Wednesday, 07 December 2016 08:55

Grocery store with no queues and checkouts

It sound too good to be true: a bricks-and-mortar grocery store without checkout tills or queues of customers. Yet that’s what online retailer Amazon has done in its home city of Seattle in the US. Called Amazon Go, it uses sensors to detect what shoppers have taken from the shelves and then sends a bill to their Amazon account. The store is currently only open to employees as it is in the trial phase, but the company intends to open several similar stores for public use next year and, if successful, could open as many as 2 000 grocery outlets across the US. Items on offer to customers include bread, milk, and ready-to-eat meals that are made on-site. While Amazon is primarily an e-commerce business, it does operate a bricks-and-mortar book shop in Seattle and often has pop-up stores at malls to sell items such as the Kindle e-reader. It also has an online grocery offering called AmazonFresh, and the intention is that the physical stores will complement this service. A report by Reuters news agency quotes retail research expert Neil Saunders as saying: “The checkout lines are always the most inefficient parts of the store experience. Not only would you save a lot on labour costs, you actually make the process much quicker for consumers and much more satisfying.” He added that the grab-and-go approach would take getting used to, as some people might feel like they were ‘stealing’ items from the store.
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Wednesday, 23 November 2016 10:12

South Africa gears up for Black Friday sales

Yes, it’s an American tradition, but Black Friday sales have recently spread across the world, with South Africa being no exception. Last year local retailers participated in large numbers and 2016 seems to be heading for an even greater level of participation as some businesses run week-long sales that began on Monday. Black Friday happens this Friday (25th) and both online and bricks-and-mortar outlets are competing strongly to get shopper attention. Electronics chain Hi-Fi Corporation, for example, says it will be offering ‘up to 80% off’ on selected goods. Similarly, online retailer Takealot is offering discounts of 60-80%. Speaking to the website ‘Times Live’, Takealot’s Chief Marketing Officer, Julie-Ann Walsh, said that last year's sale showed growth of more than 200% over 2014. She assured customers that the website would be able to deal with the surge in customer demand on Friday. Among those who are offering discount deals throughout the week are Makro, Game and Bidorbuy. The latter says it is running a Black Friday sale from Monday (21st) to Sunday (27th) and is following this up with a Cyber Monday sale that will run for the following week. Some retailers are arguably being more inventive than others. The Foschini Group (TFG), for example, has a promotion in which customers can upload a selfie of their most ‘amped up face’ to a mobi-site, where their expression will be scored. If a customer scores higher than 60%, they receive vouchers valued at up to R300 which can be redeemed during the Black Friday sale. Black Friday retailing have become more frenzied than ever in recent years and spread to countries such as Canada, Britain and Nigeria. Competition for shoppers’ money has become tougher too, with some industry observers calling it the “most important event of the year for [American] marketers”.
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South Africa is undergoing a retail evolution where mass-market ‘one size fits all’ strategies are no longer as desirable and bigger retail stores are not perceived as being better by consumers. These insights stem from a recent Nielsen Global Retail Growth Strategy Report, which highlights the need for innovative tactics in the retail landscape. Says Nielsen’s Craig Henry: “As lifestyle and consumption habits change, we’re seeing a structural shift with small formats showing big growth. This [is because] the small store has reinvented itself, [but] the hypermarket has remained more or less the same over the last three decades. As a result, small stores are able to meet the current consumer need for a higher level of specialisation and service delivery since an artisanal feel, personal service and individualism are synonymous with this store format.” South African consumers reveal that, when selecting a store, their choices are highly influenced by convenience of location (71%), ease and speed of access (61%), high-quality fresh produce (71%) and product availability (68%). Less important are price-related attributes such as lowest prices overall (56%) and good sales and promotions (56%). The study also emphasises that bigger stores are not necessarily better. Whereas hypermarket-style outlets once benefitted from scale, more shelf space to stock more products, and the ability to provide convenient one-stop shopping, these aspects are no longer as important as they were 10-15 years ago. “The modern retail store model has evolved,” says the study. “Supply chain process improvements have made it possible to achieve similar, or even higher, levels of profitability with smaller stores – paving the way for smaller retail outlets to expand and take share from larger competitors in many markets. The result is that today’s retail environment is more fragmented than ever, with fierce competition for shoppers leading to an increasing dependency on promotions among large retailers.”
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Like the independent corner store that offered personalised service, informal credit and home delivery, the local pharmacy is on the way out in South Africa and being replaced by hard-nosed retail businesses. Indeed, the entire sector is undergoing a sea change, reports the ‘IMM Journal of Strategic Marketing’ in its October 2016-January 2017 issue. Deregulation in 2003 has progressively seen the growth of corporate-owned pharmacies and the once-traditional ‘corner chemist’ is now struggling to survive. Clicks was the first to see the new opportunity and by the end of February this year had 384 in-store pharmacies. It represented an increase of 23 pharmacies over 12 months, and 60 new outlets over 36 months. “We have a leading 19% share of the retail pharmacy market by sales,” says Vikesh Ramsunder, Chief Operating Officer of the Clicks stores division. It is a market share edging up steadily, having grown from 18,5% in 2015 and 16,5% in 2013. Overall, says Ramsunder, corporate pharmacies tied to the major retail and supermarket chains now account for about 46% of total sector sales. Other corporate players include Shoprite with145 in-store Medi-Rite pharmacies, Dis-Chem with 100 big-format drug store-type outlets, and Pick n Pay with 26 in-store and three stand-alone pharmacies. Spar Group has also joined in the fray. But, in keeping with the Spar model, pharmacies remain stand-alone businesses in the hands of their owners. The attraction of the pharmacy ‘superstore’ model is not that dispensing prescriptions makes money, it’s that pharmacies attract customers who will then shop for more general merchandise elsewhere in the store. Clicks, for example, generates about 25% of sales in the pharmacy and 75% in the so-called ‘front shop’.
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Are attractive salespeople more likely to boost sales in the retail environment? While the common belief is that people react more favourably to physically appealing individuals, new research indicates this may not be the case when it comes to shopping. Instead, an attractive salesperson can discourage people from buying a product, and consumers may react more negatively to a good-looking service provider than to an average-looking one. This is because attractive salespeople can cause consumers to have concerns about their ability to make a good impression. Professors Lisa Wan and Robert Wyer of the Chinese University of Hong Kong undertook several experiments that monitored highly attractive/less attractive shop assistants of both sexes and how shoppers then interacted with them. In the study involving female shop assistants, male shoppers interacted more with the average-looking assistant and bought higher-value goods from her. In the experiment involving male shop assistants, female shoppers had to seek information about a thermal weight belt that can be used to either promote weight loss in overweight people, or to promote general relaxation and good health. “As expected, the results show that participants in the embarrassing consumption condition were less likely to make a purchase when the salesperson was presented in an attractive way than when he was not – and had a greater concern with the impression they created when he was attractive than when he was ungroomed,” the researchers say. “The study demonstrates that when a consumption situation is likely to be embarrassing, attractive opposite-sex providers can lead consumers to have self-presentation concerns. And when it occurs, it has a detrimental effect on purchase decisions.” There were also problems when shoppers and shop assistants were of the same sex. “Self-presentation concerns appear to be driven by social comparison processes, leading consumers to dislike the provider and to avoid interacting,” the study says.
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Supermarket chain Pick n Pay has confirmed that it is testing self-service checkout technology at one of its stores in Cape Town. However, the company has denied concerns that a successful trial could lead to job losses. Last week, social media users posted photos of the self-service unit at a store in suburban Ottery and, while some thought it was a good idea, others were worried that cashiers’ jobs may be at risk. Self-Service checkouts are already in use in supermarkets in many parts of the world, but not in South Africa as yet. In media interviews, Pick n Pay executive David North said the chain was always looking at ways to make customers’ shopping trips easier and more convenient. “In this case we are testing self-service checkouts in one store to see if it can save customers time at the till – particularly those in a hurry and shopping for just a few items,” he is quoted as saying by ‘Business Day’ newspaper. “We see it as an additional service and we are testing it in one store. Staff are required to monitor self-service checkouts and there is no impact on employment.” But self-service checkouts are not always plain sailing. A UK study found that customers were regularly pilfering small quantities of goods, most notably fruit and vegetables. The researchers said self-service failed to take into account human frailties such as frustration in operating the technology and a willingness to steal small amounts of goods on a regular basis once shoppers realised they could get away with it. “I’m sure most of those who now admit to stealing via self-service checkouts didn’t initially set out to do so, said a spokesperson. “They may have forgotten to scan something and quickly realised how easy it would be to take items without scanning them.”
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Urbanisation has become a key trend in Africa, with people increasingly moving to the cities and thereby making it easier for companies to target certain consumer groups. But, cautions the African Consumer and Retail Sector Report 2016 published by professional services firm KPMG, although the demographic make-up of the continent is extremely favourable, success is not guaranteed. Firstly, there are vast differences across countries. North Africa is, for example, far more developed than sub-Saharan Africa, while the retail market opportunities in countries will differ due to variances in consumer tastes, culture, income and demographics. Secondly, says KPMG, it is important to distinguish between opportunities at the national and city level. Data at the national level can often be misleading, as a city’s GDP per capita can vastly exceed the national average due to the greater concentration of wealth in some urban areas. “Finally, simply because a country has favourable demographics does not mean that this will necessarily translate into higher levels of economic growth and consumer spending,” the report notes. An increase in the proportion of the working-age population relative to the total population is potentially beneficial for consumer spending as it frees up resources. But this will not happen if there is a high unemployment rate in the working-age population.” Turning to the outlook for African retail, KPMG says the formalisation of the sector will be a key trend underlying its expansion in the coming decade. At present, most consumers – especially south of the Sahara – remain extremely poor and spend most of their money on food and other necessities. This makes for a promising outlook for FMCG companies, given the large market to cater for. Crucially, an increasing number of consumers are on the cusp of the US$1 000 annual income level, which will allow for the expansion of consumption.”
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The battle for the wallets of South Africa’s supermarket shoppers – via the hearts and minds of their children – continues unabated. Last week retail giant Pick n Pay launched its latest collectables shopper promotion called Super Animals. This follows the Spar group’s long-running Angry Birds promotion – based on the popular computer game and movie – and the recent launch by Checkers of its mini collectables campaign in which children are encouraged to collect 29 miniature FMCG products such as All Gold tomato sauce and Omo washing powder. Pick n Pay will be hoping that Super Animals achieves the same level of success at the Stikeez campaign that ran in 2015 and turned into a national craze. “Our customers loved Stikeez and we have been looking for another fun campaign to run that would appeal to our shoppers. We think we have found one in Super Animals,” said Pick n Pay Customer and Trade Executive, John Bradshaw, in a media statement to news website ‘Fin 24’. “We know from Stikeez that most of our rewards [are] going to people [who] already shop with Pick n Pay. But we do hope other people will come to our stores and see the improvements we have been making.” For every R150 spent at any outlet, customers get a free pack of four collectible Super Animal cards that can be scanned using Pick n Pay’s free app to ‘bring the animal on the card to life’. There are 108 cards to collect in nine categories. Each card has a barcode that can be read by a sound card reader sold for R50. “Such campaigns, according to experts, are a big investment, intensively strategised and often brought in from overseas markets where they have been thoroughly tested,” says‘Tatler Reporter’, a local retail industry newsletter.
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Retailer Checkers is hoping that its new range of mini collectables will generate big interest from shoppers – and more specifically their children – as South African consumers seek to rein in their spending and analysts predict weak full-year results for all the major retail chains. Checkers has ‘shrunk’ 29 of the country’s most recognisable FMCG brands – among them All Gold tomato sauce, Omo washing powder and Sunlight dishwashing liquid – and is giving them away free each time a customer spends a specified amount in-store. The retailer is also selling additional Little Shop merchandise such as mini trolleys, baskets and store fronts, as well as a carrying case for the full collectables range. In a media statement, Checkers says it is “encouraging learners to channel their inner business mogul by thinking of creative ways to complete their collections”. Tips for children on how to develop their negotiation skills in order to swap and trade minis with their friends are available on a dedicated website. ‘Tatler Reporter’, a local retail industry newsletter, notes in an article about the promotion: “Last year … Pick n Pay set the world of shopping with kids ablaze with the Stikeez craze. But, as ever not willing to be outdone, Checkers have launched their own tot-tempting treasures. We’ve been accused of a certain jaded cynicism when it comes to marketing ploys, but this one is an absolute scorcher.”
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Sandton and Soweto, Cape Town and Khayelitsha. These sets of urban areas are examples of South Africa’s two distinct retail faces: the slick, established economy and the underrated and still frequently misunderstood informal sector. But how much opportunity is there to be had by formal business tapping into this often neglected sector? According to June-July 2016 issue of the ‘IMM Journal of Strategic Marketing’, the idea of big business partnering with the informal sector is gaining increasing traction as marketers become more aware that this is a good way to connect with large numbers of consumers. Dr Tashmia Ismail, who co-authored the book ‘New Markets, New Mindsets’, is one of those who believes the outlook has shifted significantly. “A greater number of companies have awakened to the opportunity, as well as the complexity and hard work that it takes in this market,” she tells the magazine. South Africa’s banks and retailers are experimenting with non-traditional and more inclusive models aimed at the informal sector, Ismail says, as are major corporates such as GlaxoSmithKline, Unilever, Nestlé and Parmalat. Retailer Pick n Pay is another. It recently championed the first spaza-to-store conversion in Diepkloof, Soweto by transforming the Monageng Market, which had been run as a spaza outlet since 1972, into a fully-fledged Pick n Pay store. The pilot scheme will see owner Solly Legae and his family receiving guidance from Pick n Pay and the Gauteng Department of Economic Development. While the informal trading sector is a relatively hard-to-define market, research company Nielsen reported in a study entitled ‘South Africa’s Not So Traditional, Traditional Trade’ that sales through the country’s 134 000 ‘traditional trade’ outlets currently amount to R46-billion per annum, which equates to one of every R5 spent and one third of all packaged consumer goods sold. The study noted that while modern trade (formal retail) stores had seen a 9% increase in spend, traditional trade outlets showed a 10% increase. There had also been a healthier 7% increase in the number of goods sold, compared with the modern trade sector’s lower figure of 4%. Published five times a year by the Institute of Marketing Management, the ‘IMM Journal of Strategic Marketing’ is available in print and digital formats and is read by professional marketers and those working in related fields, business executives, IMM alumni and IMM Graduate School students. The print edition is on sale at selected CNA and Exclusive Books outlets, or available via subscription. Copies are also distributed via a targeted professional mailing list and through selected airline lounges and the IMM Graduate School’s student support centres.
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