Illustrative Image: Shopping bags. | Sale strings. (Images: Freepik) | (By Daniella Lee Ming Yesca) I’ve sometimes noticed that when someone, a company, a publisher or an individual does something that is genuinely new, they tend to ride the wave for quite a long time, until their rivals catch up.
But when they do catch you, they tend to gut your business.
Even if you do something really special, like invent the iPad and thus the tablet industry, unless you keep improving the iPad you will eventually disappear.
My favourite example of this is MAD Magazine, the US satirical publication.
I was lucky enough to spend school holidays in the back of a car paging through it (for some reason I think my brothers and I had an agreement where I sat on the right-hand side for quite a while... until my father decided that the three people in the back seat were no longer boys and upgraded to a Kombi).
It gave me something so important to journalism later: a healthy disrespect for authority. And an understanding that people who had chosen public life were not to be treated as deities (I have a memory I cannot verify, of their South African edition portraying PW Botha as a slavedriver in the late Eighties, something that would have been incredibly controversial at the time).
But, MAD Magazine is sadly no longer with us.
But what it created, that spirit, that sense of satire, lives on in American culture more strongly than ever. It is the basis of TV shows like The Today Show in the US, and all of the stand-up comedy we see about our politics now.
I doubt the people at Clicks were thinking of MAD Magazine when they put out their interim results today.
But it points out that during the six months to the end of February “retail trading was further impacted by aggressive competitor discounting over the festive season”.
The irony is that it was Clicks that first launched a loyalty programme in South Africa, back when Mad was at its peak in the mid-Nineties.
Of course, the writing has been on the wall for a while – back in January we already understood that promotions and discounts might be reaching some kind of peak.
But while Clicks is getting a little worried about the competition, over at Pick n Pay they’re actually intensifying their promotions strategy.
As News24 reported yesterday, their new promotion involves people with a Smart Shopper card now getting 7.5% cash back on their purchases.
Given that normally you would get about 0.5% of your cash back through other promotions run by their competitors, that’s a really hefty discount.
There is rationality behind all of this. Clicks and Pick n Pay, and I’m sure all of the others in this space, report that people with their store cards tend to spend more money in their stores than those without.
If you have a card and you get used to using it, and you realise that it works for you, you will obviously keep going back. And when you’re in the store, a place you might feel almost at home in, well, then you’re much more likely to spend a lot of money – whether you’re in a pharmacy buying supplies for the family or the liquor store buying the monthly supply of your Irish medicinal.
This is still working for Clicks. Its ClubCard now has 12.9 million members. And together those members are responsible for nearly 84% of the group’s sales.
Suddenly the actions of that incredible fierce Clicks competitor, Dis-Chem, make a lot of sense.
They’ve also revamped their loyalty programme recently. And in February they reported that it was clearly working – their revenue was up by 10% for the six months to February.
All of this suggests that Pick n Pay CEO Sean Summers knows what he’s doing by being so aggressive in this space. His big problem is probably getting people who have become used to shopping at Checkers back into his stores.
And one way to do that is to give them a strong reason to change their current behaviour.
But shopping programmes and cards and promotions are not the only ways to compete in this space.
If you really want to keep your prices down, as a big group with a national reach, you’re probably going to have to find ways around looming horrific fuel prices.
Clicks says the roll-out of its electric delivery vehicles is now paying off. Woolies has done the same thing.
We may find that as fuel costs go up, the stores with the best shopping promotions and thus the lowest prices, are those that have invested earliest in reducing their transport costs.
Over the past five years, many companies, whether they run mines or shopping malls, have been investing in their own power supply to get around load shedding and then Eskom’s tariffs. Those that have done that best are seeing that investment bear fruit now.
The next new rush might well be about keeping transport costs down.
And you would have to be MAD to think that won’t result in more competition, more promotions and more store cards. DM