Pick n Pay

Soweto, the southwestern townships of Johannesburg, came to attention of the world in 1976 when mass protests erupted over the government’s policy to enforce education in Afrikaans rather than in English. The uprising left 566 people dead and brought international sanctions. Today, Soweto is again experiencing an uprising but this one is one of regeneration and promises to give residents the ability to live, work, shop and have fun in their own town, rather than make the long tedious trip to the centre of Johannesburg. Part of this redevelopment is the urban township’s first shopping mall which dovetails nicely with the strategy of South African grocery chain Pick n Pay. It has been serving customers for 40 years and has spent the last couple of years reengineering itself, based on copious research, customer-feedback, consumer trends and generally a changing South Africa. Traditionally targeted at middle to upper class areas, it is now starting to open up stores in ‘black’ areas and as anchor tenant at the new shopping mall it gives Pick n Pay access to nearly one million residents. “For many years, our business model was focused on what would traditionally be classified as middle to upper living standard areas or ‘white’ suburbs. This was largely due to location, accessibility, political climate [and related unrest], violence, and for some time, little demand for our stores as other retailers had captured this market,” says Pick n Pay’s marketing director Jonathan Ackerman. “Over the last ten years demand for our brand and range, a growing middle market movement into city and suburban areas, a growing economy and a significantly different shopping and lifestyle environment has ensured that we are now able to open stores in traditionally ‘black’ areas.” “In addition, our research showed that there was a perception that Pick n Pay was an expensive, aspirational place to shop – something that we are addressing in our present day marketing, as it is not a true perception.”

Sporting stimulus For those who envisage Soweto as the shanty town of the 1970s need to think again. It still has areas of sprawling, poverty-stricken wasteland but this contrasts sharply with the township’s cosmopolitan, vibrant centre which is undergoing reform and revitalisation. The Pick n Pay so-called Hyper, with gross floor space of 12,343 m², is situated in the large shopping mall on one of the busiest roads in and out of the city. It is just one of a number of world class clothes, sports and toys stores which are complemented by recreational facilities, such as cinemas, and a developing infrastructure. The 2010 Football World Cup has been a great stimulus!

Enthusiastic opening Such close access to shops is entirely new to the residents of Soweto who previously had to make the sometimes dangerous, always slow and frustrating journey by public transport to the centre of Jo’burg. Thus the opening of the Hyper created a huge amount of excitement, frenzy and fervour which culminated in the store literally being stampeded by hundreds of eager shoppers on opening day. Once inside they found a range of products similar to that found in any of the Pick n Pay Hypers nationally, of which there are now six. Shelves are piled high not only with foods, clearly marked in categories such as fish, bakery, butchery, and fresh produce but also products for health and beauty, clothing, appliances and outdoor. About 200,000 creative floor plans were handed out to the customers on opening day so they could find their way around the wide aisles. The company is in the process of a R110 million (€8.8 million) rebranding strategy, not only of its 400 stores but also of its private label lines. “We stock a combination of brand and private label – currently in the process of being relaunched - convenience, ready meals, general merchandise, clothing and other household and grocery lines. In addition, we have introduced lines that are perhaps not seen everywhere,” says Ackerman. “This is in line with our concept of having, for example, a more prominent range of halal products in traditionally Muslim areas and a larger range of kosher products in stores in predominantly Jewish areas. The same concept applies in this store.” In addition, the hypermarket has a pharmacy and a liquor store, and a coffee shop is planned for the near future. Products are primarily local. Ninety-five per cent of Pick n Pay’s suppliers deliver directly to the hypermarket, with five per cent, mostly fresh produce and select fresh ranges, coming from the Longmeadow warehouse. This distribution centre opened in 2007 and was phase one of a project to centralise Pick n Pay’s distribution. Three additional centres are in the pipeline.

Reduced energy consumption The company’s cornerstones for its business strategy have long been responsibility to sustainable and social issues. While this may not be high priority for low-income customers, Pick n Pay believes it is its responsibility to take this into account on their behalf. “This Hyper represents our company’s triple approach to bottom line which takes into account issues around economic (business), social and environmental sustainability,” says Ackerman. With the country suffering from a chronic power shortage, the store includes a number of initiatives to address the company’s commitment to reducing its energy consumption by 20 per cent. This includes being South Africa’s first major retailer to participate in the Carbon Disclosure Project, an international initiative to promote more efficient use of the planet’s resources. The cold chain, tills, lights and security are protected by the use of generators. Measures to reduce energy consumption in general include the use of upright merchandise freezers with full glass doors as they use 60 per cent less electricity than open horizontal refrigeration cabinets. Fluorescent lighting is fitted with electronic ballasts as these are 22 per cent more efficient than conventional lighting, and a heat reclaim system harnesses the heat dispelled from the refrigeration systems to provide hot water and comfort heating through the airconditioning system. Many more commonsense measures to reduce the use of energy such as switching off lights or mobile phone chargers when not in use are advocated throughout the company. “And we want to help our customers do their bit, too,” said CEO Nick Badminton. “This is why we have decided to sell energy-saving light bulbs at cost.” As well as the ongoing efforts inside the store to reduce its carbon footprint, Pick n Pay is offsetting the carbon emissions generated at the Hypermarket by sponsoring 3,250 trees for the Trees for Homes element of the Greening of Soweto Towards 2010 project, operated by greening organisation Food & Trees for Africa (FTFA). Johannesburg City Parks is also planting trees along roads and in parks as another component of the greening project. These 3,250 trees, which will absorb carbon dioxide during photosynthesis, are reckoned to equate to half the number of trees required to offset an anticipated year’s worth of carbon emissions at the Soweto store. 

Learning curve As the shopping mall and the hyper are still new, there is still a mixed representation of actual shopper and browser so it is too early to pick up any trends. “This will require a full year’s worth of trading and shopping patterns during which we will learn much about customer behaviour,” says Jonathan Ackerman. Nevertheless, the entry success of Soweto Hyper, means the company is in line with its strategy to further roll out more stores of this calibre in different formats in terms of Hypers, Supers and Family stores, he says. “And to defend and grow this sector we need to offer best products, best stores, best values, best brands and have the best communication.

Store characteristics
Total surface area: 12,343 square meters
Sales area: 7,283 square meters
Opening hours: Monday – Friday 9 a.m. – 9 p.m.; Saturdays 8 a.m. – 9 p.m.; Sundays 8 a.m. – 8 p.m.;
public holidays 9 a.m. – 8 p.m.
SKUs/no of items in assortment: 59,395 Active SKUs total store
No of employees in store: 398 (total) 54 Salaries/344 Wages
No of checkouts: 39
Average basket spend: Seven items per transaction at R88 (€7,15) (as at November 2007)