Shoprite shoots the lights out with loyalty programme, on-demand delivery, transactional banking
Although retail giant Shoprite posted record results for the year to July 2022, the market did not respond favourably, with the share price falling more than 7% intraday to close at R217.63.
Shoprite chief executive Pieter Engelbrecht says the group created 4,316 jobs over the past year, having shed no jobs during Covid, the July 2021 riots or the April floods.
Sales increased 9.6% to R184-billion, while shareholders saw a 10% growth in dividends to a final total dividend of 600 cents a share for the year.
A disruption plan hatched five years ago, and the acceleration of innovation across all facets of the business, has seen the retailer shoot the lights out, from its wildly popular Checkers Sixty60 on-demand delivery service to the successful Xtra Save loyalty programme, and even a money market bank account offering full transaction capabilities.
“The first thing we had to do was replatform the entire business six years ago, and that is now paying off. Our focus is on providing customers with the best value,” says Engelbrecht.
“The Xtra Savings Rewards Programme resulted in members saving a tremendous R9.4-billion this year, with more than 1,800 swipes per minute – up from R5.3-billion last year.
“At the same time, our data insights are much more rich, with 24.7 million customers.”
During the Covid years, data from the loyalty programme showed that thousands of customers were getting pets for the first time, with the result that Shoprite expanded into a chain of standalone Petshop Science stores.
The wildly popular Checkers Sixty60 on-demand delivery service has continued on its growth trajectory, expanding to service 300 stores compared with 233 the previous year.
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Shoprite entered into an agreement with its delivery service partner, RTT, that has resulted in the retailer owning a 50% shareholding in a new delivery service company called Pingo Delivery.
“All the drivers are owner-drivers, similar to the way Uber operates, which means drivers pay their own fuel costs and they are not Shoprite employees. We pay them a fee and they can obtain subsidised finance from Shoprite to buy their vehicle over a period of time.
“The drivers are then free to use those vehicles for other delivery services and are not tied exclusively to Checkers Sixty60,” he says.
Engelbrecht says since launching the tipping feature in the app, drivers’ remuneration has increased significantly.
“It tells us that customers like the service and are seeing the value in it. We are seeing that drivers are earning a decent income,” he says. There are currently 4,500 drivers across the country.
Earlier this year, Shoprite soft-launched a money market bank account on a Grindrod bank licence. Engelbrecht says the current fuss is about the fact that the account is now fully transactional, with the ability to EFT money in and out – which means customers can EFT their salaries into the account and pay third parties. All transactions within the Shoprite environment are free.
“We’ve picked up just over two million customers using the money market account in under a year, and will be giving this initiative more attention now. There’s definitely scope for a low-cost banking product,” he says.
Looking ahead, a R5.9-billion capex spend will encompass 275 new stores – a supply chain expansion which will add about 200,000m² to distribution centre capacity over the next two to three years.
Management’s plans include a new 85,000m² campus that will go live towards the end of 2024.
“Most of the money will go into bricks-and-mortar with maintenance and revamps, plus 275 new stores … 220 of those will be supermarkets and the rest are auxiliary brands such as the pet stores and Medirite Plus.”
About R1.3-billion will be allocated towards IT expenditure, hopefully pointing to more innovative solutions for cash-strapped consumers. BM/DM