Woolworths store in Sandton, South Africa, August 28, 2019. REUTERS/Siphiwe Sibeko
South African convenience food shopping is a more likely long-term winner from COVID-19 and social distancing than online retail.
Online shopping has never been as widely used in South Africa as in Europe or the US. Inability for the customer to get exactly they want without substitution is one reason for this, says Alec Abraham, senior equity analyst at Sasfin Bank in Johannesburg.
The majority of the population will never be able to afford the technology for online shopping, or to pay for a delivery, he says.
“South African food is not an online market.” So for a retailer to beef up its online presence would be a “misallocation of capital,” he argues. “It’s not viable to scale up.”
READ MORE: South African food supply to normalise after unprecedented demand
There are aspects of online food shopping that have potential for growth, such as third-party delivery, he says. But a telling sign is that none of the food retailers are willing to disclose the profits earned from online food.
- “It’s an additional service rather than a profit driver, which won’t grow significantly.”
- Pick n Pay, Abraham says, has the best online offering, targeting middle and upper income segments.
- But the company is now trying to attract lower income shoppers.
READ MORE: Coronavirus: South Africa’s Ramaphosa mounts economic relief efforts
The route to profitable growth in food retail, Abraham says, is the use of smaller convenience stores. Rather than one weekly large shop, people who can afford to want to buy fresh, healthier produce more often.
Article Source: https://www.theafricareport.com/26974/coronavirus-woolworths-small-shop-formats-well-suited-to-post-pandemic/
