Massbuild - Dec 2019

MASSBUILD

MASSBUILD

Building for the Future with New Store Concept PRODUCTION: David Napier

As the economy throws all it can at retailers, derailing those that are not adaptable to changes, only the strongest and most robust will survive. Massbuild is a leader in its industry, employing tried and tested strategies, to bring affordable pricing across a wide range of products to customers all over southern Africa. Even in these trying times, the company still boasts decent results and fierce growth ambitions. www.enterprise-africa.net / 3

INDUSTRY FOCUS: CONSTRUCTION

© Massmart

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Following the announcement

by Statistician-General, Risenga Maluleke, that South Africa’s economy shrank 0.6% in 2019’s third quarter, all businesses are re-evaluating expectations for 2020 – New Year’s resolutions are set to focus around keeping heads above water while swimming against the current. This is especially true in the retail and construction sectors where confidence, sentiment and spend are at damagingly low levels.

COMING UNSCREWED? Retail sales increased just 0.2% in September, after a modest 1% in August, leaving companies uncertain that a rebound will occur. This came after a volatile 3.2% GDP decline in Q1 and then a 3.1% improvement in Q2. A cut of SA reserve Bank interest rates in July failed to spark renewed spending, leaving retail spending just 1.1% higher than the same period in 2018.

In the DIY retail space – a sector traditionally more immune to economic

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downturn – the struggle has been very real. Higher taxes (VAT), higher fuel costs, high inflation and poor wage growth have left consumers with little disposable income, and for the last quarter of 2018, hardware, paint and glass retailers sales shrank 1.5%. The big names are now competing for existing market share rather than a slice of a growing pie. While the major national chains still continue to post reasonable results, they are nowhere near successes of the past, and this is worrying for those at the top.

On the professional side of the industry, the corporate building and construction sector has been failing for some time. Lacking infrastructure spend and historic mismanagement in the industry has led to mistrust and financial difficulty, and the jobs that are left are too small for the big businesses to sustain. With many of the majors now in business rescue, or gone from the market altogether, retrenchments and slowdowns have been widespread.

This backdrop has been the norm

for some time for those active in the sector, including Massbuild – the Massmart division operating four separate brands across southern Africa: Builders Express, Builders Superstore, Builders Trade Depot, and Builders Warehouse – is doing everything it can to delight customers and drive loyalty so that demand does not crumble.

SA BUILT Massbuild is a pioneer of the warehouse style, mass discounting for bulk buyers model in South Africa. ‘Pile them high, sell them cheap, and make the parking lot big’ is the concept and mantra championed

by America’s Walmart and Founder Sam Walton. The billionaire entrepreneur utilised this model across Walmart and Sam’s Club in the USA, growing a business from small, regional operation to one of the world’s largest companies, making him one of America’s richest men. Right from the start, Walton’s core value was always about offering the cheapest prices while bringing a large product portfolio for customers.

MASSBUILD

When Walmart entered Africa in 2011, purchasing Massmart for a reported $4.2 billion, the ideals remained the same. Massmart had, for many years, gained a big following thanks to its Walmart-style operation, quickly becoming the biggest retailer of basic foods in the region with sales of around $6.8 billion.

“Our business is built on high volume, low cost and operational excellence which enables our price leadership,” says Massmart.

Massmart started building its DIY and construction arm in 2003 when it purchased five Builders Warehouse stores operating in Johannesburg and Pretoria. This was the start of a mass buying spree that went on for the next few years, with Massmart buoyed by early financial successes in the DIY sector. When the economy is flush,

people buy new homes, but when things dip, people choose to spend on improvements on their homes rather than moving. This helped the industry to remain somewhat protected against economic downturn. Hardware retailers started to become the golden boys for JSE-listed buyers.

Now, the Massbuild division remains a vitally important element in the Massmart strategy.

“Builders Warehouse and Builders Express are both pioneers in introducing retail principles to the South African DIY and home improvement sector and attaching garden centres to hardware stores. The clean, friendly and uncluttered look and feel of our stores offer customers a shopping experience not traditionally associated with the industry. Our new stores aim to introduce ‘retail theatre’ where lighting,

// OUR BUSINESS IS BUILT ON HIGH VOLUME, LOW COST AND OPERATIONAL EXCELLENCE WHICH ENABLES OUR PRICE LEADERSHIP // colour and ambiance enhance the shopping experience, signage is clean and bold, and product displays are enticing,” the company states.

“Several of our private brands, including Mastercraft and Builders Pride, have become household names, with our customers assured of stringent quality control and best supplier

Stratagem Training Services has been partnering with Massbuild since 2006, providing bespoke retail finance training solutions for all levels of Massbuild staff and management, with programmes such as BusinessWise Plus, Retail Finance, Retail Management Finance, Senior Financial Management Programme.

Stratagem is proud to have been associated with Massbuild right from the beginning. We are grateful to Massbuild for their ongoing support and investment in their people.

www.stratagemtraining.co.za • info@stratagemtraining.co.za • Tel: +27 11 234 0884

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INDUSTRY FOCUS: CONSTRUCTION

practices. In both the residential and commercial property markets, Builders Trade Depot’s value proposition to customers is our ability to consistently deliver an appropriate, professional range at highly competitive basket prices, combined with exceptional contractor support services in a relationship-driven environment.”

STILL STRONG Thanks to this clever and considered strategy, that is proven in Africa and globally, Massbuild is one group that has managed to buck the trend in South Africa, with its stores posting largely positive results, and the group continuing with strength. Clearly, the results are not where management would want but, with the industry and macroeconomic environment not conducive to meaningful growth, posting modest improvements is classed by most as a success.

For the first half of 2018, Massbuild recorded sales of R6.413 billion. This represented a 7.6% increase. For the wider Massmart group, 2018 saw a 2.9% growth in total sales in what the group termed a “difficult economic environment”. In the first half of 2019, Massmart reported “the South African consumer environment remains challenging with no significant improvement during the past six months. Factors that have impacted

// WE ARE MINDFUL THAT OUR COMMITMENT TO ‘SAVE CUSTOMERS MONEY SO THAT THEY CAN LIVE BETTER’ IS ESPECIALLY RELEVANT IN DIFFICULT ECONOMIC CIRCUMSTANCES // 6 / www.enterprise-africa.net

MASSBUILD

// BUILDERS HAS DIGITISED ITS INSTORE RETAIL EXPERIENCE BY OFFERING FREE WIFI AND INSTALLING 44 HIGH DEFINITION SCREENS THROUGHOUT THE NEW BOKSBURG STORE // trading performance are well-known to the market and included low consumer confidence, negative GDP growth (-3.2%) in quarter one and increased unemployment (29%).”

But, Massbuild continued to display muscle even where others have struggled.

“Total sales of R6.7 billion increased by 5%, while comparable sales were up 1.8%. Contractor sales remain under pressure and were below the prior period,” the company reported. “The current period marks one of transition for Massmart. The company is fortunate in that there is significant depth of experience across the specialist areas of each division. This experience, together with the fresh perspective brought by new senior management will see

the business well placed to remediate identified short-term performance issues and reform the operating model.”

NEW STORE PROTOTYPE In April, Builders unveiled a new store prototype at the Boksburg branch. At 15,170m2, the new store brings a more versatile retail experience by offering shoppers a wide range of in-store services, eliminating shoppers’ need to trek between a slew of physical shops to make informed decisions about their DIY, home improvement and construction needs.

Many digital and technological advancements are aimed at helping customers make informed choices, with ease.

“Builders has digitised its in-store retail experience by offering free WIFI and installing 44 high definition screens throughout the new Boksburg store. These digital and physical displays give customers the ability to order in store, order within specific departments, shop the extended range of products as well as view promotions and search for product information or inspirational DIY content. They also allow customers to watch ‘how to videos’,” the company states.

The new store also offers 3D printing services, one of the first stores of its kind in Africa to do so, for both businesses and personal use.

“Prototyping, domestic replacement parts and modelling requirements

are just some of the examples of what is now within reach for Builders customers,” the company says.

After opening on May 1, the Boksburg branch will become the flagship and example for all upgrades going forward.

Internally, successes like this are important and offer renewed hope and optimism, which employees can share with customers.

“We are mindful that our commitment to ‘save customers money so that they can live better’ is especially relevant in difficult economic circumstances,” Massmart affirms. “This requires that we are able to continually identify opportunities to adapt and improve upon our low cost operating model. To this end a priority is to leverage group scale more effectively to enable our business units to optimise store portfolio performance, improve buying and logistics efficiencies and reduce costs.”

While the second half of 2019 has proven to be just as hard and the first, those that have a proven model, and a strategy that spawns success, are those that are set to thrive, and those that thrive in hard times are those that boom when things pick up. For Massbuild, the future looks bright.

WWW.MASSMART.CO.ZA

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December 2019

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