Mass retailer and wholesaler Massmart's performance has stabilised over the past 18 months and the company has shifted focus to the Southern African Development Community region and e-commerce, CEO Mitch Slape noted during a presentation of the company's results on March 8.
Slape said the company had a solid foundation to pursue top-line growth through its focused retail and wholesale strategy during the next few years, and that all of its strategic focus areas were underpinned by an acceleration in e-commerce across business-to-business and business-to-consumer channels.
"The aim is to drive a better customer experience that we can deliver because of our store base, helps us to drive pick-up efficiency and we can leverage our warehouses. We will be focused on expanding our online range and in key strategic partnerships that help build the online business going forward."
Recently appointed Massmart group e-commerce VP Sylvester John said the group was working on a mobile-first strategy. John had been with Massmart parent company, retail multinational Walmart's omnichannel team for five years and was also the Walmart North America Last Mile Delivery VP.
Massmart grew online sales by 58.6% to R1.1-billion in gross merchandise value during the 2020 financial year, constituting 1.8% of sales, and achieved a 72.9% growth in unique customers and a 69.5% increase in click and collect order fulfilment. Retail chain online growth for Builders was 111%, Game 77% and Makro 40%.
"I can see the momentum from the turnaround and how this positions us strongly for e-commerce growth. Our current combined e-commerce starting point is quite solid, crossing the R1-billion mark for gross merchandise value, and we have kicked off work to strengthen our foundational infrastructure," he said.
"Customer growth is a critical indicator of future potential, and ours is strong. We are realising the value of our omnichannel advantage with omni-customers spending 2.65% more than online only customers."
The company was using Walmart resources to audit its websites and make improvements to customer experience, remove friction and drive conversions. Massmart was committed to accelerating e-commerce growth and will share more additional information about its strategic plans in time, added John.
The group also announced a partnership with telecommunications company Vodacom to accelerate the VodaPay Super App. The app, in which Massmart trading brands will be a retail cornerstone, will provide zero-rated data access to Vodacom's subscriber base of 44-million customers and 24-million smart devices.
Meanwhile, Massmart was leveraging the resources and expertise of its parent company and had outsourced its enterprise resource planning applications development and support to Walmart's India Development Centre, said Slape.
It had also centralised its real estate, human resources, information technology, payroll and goods-not-for-resale functions into its centres of excellence, and outsourced its financial transaction processing to US professional services firm Genpact.
The company was pursuing the second step of its strategy, which involves divesting from noncore businesses and reviewing its store geography to sharpen its focus on businesses.
Massmart is confident that it can maintain its price gap advantages in the market and continue to drive sales while ensuring disciplined expense management that it can leverage sustainably into the future, said Slape.
The company had been stabilised over the past 18 months, with its headline loss having decreased to R900-million from R1.2-billion in 2019, he said.
Massmart increased its trading profit before interest and taxes by 5.5% to R1.17-billion, improved gross margins by 147 basis points and lowered total expenses by 0.3%. It also improved free cash flow by 32.4%.
“Our turnaround plan is working and we have achieved solid forward momentum. The strongest evidence of this can be seen by comparing performance in the second half of 2020 to the second half of 2019. Specifically, trading profit before interest and tax up 82%, margin up 4%, net expenses down 2% and free cash flow up 6%,” he said.
The group delivered more than 30 turnaround projects that have delivered R600-million in total expense savings, contributed to margin uplift and significantly improved overall effectiveness, he said.
The group also improved liquidity and saw an increase in net debt by R152.6-million to R2.57-billion, despite losing an estimated R3.4-billion in potential sales owing to the impact of restrictions on trade and movement during the Covid-19 lockdown periods, said Massmart CFO Mohammed Abdool-Samad.
“We have improved headline earnings a share, stabilised the balance sheet and reduced the interest bill. The foundations are in place to accelerate strategic focus areas, including driving top-line,” he said.
"This is indicative of a shift in our strategic focus to concentrate on areas where we are market leaders and have strengths in comparison to our competitors. We are focused on making sure that we are dedicating our management, time, energy and capital of the business to the areas that count the most," said Slape.
The final step was to invest to grow the business. Massmart was a growth business that must focus on high-return assets and categories, including new stores and remodelling its existing stores to provide a better customer experience, as well as growing in the important e-commerce space, he concluded.