Shoprite Plans To Sell Property To Invest In Tech and Upgrade Stores

Shoprite Holdings Limited has announced that will sell some of its property in order to invest more in technology and upgrade most of its stores.

The largest grocery store in Africa, Shoprite says its decision to free up cash is critical as it is eyeing to grow its online markets as well as offering fresh foods.

Making the announcement on Tuesday, February  25, 2020, Shoprite Chief Executive Officer Pieter Engelbrecht said that such decisions on investments would give the company good returns.

Pieter Engelbrecht said the move is a way of embracing the changes in the industry where most of the global retailers are increasingly leasing rather than owning real estate.

Engelbrecht opined that “the heavier your property portfolio gets in your total asset base, the lower your return on invested capital becomes,” and this will eventually make Shoprite become more of a property company than a retail company.

To improve customer services, Shoprite had launched new delivery criteria where customers would request for food and it gets delivered within one hour.

“We can’t ignore where the world is going and customer data is critically important for the future of retailers. We now know much more about our products, our margins, and our customers.” Engelbrecht said.

“It’s been an overwhelming reception from customers. We still have lots to learn and our systems weren’t designed from day one with that in mind.”

“We will expand in urban areas and we are going to try and get as good at this as quickly as possible,” he added. “In the next three months, we just want to learn a bit and make sure the platform is stable and then from July we will scale it,” Engelbrecht added.

Shoprite is currently working on 80 Checkers stores with 30 of them already upgraded and the retailer says the remaining will be completed in the next two years.

On the Coronavirus pandemic, the retailer announced that it has reduced goods ordered from the disease epicenter, China and it is now getting supplies from Ukraine, Turkey, India, and Bangladesh.

Shoprite fears that it might lose about 100 million Rands due to the Coronavirus outbreak as most of its stores will be inadequately stocked.

“We won’t really move the needle now, but we don’t know where the effects of the virus are still going to go. The first batch of products ordered from Chinese factories for South Africa’s winter are already too late. Even if they start manufacturing today the full quantity will come only after winter has passed.” said the Shoprite CEO.

On its Kenyan market, Shoprite says its stores are not doing well due to frequent terror attacks.

“With the attacks having happened there it means you have to have head-to-toe searches every time you go in and out a supermarket and that’s hampering customer flow.” It’s not that easy a country to do business, but it’s got all the right macroeconomics, so it’s up to us to get the assortment right and then potentially increase beyond the four stores.”