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Game over for fresh food at Massmart’s biggest chain

It was South Africa’s leading discount retailer before its costly move into fresh food.
New broom … Massmart CEO Mitch Slape says the fresh and frozen food sections at Game stores "are already on their way out." Image: Moneyweb

The plan by JSE-listed retail giant Massmart to expand its popular discount retail chain Game into a fully-fledged food retailer has failed.

Launched just over five years ago as a strategy to take on the more established fresh food supermarket players such as Pick n Pay and Shoprite Group, Walmart-controlled Massmart has now officially abandoned that Game plan.

“The fresh and frozen food sections at our Game stores are already on their way out,” Mitch Slape, Massmart’s new CEO, told Moneyweb during a media roundtable in Johannesburg on Wednesday.

The Game store at Mall of Africa in Waterfall City, Johannesburg. Image: Suren Naidoo, Moneyweb

“In fact, the move has already taken place at our Mall of Africa store, making way for more general apparel and merchandise as part of our plan to reset Game,” he added.

It was uncharacteristic of the group to speak to the media just ahead of the official release of its 2019 financial results next week. However, it comes just weeks after the group published a sales update and trading statement pointing to a first-ever group loss of almost R1.4 billion for its 2019 financial year.

Read: Massmart could cut 1 440 jobs

The update included details of its new turnaround plan, which encompasses an almost total overhaul of the group, including the planned closure of 34 DionWired and Masscash stores. A new, more streamlined group operating model has been established as part of the turnaround plan, in which Massmart’s four previous divisions and various retail and wholesale operations are now part of just two business units – Massmart Retail and Massmart Wholesale.

Game, Builders Warehouse, DionWired and Cambridge Food are part of the retail unit, while Makro and some of the Masscash operations are part of Massmart Wholesale.

“A key priority is to return Game to profitability by restoring sales growth, recovering margins, and improved execution of our low-cost discounter proposition,” says Slape.

“We plan to do this by refocusing the assortment of growth and high-margin categories, which includes the removal of fresh and frozen food and reintroducing clothing and apparel.”

Read: Massmart in need of an ‘Edcon-like’ overhaul?

Slape joined Massmart less than six month ago and has had the complex task of putting a turnaround plan together in the midst of the busy end-of-year trading period. He is however a Walmart group heavyweight, having headed up the global retail giant’s operations in India and Japan, among other roles.

Read: Can Massmart avoid an annus horribilis after ‘brutal’ first half?

Game – which made its name as South Africa’s leading discount retailer before its unsuccessful and costly move into fresh food – has around 130 stores across South Africa and several other African countries.

‘Game Reset’ plan

Slape says as part of the ‘Game Reset’ plan Massmart will go “back to the basics” that made the chain so successful in the past. While he concedes that Game’s move into fresh food did not work out, he was unable to put a figure on the cost of the failed foray.

“Besides exiting fresh food and increasing apparel, we are looking at the basics such as improving stock availability,” he notes. “We also want to improve margin management by reducing reliance on promotions and reducing the cost of goods sold through leveraging Massmart’s sourcing scale.”

Overall, he says the Massmart group has identified potential cost savings of around R1.6 billion, which will be a key part in getting the group back to profitability.

Read: How Walmart lost $1.5bn on Massmart

Cost saving avenues include leveraging off Walmart’s technology servicing centre in India and renegotiating rentals with South African landlords as well as agreements with logistics operators. Massmart also plans to reduce the number of its distribution centres from 15 to seven, with the consolidation likely to result in much larger distribution centres that cater for its various retail and wholesale chains.

Wayne McCurrie, portfolio manager at FNB Wealth and Investments, says Massmart’s woes are linked to multiple issues, but SA’s poor economic growth is an overriding factor.

“The group’s internal problems, especially with the losses in the old Massdiscounters division, has not helped matters,” he notes.

“Besides DionWired, Game stores are facing serious challenges. The current Game format with fresh food does not work at all and never really did.”

He says the move into food has been a disaster for Massmart. “So they really do need to go back to the basics of selling general merchandise, white goods, electronics and sport apparel.

“This is what made Game so popular in the first place,” says McCurrie

“However, it is not going to be easy, because of the onslaught of online retail – not just from the likes of Takealot and other South African players, but international players like Amazon. It is a lot easier to buy general merchandise online, and Massmart as a whole will have to seriously up its online game.”

Massmart’s new gameplan is already in play …

Images: Suren Naidoo, Moneyweb

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COMMENTS   18

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Just too much competition and ‘everybody doing the same thing’.

Massmart’s greed was a costly experience which has come home to roost.

SA growth decimated by ANC corruption.
Too much canabilusation.
Not enough attention to service.
Look and feel still not there.

I am glad I am not in general retail! If the item is something people need to touch & feel, they touch & feel your merchandise but still buy from whatever online outfit has a deal – and whatever nowadays includes Amazon offshore or other physical stores nearby.

Buyers are generally (courtesy google and in-depth online product reviews) more informed about the product than sales staff in stores, so you can’t even differentiate on service and expertise.

You are an expensive collection point IF you were the cheapest on a google search…

….why buy anything from Game

All their electrics are items are yesteryear items suppliers are eager to move and they actually do not give a 12 month guarantee but first offer a replacement or repair

And all other items are available at better prices online

Which other electrics retailers or suppliers are offering a 12 month GUARANTEE? I find it very hard to believe that this is common practice

I always found their food expensive in comparison to other shops.

This turnaround plan brought by bafo and his crew will literally end in tears.

This is not 2005, this is 2020.

Yeah no. Nobody’s got money for food anyway.
Typical morning. Have a bath in the pool, shoot the morning hadedah (unless the neighbours cat happens to have jumped over the wall) in preperation for supper, empty the weir and pick some grass for salads, fill up water bottles in the pool before heading inside, making sure to grab a few toads and shongololos for the kids lunches. If they’re lucky, you might be able to grab hold of a snake before it disappears. Delicious.

Ahhh. The good life in this beautiful and friendly nation of ours. Why would anyone want more.

Aaah so. This is Africa. What more could one want? What more could one expect?

The decision to go into food defies belief.Why not stick to your knitting,and even then they are not very good as judged by Dions failure and Games wobbles.Why would you want to buy your food when you have Checkers and the like who probably have much more experienced food people at the helm.These CEOs and their egos….the likes of the Woolies and Famous Brands CEOs also spring to mind.Whatever happened to risk vs reward?

I don’t envy SA CEO’s having to put up with additional stresses unique to SA.

The instruction to go into food could have come from Walmart.

Yep, it was plain as daylight from the beginning that Game was NEVER top of mind for fresh and frozen food. Checkers, PnP and Woolworths had the share of mind re that, and it was crazy for Game to ever try and compete in that space. Wonder what expensive consultants told Game to take that route?

Tried to buy food things there once, based on the brochure in the local newspaper, none of the items I wanted were in stock (like 30 pack eggs), never bothered again.

I am not a fan of Game , find the aisles very cramped, but enjoy shopping at Makro.
Bought foodstuff there once- not bad but reminds me of an old style african trading store.

A classic business model of not understanding your brand. No doubt will be used in marketing/management courses for many years to come.

I’ve worked for Game before, and I disagree with the idea that food, or as we used to call it Foodco, can’t work at Game. The biggest challenge to Game for food was that their systems were never designed for food. This includes POS and inventory, Logistics and a risk oriented approach to food,etc. We would be told to order not to waste, but in food, abundance is everything. You’ve got to give that perception food is fresh and plenty. Who wants to buy the last pack of beef on the shelf just coz the store orders little to avoid waste? We used to have situations where food deliveries were received after general merchandise. The culture was just wrong. But I am confident in food at Game because I worked at a store with a history of poor sales and high shrinkage across all depts, but we made it become one of the best. We gave customers exceptional service. I was a sales manager and I ordered according to the range open for our store. I didn’t just stand in front of the shelf. This meant I always had a near perfect range of stock and consumers appreciated that. There’s more, but I’ll end it here today.

I think I once bought a water at Game foods.

End of comments.

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