – three focused on the long-term future [7,8 & 9], three focused on improving the core [4,5 & 6], and three dedicated to medium-term innovations [1,2 & 3].
Essentially with these nine strategic drivers the idea is to:
(1) get much closer to the customer through the use of analytics and data to better anticipate needs in the marketplace and build long-term relationships,
(2) take marketshare away from their competitors,
(3) leverage their scale and platform to maximise margin through innovation and new business models.
They call it building a ‘smarter Shoprite’ – what it comes down to is pursuing a connected strategy that is focused on acquiring new customers from their competitors, monetising them effectively and keeping those relationships going for longer.
While every other supermarket group is staring at historical and blunt metrics like gross profit, revenue and sell-through rates, Shoprite is tracking CAC (Customer Acquisition Ratio), RFM (Recency, Frequency, Monetary Value) and CLV (Customer Lifetime Value).
What are the key projects?
Sixty60 – We don’t know too many people who haven’t become massive fans of the Checkers Sixty60 service.
Not only is the technology and UX of the app world-class, but Shoprite have got the overall experience of online grocery delivery right. In comparison to comparable digital offerings by Pick n Pay and Woolworths, the Checkers app is streets ahead.
What that means is that Checkers are suddenly now taking customers away from their competitors…and keeping them. This must be a worrying headache for the likes of Woolies who can ill-afford to lose affluent grocery buying customers (not a lot is going right for Woolies outside of their food category) to another supermarket group.
It’s not that Shoprite’s competitors don’t have access to the same tools to connect with customers in this way – it’s that Shoprite appear to be the only ones that really ‘get it’.
They sweat the small stuff and actually seem to have some notable competence in the digital space. They have clearly hired some good people and have chosen to get out of their way so that they can get on with things.
The group are setting the benchmark in the digital space and everyone else just appears to be proving their own lack of agility in the space.
An ecosystem of partnerships
Apart from a dramatic increase in the prevalence of their own brand labels, which unlocks higher margins for the group, Shoprite have also signed some very clever partnership deals with luxury consumer brands like Starbucks, Kauai and Krispy Kreme; brands that attract the market that they are trying to steal from their competitors.
Even though these brands are just partners, in combination with their supermarket platforms, they are creating a cost-effective brand differentiator by simply building a relationship with other category leaders.
Without making a huge song and dance about it the group have strategically redefined what business they are in.
They no longer appear to classify themselves as a supermarket, but rather a community platform and ecosystem on which they can create compelling retail experiences and offerings that draw a desirable buying audience.
Instead of trying to own every part of the ecosystem, they’re creating the conditions under which the right kind of people will be attracted to what they have to offer.
This open, multiplier effect is in sharp contrast to how most business is conducted in South Africa – so clearly somebody has done a significant amount of lateral thinking over there, challenging their own assumptions as to how best to build a future-focused supermarket business….
Cherryflava.com: Read the full article here