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Continued revenue growth for top South African retailers

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Five local retail operations dominate Africa/Middle East region on Deloitte global Top 250 retailers’ list

The digital divide; growing revenues, but retracting margins; and the success of retailers with a global footprint are amongst the key trends to emerge from Deloitte’s 19th Global Powers of Retailing report for 2016.

The report identified the 250 largest retailers around the world based on publicly available data for fiscal 2014 – incorporating companies’ fiscal years ended through June 2015 – and analysed their performance based on geographic region, product sector, e-commerce activity and other factors.

In a year dominated by a strengthening US dollar, plummeting oil prices and China’s economic slowdown, South Africa continued to dominate the Africa/Middle East region in the report with five of the eight Africa/Middle East retailers in the top 250 being South African.

South Africa’s Steinhoff International was identified as the leading retailer in the Africa/Middle East region, up from second place in 2015. Shoprite Holdings was ranked second, with Pick n Pay fourth, Spar Group seventh and Woolworths eighth. Turkey’s BİM Birleşik Mağazalar A.Ş. moved up to third place from fourth place last year and the UAE’s Emke Group/Lulu Group International has moved up from sixth place in 2015 to fifth in 2016. New on the list was the UAE’s Majid Al Futtaim Holding LLC, slotting into sixth place amongst the leading Africa/Middle East retailers.

Deloitte Africa Consumer Business leader, André Dennis, says the top-ranked retailer Wal-Mart Stores Inc. is the parent company of the JSE-listed Massmart Holdings Ltd.  “The global report focused on the parent company. Had Massmart been assessed individually, it would have ranked third in the Africa/Middle East region, consistent with the ranking of the prior year.”

The eight Africa/Middle East retailers generated the highest composite retail growth of all regions with 19.4%, 4.5 times greater than the Top 250 as a whole. This was up from the previous year’s composite retail growth of 12.9%. Strong growth yielded a robust profit margin of 5.6%, double that of the Top 250.

Acquisitions boosted growth for two South African retailers when Woolworths acquired Australian department store chain, David Jones, in August 2014 and Steinhoff bought South African clothing and footwear retailer, Pepkor, in March 2015.

In addition, retailers based in Africa and the Middle East expanded well outside their home countries - although mainly within the region, with the exception of Steinhoff – operating in an average of 12.4 countries. Close to one-third of their revenue came from foreign operations in 2014.

Steinhoff Holdings was the top performing South African company with a 2014 retail revenue of US$10 240m, putting it in the 101st position on the global list of retailers. It was also ranked the fifth fastest growing retailer in the world with a compound annual growth rate of 41.6% between 2009 and 2014.  Shoprite, which was in the number one spot in 2015, slipped down to second place in Africa/Middle East with a 2014 retail revenue of US$9 960m and a 105th ranking on the global list.

Internationally, three US-based operations, Wal-mart Stores, Costco Wholesale and the Kroger Co topped the list in the Deloitte report. Wal-mart Stores generated retail revenue of US$485 651m in 2014, with its nearest competitor, Costco Wholesale, generating US$112 640m in the same year.

The report also identified the top 50 e-retailers (e50), where business owns the inventory and sales are made directly to the consumer (B2C). It found the majority of the e-50 (39) are omni-channel retailers with actual stores as well as online and other non-store operations.

Deloitte Associate Director, Claire Hoy, says there is a growing trend to find a balance between e-commerce and physical retail stores. “Increasingly, retailers need to mine data to assist in decision making processes, such as where to open stores.”

A product sector analysis showed that as a group, apparel and accessories retailers were the fastest growing and most profitable product sector in 2014, as it was in the previous year. Retailers of fast-moving consumer goods represented the largest product sector and accounted for half of all Top 250 retailers and two-thirds of Top 250 retail revenue in 2014. South Africa fell firmly within this category with FMCG retailers, Shoprite, Pick n Pay, Spar and Woolworths, dominating the list of top Africa/Middle East retailers.

This was also underlined by an earlier Deloitte African Powers of Retailing 2015 report, where food and beverage accounted for 52.5% of total retail sales amongst the top 25 African retailers. It was also the fastest growing retail sector with a 12.9% compound annual revenue growth.

Notably, this year’s global report focused on the theme of “navigating the new digital divide”, the gap between consumers’ digital behaviours and expectations and retailers' ability to deliver the desired experiences.

Customers around the world are using digital access to tailor the way they shop. The data reinforces the reality that retailers are underestimating or under-delivering on the consumer’s evolving desire and ability to incorporate digital into their in-store shopping journeys.

While all markets are moving toward widespread digital adoption, some are taking somewhat different routes. Some emerging markets, for example, are entirely skipping adoption stages previously experienced by developed markets.

“In South Africa we are seeing an increase in online sales, however this is not translating directly into in-store sales cannibalisation, a trend we are seeing internationally. In fact, brick and mortar and online are enhancing each other. This requires that they are not considered separately when it comes to strategic planning for retailers,” says Hoy.

Top 8 retailers in Africa/Middle East region

 

Retail revenue rank

Global rank

Name of company

Country of origin

2014 retail revenue (US$m)

1

101

Steinhoff International Holdings Ltd.

South Africa

10 240

2

105

Shoprite Holdings Ltd.

South Africa

9 960

3

153

BİM Birleşik Mağazalar A.Ş.

Turkey

6 621

4

161

Pick n Pay Stores Limited

South Africa

6 125

5

165

Emke Group/Lulu Group International

UAE

5,800

6

172

Majid Al Futtaim Holding LLC

UAE

5 603

7

180

The SPAR Group Ltd.

South Africa

5 210

8

187

Woolworths Holdings Ltd.

South Africa

4 950

*(Comment) Massmart Holdings Limited, if included separately to Wal-Mart Stores, Inc. would rank 3rd in the Africa/Middle East Region, marginally higher than Pick n Pay, per their 2014 Annual report with ZAR revenues of R78,173bn

Top 10 retailers worldwide

Retail revenue rank

Name of company

Country of origin

2014 retail revenue (US$m)

1

Wal-Mart Stores, Inc.

U.S.

485 651

2

Costco Wholesale Corporation

U.S.

112 640

3

The Kroger Co.             

U.S.

108 465

4

Schwarz Unternehmenstreuhand KG

Germany

102 694

5

Tesco PLC

U.K.

99 713

6

Carrefour S.A., France  

France

98 497

7

Aldi Einkauf GmbH & Co. oHG

Germany

86 470

8

Metro AG

Germany

85 570

9

The Home Depot, Inc.

U.S.

83 176

10

Walgreen Co. (now Walgreens Boots Alliance

U.S.

76 392

Top 5 fastest growing retailers
 

Growth rank

Top 250 rank

Name of company

Country

1

246

Vipshop Holdings Limited

China

2

58

JD.com Inc.

China

3

150

Axel Johnson AB / Axfood, Axstores

Sweden

4

37

AB Acquisition LLC (now Albertsons Companies Inc.)

US

5

101

Steinhoff International Holdings Ltd.

South Africa

 

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