Director: ReVive Advisory & Turnaround
Since the COVID-19 Pandemic, the dynamics that have driven the retail industry have continued to evolve. Those who did not adapt to the changing environment swiftly suffered.
One of the most significant casualties of the Pandemic was retail giant Pick n Pay, which lost considerable ground to Checkers, Pick n Pay started to lag behind the market as reflected in its earnings and revenue that failed to maintain market share. Load shedding and consolidating its logistics into a new distribution centre added to its cost base.
Sean Summers was appointed as the Group CEO in October 2023 and is determined to reestablish Pick n Pay as the country’s leading grocery retailer.
Pick n Pay recently launched an ambitious turnaround strategy, which Summers hopes will help the retailer reclaim its former title. The strategy implies that the return to core business and that a focus on Brand delivery and experience will align the core operations of PnP. The cash required to deal with the legacy issues and fix the balance sheet will be done by way of a capital raising exercise which includes spinning off Boxer.
The core future challenges
Speaking to the Daily Investor, Summers said, “I think if we apply our minds correctly, we can come back and carve back its place in the marketplace. It’s about putting that passion back into the business, and that passion has to be shared by everybody. Every associate in the business should feel that same love and sense of belonging.”
However, while Summers believes it is his job to revitalise the company, he said it is important to be realistic about a turnaround.
He explained to the Daily Investor that Pick n Pay’s core business has lost its edge. This is because the company’s products, presentation and variety have not kept up with the rest of the market. “For a period of 10, 12 years, the company took their eye off the ball,” he said.
Summers told the Daily Investor that the company has had many interventions to address this over the past decade, with many outside advisors and consultants, ultimately placing the company where it is today.
“I think the outcomes that we have here have just been the result of too many opinions, too many committees. So, our immediate focus moving forward is looking at what support there is for the people in the stores and how we can get more of this support and improve communication in the company. “Summers believes the best strategy for Pick n Pay going forward is ‘store by store, door by door’. This involves Pick n Pay focusing on its command structure and supporting every store in Pick n Pay’s stable.
Image By: MyBroadband
Reinvigorated management teams focused on turnaround
In an effort to address the immediate concerns that he had with the company, Summers announced a significant change of leadership at the retailer.
“These changes will allow us to focus with clarity on the job at hand. This includes creating a new, dedicated head of Retail, regionalising our Retail division to allow a much sharper focus on our customers, and the creation of a dedicated Commercial section to focus on our products across the retail spectrum,” said Summers who is confident about the turnaround.
He added that the new Pick n Pay Retail division will focus on retail at Pick n Pay, which needs the most attention. PnP Retail is effectively a standalone business, with Franchises now falling under it.
“This will mean that the actual trading in the franchise will fall under Retail, which is where it should be. The customer will now see one Pick n Pay with the same execution and the same operational standards as corporate-owned stores. It will now be a seamless experience for customers,” Summers told Business Tech.
Shift in customer behaviour
But is this the extent of Pick n Pay’s problems? While core business has been a problem at the retailer? Their inability to respond to and capitalise on a shift in consumer behaviour is what has hurt them the most.
A Turnaround Talk article details the rise of Checkers Sixty60 and points out that the problem for both Pick n Pay and Woolworths is that Checkers is entrenching a fundamental and permanent shift in behaviour among customers. Checkers is generally considered as the price leader in the general retail market. In addition, once you order groceries on Sixty60, you’re likely to do so again (and again and again). If Checkers succeeds in building this habit, it will likely see stronger customer loyalty and, ultimately, capture a greater portion of their grocery spend.
Image By: Checkers
Shoprite says sales growth at Sixty60 was 81.5% in the year; it nearly doubled its turnover from the 2022 financial year. This mis good turnaround
The article adds that, in 2022, growth was 150%. Of course, rates will moderate as the base grows, but nearly 82% should not be sneezed at. This rapid growth helped propel Checkers’ overall turnover growth to 18%. It is clear that the advantage Checkers has built with Sixty60 will continue to deliver market share gains.
The focus of Pick n Pays turnaround is evident. Summers will enhance the company’s focus on its core business. This will be achieved by offering dedicated support on a store-by-store basis as each store faces different challenges, led by a leadership team heavily focused on improving the retail experience.
It is interesting that Summers has also indicated a significant investment in enhancing its online shopping and delivery platform. Part of that relaunch began earlier this month. This would suggest that Pick n Pay feels that Checkers is growing a dominant position in this area. It also applies that there is still a significant opportunity for growth in conventional shopping; not all South Africans have access to online shopping platforms.
Where does your turnaround focus need to be?
Do you need to pay more attention to the core elements of your business to address your challenges? What role will online shopping with direct-to-home delivery play in your business?
How will this grow in the next five years? Whatever form it takes, you cannot ignore it.
