OBG talks to Grant Pattison, Chief Executive Officer, Massmart Holdings

Interview: Grant Pattison

What factors are driving the expansion of online shopping in South Africa?

GRANT PATTISON: Online shopping is still in its infancy, and is estimated to account for less than 0.5% of retail sales. However, growth is expected to accelerate quickly as the country’s shoppers begin to realise the benefits of online shopping, and as the internet becomes more affordable and accessible for citizens of South Africa.

The trend up until now has been for consumers to research durable goods online, then make the purchase in store. But consumers are becoming more comfortable with the concept of purchasing online. The future of retail is a seamless customer experience that meets the demands of customers in all channels. For example, if a customer does not like a product that was purchased online, the product will be collected at no extra cost, or the customer can return it to any store location for a full refund or replacement.

What are the main supply chain challenges here, and to what extent do these stifle logistics gains?

PATTISON: The economic development of South Africa over the past decade has positioned the country to be the main logistics hub for sub-Saharan Africa. In many parts of the country, development has outpaced the expansion of road and rail infrastructure, making the lead time of goods difficult to control. There is still a big gap between South Africa and the capabilities of Europe or the US in terms of achieving efficient and regular lead times for the flow of goods. This can mean less reliability, which leads to higher stock levels and the need for more working capital. Different Customs clearance standards also pose a significant hindrance to perfecting lead times – particularly when many Customs clearance stations have different lead times.

How can the government encourage partnerships between small-scale food producers and retailers?

PATTISON: Retailers want consistent and reliable small-scale farmers who produce a quality crop that they will be comfortable and confident to sell to customers. The government already provides assistance to small farmers in areas of infrastructure such as fencing, irrigation, machinery and equipment. And the Department of Agriculture, Fisheries and Forestry is doing commendable work in encouraging retailers to purchase fresh produce directly from farmers. Pack houses are also crucial for small-scale farmers to properly sort, pack and store crops before they can be transported to stores or distribution centres.

Do you see the spread of supermarkets eroding the role of informal traders in communities?

PATTISON: Perhaps one way of looking at the status of informal and independent retail outlets is through a wholesale lens. The experience of many developed markets is that fast-moving consumer goods wholesaling has a tendency to stabilise at roughly 20% of total market share.

South Africa has a vibrant independent retail sector that includes large independent traders and also smaller (usually township-based) spaza shops, which are mostly supplied by wholesalers. The business model of these wholesalers should include providing our independent wholesale customers with coaching, technical assistance and supportive procurement terms in order to assist them with competing more effectively against national retail chains.

In your opinion, what factors are contributing to merchandise price inflation?

PATTISON: Food inflation is driven by increased input costs including fuel and fertiliser. Consumers are sensitive to price increases, particularly less well-off consumers who are reliant on social grants. A key retail response should be to ensure exceptional cost control pursuant to operating a very low cost distribution channel, as well as forging supplier partnerships that aim to accurately forecast and meet demand, thereby reducing inefficiencies and wastage in the supply chain.