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What is the Future for Brick & Mortar within the SA FMCG & Clothing Retail?

VUL’INDLELA

Syndicate 5 “opening the way”

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Pillay. L / Hoosen. N / Wajoodeen. M / V. Fisher / A Mseleku / M Gqalo

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TABLE OF CONTENTSPage Number

Executive Summary 3

Introduction/Background 3

Systemic Approach 7

Research Goal 8

Objective Questions 8

Relevance to Industry 8

Research Methodology 8

Research Audience 9

Project Scope 9

Research findings: International Immersion 9

On-line 11

Mobile 12

Virtual Reality 13

Small Format Stores 14

In Store Experience 15

`Showrooming’ 17

Research Findings: South African Retail 18

Recommendations to South African Retail 22

Implementation Plan 26

Conclusion 30

References 31

Appendix I – Research Questions 33Appendix II – Interview Transcripts 35Appendix III – Hello Kitty Sales 44Appendix IV – CCWTR Report 46Appendix V – SA Customer Survey 48Appendix VI – Pop-Up Stores 55Appendix VII – Statements from Big Business re On-line 57

Personal Reflections of Syndicate Members 58

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EXECUTIVE SUMMARY

Technology is evolving at an exponential pace. These changes are redefining our lifestyle and our

value systems. The change in lifestyle and values, in turn, is altering the needs of the customer. This

paper looks to explore this change and to understand how these changes are impacting on the retail

formats.

We will investigate the new needs of the evolving customer and we will explore whether the current

brick and mortar format ideally suits the customers’ needs. We will first look at the external environment

and understand the shifts internationally and we will relate these shifts to the South African market and

environment.

Through this paper we will test the question: What is the future for brick and mortar within the South

African FMCG and Clothing Retail? We will not only test the question, we will re imagine the future

format and recommend a new world in retail format that will offer the retailer options and alternatives to

adapt their future store in order to meet their customers changing needs.

INTRODUCTION/BACKGROUND

For many decades now the future growth of retailers had been determined by the prime retail estates

that they could secure.

The big box retailers have all along been the darlings of the shopping mall developers due to their

ability to attract thousands of customers to these malls. The success of the mall was mainly measured

by the quality of its tenant mix. The more multi national chains the mall could attract, the better the

chances of success. Often some of these big box retailers were sometimes referred to as anchor

tenants of the mall.

The conventional approach to retailing has always been to drive business growth by driving floor space

or improving turnover per existing square meter of occupied space. Retail was about the store space

and store experience.

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The emergence of the internet, social networking and multi channel media is starting to quickly shift

this conventional thinking. Is the format of big box retailing changing? Initial indicators in the American

markets suggest that on-line retailing is certainly picking momentum. The Amazon on-line retailer sales

last year was $48Billion compared to Macy’s of $26Billion (The Economist, 2012).

Whilst big box American retailers are showing flat sales on the previous year, on-line retailers are

showing sales growth of double digits. In America, 8% of the total retail sales came from on-line

retailers last year, totaling $188billion with a forecast of $270billion by 2015. (Anon, 2012).

Research conducted in South Africa (SA) show similar trends in on-line retail growth. Even though on-

line retail is at its infancy in South Africa, percentage growth rates of on-line retailing is four times

greater than that of brick and mortar retailers (30% versus 7%) Whilst these percentage growths are

significant, at this stage, on-line retailing only contributes to 0.36% of total retail sales in South Africa

and South African retailers admit that while on-line opportunities have changed the way in which

customers interact, on-line sales have been minimal (Enslin-Payne, 2012).

According the Boston Consulting Group, a report published earlier this year shows that SA's e-

commerce offering was growing at a surprisingly slower rate (12.6%) than the average for developing

nations (17.8%). The report predicts that on-line purchasing would account for 1.5% of all retail

shopping in South Africa by 2016 (Leps Consulting, Biz Community, 2012).

South Africa is ready for technologically-advanced e-commerce offerings. However, low broadband

access and a lack of affordable devices to access the internet has contributed to low on-line retail

statistics. Where South African retailers should be, in addition to e-commerce, is the mobile space (also

known as m-commerce). About 42.3 million mobile phones have been recorded in South Africa, with

more than 59 million active SIM cards.

As South Africa's broadband capabilities grows, so too will businesses interests in making use of e-

commerce and m-commerce. Companies, cannot, and should not, ignore the growing opportunity in

these spaces.

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Our case study will focus on understanding the impact of on-line sales on brick and mortar retail in the

so-called Developed Markets (US, Canada and UK) and to relate this to the South African market and

future. We will, through, this case study establish what the future of big box retailing will be given the

developments in on-line. As part of the research process, the first steps were to deeply understand the

question and to unpack the key drivers that will assist in answering the question. By applying a

brainstorming technique and by applying basic fishbone tools we were able to identify the customer

behavior as the main factor that would determine the future of brick and mortar retailing. If there is a

change in customer shopping behavior then there will be an impact on the future of brick and mortar

retailing. The next step was to then understand what could change customers shopping behavior and

the conclusion that we reached was that a change in the external environment influence the change in

customer behavior. This change in customer behavior will determine the future format of retail stores

SYSTEMIC APPROACH TO UNDERSTANDING THE CHANGES IN CUSTOMER BEHAVIOUR

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Level of ChangeIn

External Environment

Level of ChangeIn

Retail Format/Brick & Mortar

Level of ChangeIn

CustomerBehavior



A change in the external environment results in a change in customer behavior which impacts the

format of retail. In this paper we will look at the changes that are occurring in the external environment

that relates to a change in customer behavior. We will then unpack how this change in customer

behavior is impacting on the current retail formats. We will then analyse these current retail formats and

use it to draw a view on the future formats of retail. This new view will then answer the question around

the future of brick and mortar retailing

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7

Mobile Store Format On-lineClick ‘n Collect Sensory Brick and Mortar

savour the store experience

convenenience when shopping

looking for value

safety/communial

more demanding

capture my attention

disloyal

on-line

mobile

virtual reality

show rooming

pop up stores

store theartre

mega stores

Need for Speed

Covenenience

Options and choices

High Mobility

Power of Information

Technology Savy

SA Infrastructure

LSM Emergence

Mobile Penetration

Informal Stores

Labour Laws

Job Creation Plan

SA Real Estate Plan

Education and Training

SYSTEMIC THINKING APPROACHIS THERE A FUTURE FOR BRICK AND MOTAR IN SA FMCG & CLOTHING RETAIL

South African Environment



RESEARCH GOAL:

This project seeks to answer the following question:

Based on evolving customer needs and expectations, what is the future of bricks and mortar retailing in

South Africa within the FMCG and Clothing sector?

OBJECTIVE QUESTIONS TO BE INVESTIGATED IN THIS PROJECT

1. What are the changes we are seeing in the external environment that could impact the future of

retailing?

2. What are the changes we are seeing in customer behavior?

3. What are the international trends on brick and mortar versus on-line retail?

4. What are the key international factors supporting this trend?

5. How do these key international factors relate to the South African customer?

6. What are the South African customers telling us?

7. How does what the SA customer is saying influence the future of Brick and Mortar?

RELEVANCE TO THE INDUSTRYWith international retailers making in-roads into South Africa, local companies have to remain abreast

of international trends and evolving customer needs and expectations so that they can compete on an

equal footing.

RESEARCH METHODOLOGYQuantitative

1. Review of statistics and trends

Qualitative1. Interviews with Retailers

2. International and local case studies

3. Interview leading academics , analyst and subject specialists

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Contextual Environment1. Economics

2. Social Environment

3. Technological Development and Trends

4. Globalization

5. Politics

Transactional Environment1. Buyers/ Procurement

2. Distribution of Goods

3. Suppliers and Producers

4. Labour

5. Government

RESEARCH AUDIENCE International stakeholders (customers and retailers)

Suppliers

Local stakeholders (customers and retailers)

Government structures

Skills Authorities

PROJECT SCOPE South Africa

South African FMCG and Clothing Retail

The South African Customer

International Retailers

RESEARCH FINDINGS – INERNATIONAL IMMERSIONInsights from International Retailers and Industry Leaders

Retail Councils, Industry Experts and Store Observations The emphasis is on in store experience and differentiation.

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Well crystalized value proposition backed with consistency throughout the brand activities

Impact displays with less range where the emphasis is in variants – UNIGLO and Zara

More range less depth in quantities – Bergman Goodman and Harry Rosen

Technology combined with well-trained Stores Associates for high quality and service – Apple

Theatrical displays and freshness – Loblaws Food Stores and Whole Food

Combination of technology and bricks and mortar to complement each other which results in

increase sales – refer Google and Planet Retail Presentations

Retailers changing the brick and mortar formats to smaller formats and convenience and

collection stores e.g. Tesco, Wal-Mart

Electronic Goods retailers becoming more vulnerable than the rest of the retail industry

On-line shopping business growing on average 20% but not profitable due to high cost of

infrastructure development and distribution – Google and Planet Retail

Staff numbers have not been adversely affected – Planet Retail

Grocery retailers enjoy more on-line shopping in the UK while on-line shopping is more popular

in fashion, clothing and electronic goods in the US and Canada

Millienium age group is more comfortable doing on-line shopping than any other age group.

There has been cut back on the development of retail big box space in UK, US and Canada –

refer Planet Retail, Susan Reda and Cadillac Fairview presentations.

UK, US and Canadian Markets are mature and supported by the aging population

UK and US markets have a well-developed on-line shopping market

Lack of profits on on-line shopping businesses due to the costs attached to the development of

this business.

Collaboration, networking and co-ordination is the key in doing successful business

In summary, bricks and mortar is far from dead, however much more is now expected by the

customers. The following were specific formats/trends observed and these will be elaborated on further:

1. On-line

2. Mobile

3. Virtual Reality

4. Small Format/Convenience Stores

5. In-Store Experience

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6. Showrooming

ON-LINEDuring the early 1990’s new technology allowed opportunities for companies to offer a new mode of

retailing, on-line retailing via the internet (World Wide Web (www)). In 1991, the internet was opened for

commercial use and only gained popularity by the general public in 1994; Pizza Hut was one of the first

companies to allow for on-line sales. Not long thereafter, 16 July 1995, Amazon offered on-line

purchases starting with sale of books. Nineteen years down the line, it is now the largest on-line

retailer, selling everything imaginable. Initially companies were reluctant to pursue on-line retailing due

to lack / fear of security protocols and lack of internet infrastructure. Since 2000, many companies

embarked on the idea of on-line sales, despite the relatively slow growth of sales, today on-line sales

are increasing in double digits as opposed to brick and mortar sales.

Despite the difference in opinions to the total amount that on-line retailing contributes to the overall

retail purchases, it is believed to be approximately one fifth of all retail sales in developed markets. It is

anticipated that this growth could be, between 15% to 20% per year and in certain emerging markets

where advancement in technology is increasing at an alarming rate, this figure could be around 75%

per year. By the year 2013 the global e-commerce could be worth around 1 trillion dollars. The US on-

line sales is currently the largest, with an average spend of 1 000 dollars on an estimated 170 million

on-line users. It is estimated by 2015 that the US on-line sales could be approximately 279 billion

dollars. On-line retailing has greater advantages to brick and mortar retailing by virtue of the fact that

consumers have easy access to larger databases of products where they are able to search for various

product categories at a touch of a button, 24/7, at their convenience. At the same time, they are able to

compare and obtain the best price. Over and above the sales derived from on-line retailing, and in

stances where there are no physical stores, retailers may want to test markets prior to establishing a

physical presence, thereby allowing retailers to become more aware of their customer’s needs, buying

patterns. Analysis of the data will also provide retailers with more accurate data of the type of

customers and their locations. Retailers are now able to make more easily informed decisions on their

physical presence to establish stores in specific locations or expansion in certain instances. In spite of

that boom in on-line retailing, existing retailers, new entrants and logistics partners and customers are

experiencing challenges.

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Increased implementation of on-line retailing by existing brick and mortar retailers are challenging the

predominantly “only on-line” retailers with the continued expansion of product lines and increased

competition. The increase in demand of delivery by both existing and new entrants is creating

challenges for their logistic partners, in terms of the increase in volume on deliveries, delivery

turnaround time by on-line customer demand patterns including the need to increase capital investment

to meet the retailer’s delivery demand schedules. New entrants are faced with the challenges of

adjusting distribution patterns to serve multiple channels. In addition, Fraud still remains a concern for

many consumers despite the strict security measures put in place; there is the fear of details falling in

the wrong hands. Delivery time, in most instances may be within your expectation however there could

be the odd occasion that items are required immediately or within a short period of time this mode of

purchasing may not be suitable hence on-line purchasing maybe risky when time is of .South Africans

enjoy the pleasure of shopping in brick and mortar stores, despite the increase number of brick and

mortar stores, there has been an increase number of on-line shopping however not a significant

increase comparatively to the rest of the world.

MOBILE

There is no doubt that mobile commerce is rising at an exponential pace. Within the American market,

the number of consumers who are using their mobile to make on-line purchases has doubled from 9%

in 2010 to 18% in 2011.This rate of growth certainly suggests that mobile is poised to be a big player in

the retail space. Analyst believe that the use of mobile web will overtake the desktop internet by 2014

( Ankeny, 2009).

With South Africa and Africa having such a higher mobile penetration, it seems logical that it would

soon become the preferred method to retail. As a retail tool, mobile retailing offers many advantages

over brick and mortar. It offers cheap and convenient advertising to the customer at any time. Due to a

mobile phone offering and the opportunity to identify the user’s exact location, advertising and

marketing can be specifically targeted based on the user’s location

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A recent survey conducted by Oracle Communication in July 2011 in the US and Canada suggests that

users are more willing to share their location via their mobile device than they were a year ago. This is

a very positive move in the right direction for the future of mobile.

Apart from this, consumers are seeing the mobile phone as a key information tool during shopping. The

mobile phone is being used to read customer reviews, to conduct comparison shopping and to scan QR

codes in advertisements and articles.

The world of mobile apps has taken mobile retailing to a level that confirms that it will stay and grow. It

answers all of the customers needs for convenience, time saving and information power. The Apple

store as an example uses mobile to help you get the most out of your shopping experience by allowing

you to make reservations before coming in. This allows much time saving. The Reddbox app allows

you to reserve a movie upfront so that the movie is waiting for you when you go into the kiosk.

With Starbucks Card mobile you are able to use your barcode to make purchases at Starbuck. Target

apps help you find the right product and makes your shopping trips quicker and easier. The Toys R Us

apps allow you to use a barcode scanner to instantly get product details, reviews and video reviews.

Therefore Mobile retailing is not just offering an alternative to buying in a brick and mortar store, it is

offering far greater solutions that are not available to brick and mortar. It is these solutions that are

making this form of retailing more lucrative than brick and mortar.

.

VIRTUAL REALITYVirtual reality applies to computer simulated environments that can simulate physical presence in

places in the real world as well as in imaginary worlds. (Wikipedia).

Previously virtual reality was used in for market research, where shoppers navigate through virtual

stores, consider various alternative products and chooses a specific product. Various factors could be

measured, for example, packaging, shelf position and merchandising. Attempting to do this exercise in

a physical store would involve time and cost. ( Kelley School of Business).

Augmented Reality adds graphics, sounds, smells, etc to the natural world as it exists so information

becomes interactive and digitally manipulatable (Wikipedia).

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Kats (2012) refers to the campaign by Starbucks during Valentines Day, designed to increase customer

engagement. Customers downloaded the Starbuck Magic Cup which interacted with the company’s

limited edition hot cups. When the cups were scanned, they were able to watch as their Valentine came

to life. This was assessed as being quite effective allowing Starbucks to interact with the customers

while using their own products.

Mabelline got consumers to try on various shades of nail polish using similar technology. Devices

needed to be aimed at a print ad to activate the digital portion, a screen shows a circle of all the new

colours and customers could try on any or all of the 40 colours by taking a picture of their hand.

Virtual Reality has also been used to allocate space more effectively (Greene : 2012). It will use an

image of your store and automatically build in shelves and merchandise. In this case, the manufacturer

and the retailer are brought closer together.

Selfridges created a Fantasy Mirror which was not regarded as an alternative to trying on clothes but as

an additional shopping experience. It projects a virtual version of the customer wearing different

clothes.

Companies like Macys, HSN and Adidas are building large TV like interactive screens to provide a

different customer experience. In the 2 weeks that Adidas previewed its virtual wall in one of its London

stores, it saw a 500% increase in sales of the product compared with a similar shoe it had launched 6

months previously at the same price. (Malcolm, 2012).

The wall included a touch-screen panel as well as a panel of actual `dummy shoes’ that customers

could try on for size. The touch screen shows representations of the products as well as marketing

content and also pulls in Twitter feeds to show what customers are saying about the product. The wall

has been described as an `endless aisle’ as customers have access to a far larger selection of products

as it isn’t constrained by the inventory challenges of bricks and mortar stores.

The uptake for Virtual or Augmented Reality in South Africa has been relatively low mainly due to the

high costs.

SMALL FORMAT STORESThe formation and the purpose of convenience stores are to serve and meet the local customers’

needs. They are predominantly food stores with a very limited range of no-food essential items. They

are often privately owned, franchised, partnerships and co-operatives. Most of these stores are global

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and regional operations. The size of these stores varies from 26m2 to 2500m2. Woolworths has 26m2

stores which is partnered with Engen, the fuel petroleum operators.

These convenience stores have an advantage over the big stores because they serve regular

customers and therefore develop a close relationship with their customer which enables them to offer

personal service. Another benefit of having such customer is that the customers become part of the

store members and develop the confidence to advise the retailer of potential opportunities which is

turned to instant service by the retailer. The examples of such stores are Co-operative Group in UK

which operates 48000 outlets and Budgens also in UK. Budgens has 48 stores in the UK. US and

Canada have stores such as 7 Eleven and Speedway. 7 Eleven is the largest convenience store in the

world and operates 46000 stores in 8 countries. 7Eleven has won various honors such as Forbes

Magazine `Top franchise for the money 2012’.

The convenience store value proposition in the main seems to be the same. They offer convenience in

convenience rage of meals, flexibility, home deliveries, on-line shopping facilities, not undersold by the

competitor, freshness, and high quality merchandise.

Another popular small new store format gaining momentum are pop up stores (see appendix VI)

South Africa has a lot of independent small format food retailers. However Woolworths seems to be

leading the way with their small partnership with Engen stores. These stores vary in size from 26m2 to

40m2. There are currently 43 of these units in the country. Their performance is well above the

company expectations. The biggest secret behind this kind of performance has been location. The

stores that are homeward bound for customers performed a lot better than those situated along the

highways.

They also help the company tap into the twenty four hour trade and increase the volume of sandwiches

exposed to the customers. However the units have not taken the advantage of convenience store

margins which means there is an opportunity for pricing review in this business model. Range also

provides the group with the opportunity to increase and start sweating the assets because the store has

350 stock keeping items of perishables and 100 others against 6,000 in the normal supermarket.

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IN STORE EXPERIENCEAs on-line retail continues to grow, the appeal of brick and mortar stores is being challenged. The big

question on all retailers’ minds currently is that if on-line retail is here to stay, how should real life

shopping co-exist alongside these new digital formats?

The current shopping patterns indicate that consumers shift between on-line shopping and in store

shopping depending on their needs. Often they would conduct the research on-line and then go into the

physical store to look at product and make a decision.

The biggest challenge that retail faces is to now make the store interesting and compelling enough to

keep the customer in the store and to entice the buy. Whilst on-line shopping offers functionality and

convenience the interactive and sensory experience of an enticing brick and mortar store can be a truly

engaging and fulfilling experience.

Retail theatre has become the new buzz word as the answer to the threat of on-line. The objective is to

focus on two key principles i.e. to make stores exciting and enticing and to make shopping convenient.

Creating the retail environment that is both emotively captivating and engaging to both an art and a

science

Live and Breath which is a creative retail marketing agency has identified five scales that a shopping

experience must register on. It is these five scales that would become the hook that will keep the

customer engaged and would keep the customer in the store. The first is affinity. This is the closeness

that the customer feels to the values being portrayed in the store environment. The second is pleasure

and speaks to the degree of enjoyment that the customer will attain whilst in the store. The third is

arousal which refers to the customer level of stimulation within the store environment. We have seen

this being achieved with perfume scents being sprayed in store and through the use of super models

within stores – for example, Abercrombie and Fitch. The forth scale is dominance. The customers want

to feel in charge when they are shopping. The last element is the store flow. The store must be laid out

in a manner that allows easy movement through stores.

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The secret behind store theatre is to relax buyers, encourage a buying mind set and to use their

emotions and sense to influence a buying decision. A perfect example experienced was the

Abercrombie and Fitch Stores. When you enter the store you are welcomed by hosts who make you

feel special and welcomed. As you enter the store, supermodel men or ladies in perfectly carved bodies

pose at the entrance in scant outfits. The store has very little or low lighting creating the atmosphere of

a night club and the music pumps through retro hip hop music. To add to all of this theatre, young

ladies walk around the store spraying sweet scented perfume. Everything about the store appeals to its

target customer of young 16 to 24year olds who love modern and contemporary clothing.

If the stores of the future are to survive the onslaught of on-line retail serious consideration needs be

given to the element of store theatre. The days of cluttered aisles, poorly lit stores, un-impactful

displays and very little product statement is over. It will now be about the store experience. No longer is

the store viewed as a display rack of products. It is now an opportunity to stamp an unforgettable brand

experience into the minds of the customers. It is about “retailtainment”

Whilst “retailtainment has become a key issue in ensuring the survival of the future store, the element

of convenience when shopping is also crucial. Strides are being made with technological

implementation into stores that are improving the convenience factor to the customer. These include

mobile scanning devices that allow shoppers to scan product as they buy therefore preventing the need

to join queues to pay for product. This intervention removes the frustration of time lost in long queues.

The other popular intervention relates mobile scan apps for comparative shopping. These apps allow

the shopper to walk into a store and scan a product using the camera from a smart phone. The apps

will then allow you to compare the price and spec of the product to other similar product offered by

other retailers. This allows the shopper to get the best deal and also saves time. Some examples of

these apps are Red Laser, Snaptel and Shopsavy.

The other key forward shift in shopper convenience relates to store staff and the new era sales teams.

The new era customer is much more informed and knowledgeable. They have information at their

fingertips and have power through product knowledge. Their expectation from store staff is therefore

much higher. This has resulted in a shift from Sales Assistant to Sales Specialist. The new age sales

staff have specialized skills in the product they sell. The sales staff selling golf gear is a pro golfer, the

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sales staff selling fishing gear is a pro angler. This deep product knowledge base improves the quality

of service and the level of service offered. Ultimately the store of the future will embrace store theatre

and outstanding service convenience, to give the customer and unforgettable shopping experience.

‘SHOWROOMING’Showrooming is the practice of customers perusing and trying out product in stores and then ordering

them from on-line competitors that charge less.” (Kaplan, 2012). Kaplan goes on to refer to Best Buy

who have identified themselves as victims of the showrooming phenomenon. In the past, Best Buy’s

on-line store had cheaper process but they are now offering customers the best price regardless of

whether they are in-store on on-line. Electronics and appliance stores have been hardest hit as it’s the

category with the highest levels of smartphone shopping adoption (Deloitte Digital , 2012).

An article in Time, however suggests that Showrooming can actually boost sales (Tuttle, 2012). It

appears that a minority of shoppers will actually purchase from a competitor as they are much more

likely to purchase from the physical store’s own website. Some retailers have taken steps to discourage

customers from purchasing from competitor websites so items may only be sold by a particular retailer

(the children’s tablet, for example, can only be found at Toys R Us) or they launch their own apps and

incentivize customers for in-store browsing and purchasing (Target).

Therefore, on-line options should not be seen as competitors and retailers should ensure an integrated

strategy with regards to their physical and on-line presence. Sales Assistants should be trained to

observe showrooming behavior and then proactively offer assistance to help close the sale.

UNDERSTANDING THE RELEVANCE OF THE INTERNATIONAL TRENDS TO THE SOUTH AFRICAN CONSUMER

All the research conducted during our international travel suggested certain key shifts in customer

behavior that favoured a shift towards omni-channel shopping. Omni-channel refers to retailing via

various channels, including brick and mortar. These may be on-line, mobile and other electronic

devices. Whilst internationally brick and mortar still played a role, there was a massive shift towards

different formats of omni-channel retailing. We now needed to test this trend in the South African

landscape and to understand if we were seeing similar trends in the behavior of the South African

consumer.

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What is South Africa’s current on-line retail usage compared to the rest of the world?

Research conducted by Woolworths SA indicates that South Africa’s current on-line usage is minuscule

when compared internationally. However, the important point is that in the last year 22% more South

Africans made their first on-line purchase. Therefore, whilst the usage is very low, the rate of growth in

the last year has been significant. This suggests that on-line is growing rapidly in this country.

Whilst the on-line usage in South Africa was extremely low, we researched the internet penetration on

mobile to understand whether the mobile was the more accessible device. The results were very

encouraging. South Africa’s mobile penetration/usage compares with and, in many cases, is higher

than most developed countries. This suggests that the mediums for mobile exists and is being freely

used.

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SA : Mobile Internet Penetration and Usage

SA Performance 2011

Indicator Penetrations

South Africa

Global Developed Nations

Emerging Markets

Africa

SIM Penetration 115% 87% 118% 79% 53%

Internet Penetration 14% 35% 74% 26% 9%

Facebook Penetration 10% 33% 35% 8% 4%

Smartphone Penetration 20% 7% 45% 17% 5%

Woolworths SA conducted a survey to understand how many South Africans use the internet for

research purposes and then use the brick and mortar store for the actual purchase. The following were

the findings:

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Of the sample size surveyed, 77% acknowledged conducting on-line research yet going into a store to

purchase. This statistic re-affirms that South African customers are leaning towards a multi-channel

way of shopping that is, shopping behavior that touches various channels at different points. See

Appendix II for Interviews conducted with South African Retail Leaders on their views on the future

format of retail.

RESULTS OF SOUTH AFRICAN CUSTOMER SURVEY

Appendix V shows the results of a survey that was carried out from a selected population of shoppers

in the South African landscape. In summary, the message from the survey carries 2 important points.

The first is that the South African shopper is looking for other channels to shop other than brick and

mortar however they do believe that brick and mortar will still have a role to play. The other point

emerging from the survey is that customers are looking for more from the current brick and mortar.

They want more convenience, more technical and informed staff and more excitement. All these factors

strongly support the recommendations that we are making through this investigation.

SOUTH AFRICAN ON-LINE SHOPPING TREND IN SUMMARY

Current Total Value: R 2.26 Bn. It is currently 0.36% of total South African retail. The growth for 2011

was 30%. The forecasted growth for 2012 is 40%.Therefore all of the indicators suggest that multi-

channel retailing is growing is South Africa at a significant rate. This growth is being driven by lifestyle

changes related to time pressure and the need for convenience. It is also related to the improved

accessibility to electronic devices. The trends that were observed internationally therefore have an

application to the South African Retail environment and must be in co-operated into recommendations

around South African retail.

In summary South African retailers still believe that Brick and Mortar has a significant role to play in the

future of retail however they acknowledge that other channels of retailing are becoming more relevant

and must be taken into consideration when planning the future retail format.

21



RECOMMENDATIONS TO SOUTH AFRICAN RETAIL:

REIMAGINE BRICK AND MORTAR STORESAll of the research conducted both locally and internationally confirm that there is a future for brick and

mortar. However the store experience needs to be uplifted. The new buzz word for brick and mortar

stores is “Store Theatre” Retailers will need to improve the experience within stores. We have seen

many examples of this at the international stores and see this as a massive opportunity within local

retailers. The following are elements within store theatre that can be looked at:

New Age Store Staff: The internet has opened the floodgates with respect to technical information.

Customers are now more informed when they shop. It therefore becomes critical that the store staff

attending to a customer is a specialist in the product that they are selling. It is no longer acceptable to

have store staff that are generalist and know little about everything. The new age store staff need to be

absolute specialists in the product they sell.

Making Stores Exciting and Enticing: The future customer wants to walk into a store that is emotively

enticing and engaging. They want a store experience that offers enjoyment and pleasure. Much more

research must go into ensuring that the store deco, the store fixtures, the type of advertising and the

store music all appeals to the customer you target.

Dominance: The customer wants to feel in charge. The way the store is laid out and the ease of

shopping must allow the customer to feel in charge as opposed to feeling lost and confused.

Speak to the Customers Values: It is also key that the environment of the store must speak to the

customer’s value system. A customer feels more comfortable supporting a store that supports their

values. This is becoming more and more critical as we see many brands now start to promote

sustainability and social responsibility in their advertising.

Convenience when shopping: Convenience is becoming a vital element of the shopping experience,

from the ease of parking to conveyor run trolleys; every element of convenience is being explored. The

22



brick and mortar store of the future must explore elements such as mobile cash tellers and trolley

scanners. As part of addressing the element of convenience, pop up stores and kiosks are fast

becoming a new key format in brick and mortar. It allows for to retailing to get closer to the customer

and provides a store format that is less complicated and quick to shop.

In order to test the validity of the recommendations on a re imagined store environment, two trials

conducted by Woolworths in order to drive high footfall and ultimately higher sales in their store were

reviewed. The first trial related to empowering sale staff. One store was used as a trial store where

competent sales staff was selected to be trained and developed on bra fitting specialization. The

employee was put through a detailed training course where she was trained on understanding body

shapes, the transition of breast size through a women’s age cycle and on measuring and selecting the

ideal bra for a customer. The employee was then redeployed in the same store and was assigned

specifically to the women’s lingerie area of the store. The store realized 50% uplift in bra sales in the

first month and a 65% bra uplift by the second month. After a 6 month trial, the sales performance of

the store was reviewed and the store realized a 45% average increase in sales on bras over the six

month period against the same period last year. This result was sufficient for Woolworths to roll out the

bra specialist function into all clothing stores that carried a bra range. Since the introduction of the bra

fit specialist role in stores the Woolworths, market share of the bra market has risen from 28% market

share to 32% market share. The only additional cost incurred had been the cost in developing the

training course and the cost of conducting the actual training

The second trial conducted by Woolworths was the introduction of store theatre. This trial was

conducted in the kidswear area. Woolworths hold a range of Hello Kitty products in their kidswear

department. Woolworths selected a specific Saturday where they brought in the Hello Kitty character

into the store for 2 hours to interact with the customers, give autographs and engage with kids. The

character was then removed from stores after 2 hours and shifted to another store. In total 3 stores

were covered on the one Saturday. The results showed a significantly higher uplift in sales in the stores

that had the Hello Kitty character versus the stores that had no character (see Appendix III). More

interestingly, the stores that had the Hello Kitty character in the stores not only showed a significant

uplift in sales on the Hello Kitty product but also uplift in sales in other areas such as Womenswear and

menswear. By creating Store Theater in the kids area, the entire business saw the benefit.

23



CLICK AND COLLECT IS A KEY STRATEGY

Fifty years ago it was standard practice for housewives to drop their weekly shopping list off at their

local grocer and then collect their food and products later. All of our research in the South African

landscape indicates that extensive research is done on-line before customers go into store to buy the

goods. The click and collect strategy helps keep the customer that has not fully transitioned into on-line

shopping but is at a stage where they are starting to explore and experiment with an omni-channel

retail format. This would mean that the retailer develops a comprehensive and easy to navigate web

site that allows the shopper to shop and purchase the product they want and then go into stores and

collect without joining queues to pay for the product and without wasting time browsing the stores.

Many of the current brick and mortar retailers are opposed to this strategy as it puts opportunistic sales

at risk however there are many on-line marketing strategies that can help promote larger basket buys. It

will be vital that the retailer of the future offers the customer the opportunity to buy on-line and collect in

store.

MOBILE – AFRICA’S MOST POWERFUL RETAIL TOOL

With the extent of mobile penetration in South Africa and Africa, any retailer would be very short sighted

not to include mobile retailing as a key strategy. International Statistics show a doubling in the mobile

purchase transactions in the last year. It would therefore be critical that retailers have a strong mobile

strategy that promotes the use of mobile phones to transact. Beside the purchase transaction, mobile

phones offer the retailer opportunities for cost effective marketing. It can provide convenience with

specific barcode apps that would allow customer to scan barcodes of product in store and get info on

product such as size availability etc. Mobile phones also provide customer location which allows the

retailer to target advertising based on customer location. All of the above factors make mobile retailing

a logical option for the South African Retailer.

ON-LINE RETAIL MAKES SENSE

With on-line retailing growing at a faster pace than brick and mortar retail and with on-line growing at an

average of 15% per year it becomes critical that retailers have an extremely aggressive on-line strategy

that supports their brick and mortar strategy. All of the supporting evidence outlined from the

international immersion supports the need for an on-line strategy. Whilst the levels of growth in South

Africa is not close to the international numbers, there is no doubt that the South African retailers are

24



seeing on-line as a key part of their strategy and every initiative is being made to get into the on-line

market as quickly as possible.

The 2012 Cisco Connected World Technology Report (CCWTR) found that 63% SA respondents purchase

up to 24% of their goods on retail websites

The results for South Africa are based on a survey commissioned by Cisco of 1,800 Generation Y (Gen Y)

university students and young professionals, aged 18 to 30, across 18 countries. This clearly suggests that

the future generation will be looking to transact on-line (See appendix IV)

From all of the research conducted we have been able to answer the question – Is there a future for

brick and mortar retail in South Africa. In summary, the answer is YES, we have learnt that the external

environment influences the customer’s behavior and that the customer’s behavior influences the way in

which they shop. Current research has indicated that the customers shops via various channels and

therefore if we want to retain and grow the customer base we need to be able to meet them at the

various contact points. Our recommendation is therefore an omni-channel retail strategy that

compliments a “re-imagined” brick and mortar with a click and collect, on-line and mobile channel. This

strategy ensures that the customer remains at the centre and heart of the retail strategy.

Omni-channel Retail Recommendation

25



IMPLEMENTATION PLAN

Any retailer faced with the above challenges and recommendations will obviously be struggling with the

big question. What do I do next? Yes, I realize that omni-channel is a reality and that I need to adjust

my business format to meet the customer at any point – but what do I do next?

The following is a proposed implementation plan based on our recommendations. This would be a

general proposal and will need to be modified where appropriate depending on the product being

retailed:

Assess your current retail space footprint and identify the potential channel migration movement that

you can expect based on your product type and your customer profile.

26

On-line Retail Mobile Retail

Click and Collect

Reimagined Brick and

Mortar



Use the expected channel migration to gauge the size and initiatives that you will need to place in

developing an on-line strategy.

Certain product types may require immediate and aggressive interventions whilst other product types

can be put on a more medium term strategy.

Develop the strategy to focus aggressively on mobile transacting.

In developing the strategy, revisit the full value chain impact. Understand how click and collect will

impact on store re-staffing or re-skilling, additional stock rooms and stock movement.

In developing the on-line strategy, evaluate the supply chain format for on-line and the warehousing

format based on the new selling channel.

Carry out an international evaluation of US and European Retailers selling your product types and

understand what shifts they are making in Store Theater and attractions. Identify which ones you think

will have an application to you customer.

IMPLEMENTATION PLAN

27



The implementation plan for omni-channel will therefore follow the following sequence:

1. Identify the product and services you will plan.

2. Through your strategy define the options you will be taking forward based on opportunities defined

for example, Aggressive mobile.

3. Define the user experience you want to achieve for your customer and, based on this model, a

customer solution.

4. Research and develop the tools that would suit your business best.

5. Interlink all interfaces to ensure a consistent customer experience.

6. Continuous review

Since our focus in this project has been on brick and mortar we have unpacked the element of

reimagining the Brick and Mortar with the following implementation suggestions:

28



Intervention Resource Anticipated Cost

Success Measure

1. Develop Sales Specialist

Training Material and TrainerExposure to best practises International Travel

R30000 - R 150000 per staff member

Sales uplift in the area being managed

2. Make Stores more Exciting with an Events Calendar

“Store Theatre”

This will be dependent on events plannedTasting sessions with chefsInteractive TechnologyCartoon Characters in Kids areaCelebrity invites into storesTechnologist in stores explaining and demonstrating product intrinsicsInteractive displays – for example, body scanners Music , aroma other sensory stimulants in store environment

Event dependant

Footfall during eventSales uplift during eventLevel of cross shop

3.Improving Store convenience

Mobile scanners with credit card facilities that saves the time of waiting in a cash register queue

R 50000 per scanner

Customer satisfaction index

Improving trolley to car boot transit- eg conveyors for trolleys

May vary Customer Satisfaction IndexFootfall

Revisit store layout to align to customer behaviour and shopping pattern

Store size and fixtures dependant

Sales uplift

4. Share your values with the customer“Tell the story”

Revised marketing strategyPartnership with other bodies that share your values eg WWF or CANSA, Organic Exchange etc - incorporate in store marketing and displays

Can be halved when partnering with other bodies

Customer satisfaction index

CONCLUSION

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We started off this journey exploring a key question around the future of brick and mortar retailing in a

FMCG and Clothing space. What we have discovered is that answering this question is more about

understanding our changing world. We have learnt that as the environment around us evolves and

develops, the needs, behavioral patterns and priorities of customers change. The future of retail is

about meeting the customer at a place where they want to be met. The future is not purely about brick

and mortar, instead it is about an omni-channel experience made up of brick and mortar, on-line,

mobile and click and collect. Yes, there is a future for brick and mortar however the future brick and

mortar stores needs to be reimagined to meet the new customer needs. The future brick and mortar

store needs to provide theatre that attracts the customer. It needs to provide outstanding and informed

technical staff. The future brick and mortar store needs to provide convenience that shows the future

customer that we value his time and that we have considered his lifestyle.

From our investigations it has become evident that incremental changes and upgrades in a store

environment is no longer sufficient to ensure the survival of brick and mortar stores, the shifts need to

be greater. Stores need to be reimagined into a captivating entertaining and convenient environment

that will lure the customer into a theatre of dreams.

Yes, there is a future for brick and mortar retailing however it must be complimented by re imagined

stores and by other omni-channel meeting points!

30



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http://www.practicalecommerce.com/articles/3671-Showrooming-Challenges-Brick-and-Mortar-Retailers



APPENDIX I

Research Method

Research Audience

Research Question

Interviews Small

Retailers

1. What has the business performance been like over the last year?

2. What have been the biggest challenges over the last year?

3. Has on-line retailing affected your business, if yes, how?

4. Have you made any changes to your business strategy with the advent of

on-line retailers?

5. Do you have an on-line strategy?

6. Do you have any plans to change your store format?

7. Are you happy with the size of your business?

8. Do you see any opportunity to change your business model?

9. What is your staff complement?

Research Method

Research Audience

Research Question

Interviews Big Box

Retailers



3. How do these key international factors relate to your customer?

4. Who is your future customer and what are the needs of the future customer in

relation to shopping habits and lifestyle preferences?

5. What has been the historic evolution of retail space in your industry’s landscape

in the last few years?

6. What are the approaches of local retailers to the expansion into Africa with

respects to Brick and Mortar versus on-line?

7. What is your business growth strategy going forward (split between on-line and

physical)?

8. Has your supply chain model changed in response to your business format?

9. What is government’s perspective on the future of the retail sector?

10.How has on-line retailing impacted on the skills required for your staff?

Research Method

Research Audience

Research Question

Interviews On-line

Businesses



33



3. How do these key international factors relate to your customer?

4. Who is your future customer and what are the needs of the future customer in

relation to shopping habits and lifestyle preferences?

5. What has been the historic evolution of retail space in your industry’s landscape

in the last few years?

6. What are the approaches of local retailers to the expansion into Africa with

respects to Brick and Mortar versus on-line?

7. What is your business growth strategy going forward?

8. Has your supply chain model changed in response to your business format

9. What is government’s perspective on the future of the retail sector?

Research Method

Research Audience

Research Question

Interviews Industry

Experts

1. What is the future of bricks and mortar retailing in South Africa within the FMCG

and Clothing sectors?

2. What has research shown on customer preferences (on-line vs retailers) and

are there specific factors that inform this (for example, age, LSM group, etc.)

3. What type of skills does your business currently require?

34



APPENDIX IIa) Interview Session held with Nikki Cockroft – Head of On-line Woolworths

1. What are the international trends on brick and mortar versus on-line retail?All of the international trends are suggesting a customer centric approach towards retailing. It’s all

about meeting and interacting with the customer in a space where they are most comfortable and

accessible. This can include any and all channels form in store to mobile to on-line. All of the

international statistics is that as a percentage, on-line sales are growing faster than traditional

brick and mortar.

2. What are the key international factors supporting this trend?The factors supporting this trend are the advent of technology and the change in individual

lifestyle. Time is becoming more and scarcer and individuals are looking for ease and speed. On-

line and mobile offers them that advantage. The pace of technology is also ensuring that more

and more people have accessibility to technology hence it becomes easier to transact in this

manner.

3. Do you still see a place for brick and mortar in this country?Yes, absolutely. People are going to always want to shop in stores. The latest survey conducted

by Woolworths revealed the following:

There is still a strong support from our customers to want to go into the store however they are

also looking for an easier experience in store. Shopping is fast becoming `shopetainment’, it’s

35



about Store Theater and about the customer wanting to go into the stores for the experience.

Therefore whilst we have an aggressive on-line strategy we also have an aggressive store

improvement strategy. We are building mega stores and improving store deco.

What is Woolworths Strategy with respects to Brick and Mortar and on-line retail?We have just employed a Director for on-line (which is my new boss). This suggests how serious

the business is about on-line. We are seeing it as an omni-channel strategy that includes brick

and mortar, on-line, mobile

The view is that the Woolworths customer is familiar with the web and will want to go on-line.

Even though the internet penetrations are low, mobile penetration remains a massive opportunity.

36



The above chart will justify and illustrate how customers are moving in between on-line and

instore and it presents a strong case as to why we believe that both on-line and instore is the way

of the future, bearing in mind that on-line will grow more aggressively.

What is your retail vision for the future?

37



Interview Session held with Donald Freison – Chief Integration Officer - WalMartThe topic of the discussion was The retail companies views on the future impact of on-line

shopping on current brick and mortar business and at what speed these companies are adopting

and incorporating the new technology into their current businesses.

Alpheus started by asking whether the South African Retailers were concerned with the growth of

internet users and the number of consumers who are doing on-line shopping in South Africa and

Africa.

Don told Alpheus that the South African retailers are not really concerned about the current

growth of this market due to the following reasons:

Internet is still expensive in this country to create critical mass market

The infrastructure development both in South Africa and Africa is probably ten years behind to

those of developed markets.

The retail competition in this country is still dominated by brick and mortar business formats.

Shopping is a social event, therapy and experience

However having said all that he conceded that there are categories of merchandise that are

currently and hugely affected by this new form of shopping such as movies, music, books and

some electronic goods. As a result the South African retailers are starting to offer such services

to this new market in a small scale.

Alpheus further asks him whether the South African companies have strategy in place to

embrace the technology. Alpheus mentioned to Don that talking to a few retail commentators

overseas about the effect of on-line shopping on brick and mortar such as Natalie from Planet

Retail and Christine from Retail Association in UK, the view was that most big retailers were fast

reviewing the size of their business models making them smaller and lot more convenient.

Don is of the view that the South African retailers have the right size models which can compete

effectively with on-line shopping on convenience, experience, range, service and price. He sees

these retailers having a much more advantage over any other form of retail due to their

geographical spread and locations throughout South Africa while the rest of Africa provides a

totally new retail market for growth opportunities. He does believe though that some general

merchandise retailers might be over ranged which in itself is an opportunity to introduce totally

new offerings in the market such as food at much lower prices because of the cost benefit

derived from the occupancy cost due to better utilization of current real estate. Like Jason

38



Richard from Pepsco UK, Don argues that the technology is not new or still coming but it is here

and is up to the retailers to choose the one most suited for their business model.

Don does feel that there is still a lot of work to be done by brick and mortar retailers to compete

with on-line shopping in the following areas:

Instore experience/ excitements

Customer engagement by retail team members

Inventory management - stock availability

Trust relationship

Supply chain management systems

Alpheus further asked Don whether there were any glaring advantages that brick and mortar has

over on-line shopping which the retailers can maximize

Visiting these shops has become more of Social events than just shopping

Touch and feel the product

Flexibility of combining brick and mortar with on-line shopping

Flexibility of payments and collection or drop off points due to stores locations

Fast and efficient reverse logistics

Security of payment and control of merchandise

Savings on delivery charges

Total peace of mind

Alpheus asks Don whether he felt the South African retail market was saturated and over traded

already.

Don's view is that this market is nowhere near saturation point however to increase the basket

value and foot count, the retailers need to develop new markets within the country by changing a

few tactics and strategy such as sourcing and marketing. The retailers need to start developing

local small and medium suppliers/ enterprises in manufacturing and local agricultural producers.

In this way the retailers will create jobs and make goods affordable thus creating new markets.

He also feels there is a huge need for setting up pop stores in underserved and undeveloped

markets to introduce new ranges of products and test these markets which could lead in the

development of tailor made range to suit them.

Finally Alpheus asked Don when all said and done how much business Don believes will be done

on Brick and mortar considering that Jason Richard from Pepsco UK/AFRICA believes will be 80

39



%. Don believes it will be slightly lower than 80% but 60% however on-line shopping will be used

by competitors as a huge competitive advantage and it would be suicidal for any business not to

embrace the technology.

Interview Session held with Paul Marsh – Chief Operating Officer – EHL Group

Paul Marsh is a Chief Operating Officer for the EHL Group i.e. Ellerines Holding with 6 different brands

-) Ellerines, Bears, Weatherly’s, Furniture City, Dial-A-Bed and Geen and Richard. Paul has had

several senior positions within the industry, he hails from Makro with a mountain amount of experience.

Paul is currently heading a new division of virtual/On-line within the group.

Question: What is the Future for Brick and Mortar within the South African Retail?

Answer: “Yes there is, South African business must now review their business strategy as a matter of

urgency given the changes that are rapid in the retail industry. These changes are influenced by a

number of things. E-commerce, on-line shopping and the social network. Malls and shopping centres

are no longer just places to do shopping, they are more of relaxation places where people walkabout.

Today’s consumers want the All in One principle which simply means all under one roof i.e. Banking,

Internet café’, Clothing shops, Movie places, Restaurants, Gymnasium and many more. It is all about

how well Brick & Mortar presents itself to the public. You can see that a lot of retailers are renovating,

relocating and rebranding even, just to speak to the consumer. Take a classic example of Spitz; they

have repositioned themselves by disintegrating certain brands to stand alone by operating

independently i.e. Kurt Geiger and Carvela. Spitz was responding to the consumer behaviour.

Question: What do you think will be the impact of on-line shopping to the existence of Big Box?

Answer: Amazon, Google Drive, eBooks and many other offerings available on-line obviously affects

the revenue turnover in the Big Box retailers. Brick & Mortar must make sure that whatever

developments and/or changes they introduce are to the benefit of the customer’s convenience.

Consumers hate long queues and some don’t just like overcrowding. The All in One principle is not bad

but the solution is a complementary type of service where one can option for manual or digital at no

inconvenience. A customer must be able to view the catalogue and order on-line if they want to at the

comfort of their home or even while in store, let them go to the store for the reason like if they want a

feel ‘n touch of the product or even fitting it. If the company does not see the need of beefing up their

40



technology to complement their theatre, the impact will even be worse and could lead to the business

closing.

Interview Session held with Robert Daniel – Head of Property – EHL Group

Robert Daniel is Head of Property at the EHL Group, he looks after all new store developments within

the business. Robert was an ILDP student in class of 2012. He has been with the company for years

and built a good reputation through his skillful site reservations.

Question: What is the Future for Brick and Mortar (B&M) within the South African Retail? If so, why?

Answer: “For sure, the future is certain for the Brick and Mortar. Without going far or making

unsubstantiated remarks, I will take you closer. As a person in charge of securing and negotiating

property for the group I will give you an indication of where the big Box is going. I know of at least 15

malls being renovated in Gauteng of which we are eying to move into them, we are planning to open 9

new stores across the group in the financial year 2013. In the malls we are moving into, there are food

and clothing stores moving in as well and this on its own is an indication that Brick & Mortar is here to

stay. What I have seen though in the structural change is that space has become a bigger issue in the

Bricks & Mortar, the same with us, we have reduced most of our stores from 2000 sqm to 1000 and we

still make the same turnover and sometimes even more. I think we don’t see more customers coming to

the stores, they view or shop in the comfort of their home and only come through to the store to do one

final touch to the product to finalize the purchase. As a result there is a low foot-count in the stores; B &

M has become a weekend place. Boardman as well, they are FMCG and they have reduced their

trading space from about 1200 sqm to 600 -) this is a 50% reduction and yet they still achieve their

targets, this is smart trading. Build small stores with more focus to customer centricism.

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Interview Session held with Susan Mawer – Managing Executive – Furniture City, Dial a Bed, Geen and Richards (G&R)

Although Susan is currently leading one of the biggest Furniture retailer in the country, she has an

extensive experience across the retail industry and holds an MBA qualifications, in fact she has more

experience in FMCG than where she is now. To top up on her position and knowledge of the industry,

she is a lecturer at GIBS.

Question: Is there a future for Brick & Mortar retail in SA and why?Answer: “Retail in a form of Brick and Mortar, Box as well knows has been there for ages. Yes there is

definitely a future especially in the South African context. As said that it has been there for decades if

not centuries. South Africa is a new entrant in the global arena in term of business. South African are

still feeling good about going out to do shopping, sure you can see by how full the malls and shopping

centres every day and especially on weekends.

Question: What are the key international factors supporting this trend?Answer: “A very good question, ask yourself how many international companies came back to re-

invest in SA and how many new ones. Barclay’s Bank, Pepsi and ZARA and many more in the form of

new investment.

Question: How do these International factors relate to South African Customer?Answer: When companies invest in the country, they must have seen a business opportunity, they

don’t come into the country to teach consumers how to behave or spend their monies. This is where

relationships play a pivotal role that is why you will see that foreign investors prefer to partner with local

business so that they can adjust to the SA environment. Of course there are international trends that

42

Customer is a King



local consumers begin to bring home which influence the buying behaviours of which in turn this

influence the way business is done as well. Introduction of computers brought about a big change in

both consumer and business behaviour.

Question: You have mentioned relationships; would you please elaborate on that as how do

relationships impact on the sustainability of the future of Brick & Mortar?

Answer: “When two or more people come together to do business, firstly they must have or share the

same common goal to be able to work towards the same objective. With South African business

understanding the market [consumer] and the environment and on the other side the investor bringing

money, products and expertise, what is key is providing the service and making money as a result of

investment. The consumer is a deciding factor here as to what product I want, when do I want it, how

do I want it and most probably how much I am prepared to pay.

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APPENDIX III

From: Julie Cockcroft [mailto:[email protected]] Sent: 04 February 2013 08:03 AMTo: CB&GM Group 3 Kids; Sheri Hasson; Ike Hasson; Jenny Wolfaardt; TxtMgr Canal Walk CT; StoreMgr Canal Walk CTSubject: Hello Kitty at WW Canal WalkImportance: High

Dear all

Hello Kitty launched on Friday in WW stores. Below find a summary of performance:

Top selling items were bags, plush and stationery. Eastgate & Gateway each sold 1 units (sold out) on the R1999/ R2500 HK Suitcases.

Not surprisingly Canal walk was the top store where Hello Kitty put in an appearance and rocked Canal! Hello Kitty was supposed to work for 45 minutes but because of the crowds she stayed for 2 ½ hours! Thank you Hello Kitty – photo’s to follow. At 2pm she had to go home for a nap – she was soooo exhausted after all that excitement. A special thanks to the store for hosting Hello Kitty and arranging crowd control – the only tears shed were of excitement!

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mailto:[email protected]



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APPENDIX IV

South Africa’s Gen Y buys on-line

By Staff Writer | 27 December 2012

As the festive shopping season gathers momentum, new research conducted by technology group Cisco

reveals that 69% of South Africa’s generation Y population shops on-line.

The 2012 Cisco Connected World Technology Report (CCWTR) finds that 63% of SA respondents purchase

up to 24% of their goods on retail websites

The results for South Africa are based on a survey commissioned by Cisco of 1,800 Generation Y (Gen Y)

university students and young professionals, aged 18 to 30, across 18 countries.

Additional highlights

· Privacy versus coupons and discounts

Nearly 60% of South African respondents are willing to share their email address with stores and on-line

sites in order to receive notices about discounts and sales. However, a very small percentage of these

consumers would be willing to share their phone number, home address, or similar information.

· The importance of on-line reviews

65% report using on-line reviews at least occasionally when making purchasing decisions. However, of all

the consumers surveyed worldwide, South Africans were found to be least likely to use on-line reviews prior

to making purchases, as more than one third indicated they rarely or never do so.

· Tracking and analysing consumer activity

The growing interest and reliance on internet retail sites means that there is an increase in on-line data,

presenting greater opportunities for marketing and sales campaigns that are based on analysing, correlating,

and cross-referencing consumer data.

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http://businesstech.co.za/news/author/staff-writer/



Big Data analysis is being adopted at a rapid rate by retailers, both for retail stores and on-line sites.

Almost half of the South African respondents are conscious that many stores are likely to track and analyse

customer activity and shopping habits, but most express their disapproval of the idea. A quarter of the

respondents was unaware of such monitoring and also expressed their distaste for it.

· Lack of consumer trust

Although consumers love the convenience of on-line shopping, over four out of five Gen Y respondents,

globally, stated that they do not trust most Internet sites to keep their private data safe.

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APPENDIX V

South African Customer Survey

48



49



50



Do you feel that bricks and mortar/physical stores will survive in the face of mobile and on-line shopping options? Why do you say so?

Yes, people like to touch what they buy - get the real feel of the product before buying it.

No..Amounts involved are too high and risk too big

Human Touch is irreplaceable. I'd rather interact with people than machines.

Yes, but they will struggle if they attempt to compete on price alone. Product knowledge, customer service and "add ons" need to be the focus. eg delivery with installation, hands-on demonstration of products etc

Yes, they say the same about books and newspapers, I think it will take a long time for that mind-shift to really change towards on-line shopping.

Yes they will. People still have the need to physically see and feel the product that they are looking to purchase. Whereas something on-line, you may buy it but when you receive it, it may not be what you expected.

With the help from sales staff you can make decisions readily and do the purchase of materials.

Yes, the experience of going to a mall or shop is far better and stimulating than on-line shopping. Also the ability to touch, feel and smell and product is irreplaceable.

Yes. Shopping is still an outing/type of escape to most females. Many females still like to touch & try actual items prior to purchasing such.

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Brick and mortar is more than just shopping, families use this time for outing and meeting friends as well. What is of great importance is the convenience caused by shopping centers.

Yes, they definitely will. The reason for this is that sometimes, there are just certain things you prefer to see and test/try before you buy. Also, you feel more secure buying from a store where you're face-to-face with a sales assistant. Also, there are lots of people who do not have access to the internet and who do not have credit card facilities to purchase on-line. i don’t think that Physical stores will ever die out or have trouble surviving.

Always - its a totally different experience, but sales will drop.

Yes. I believe there will be more integration between the on-line store and the physical store. People still love touching and feeling things and people are different so some will love on-line and others will prefer a store. But for physical stores to survive they will need to create a REAL experience that makes it worthwhile for the customer to step out of their home. Like for example if you visit Melrose Arch Edgars, you can get a personalised fashion consultant who can hook you up from head to toe with the best fashion and style advice for your body shape. That is the future - the experience. It is the only way the physical stores can survive and to integrate that physical store experience with the on-line offering. It cannot be one or the other.

Yes - because there is a broader range of goods available in physical stores; because one can touch and feel products before purchasing them; because there is less of a security risk in terms of fraud.

yes, because shopping is not just about acquisition, it is also a social and aesthetic process

Yes - People still want to go out of their houses

Yes. They adress different needs. Retail stores is more than just fulfilling the need to purchase, it is a family activity and stimulating experience.

There will always be a place for bricks and mortar, but it has to be an "outing" of note - entertainment will have to be part of the package.

Yes and no. South Africa has a very diverse culture and a small percentage has access to on-line shopping and a actual address where goods can be delivered. Smart phones are also too expensive and near field communications (pay with your cellphone) is not mature yet. Our government and private sector can play a big part in driving this, for example Shop-rite Checkers with their new phone app and FNB allowing customers to experience cellphone innovation. I think our economy will help drive the adoption of mobile phones and on-line shopping quicker as we have to find smarter ways to do business.

Yes, until every person has access to the internet and is educated on how to use it, it will.

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Yes they will: while people like what on-line shopping offers they also love the look, feel and smell of the brick and mortar store. Also some things you won't buy on-line...

yes. feel fabrics!

Yes - for fmcg products (freshness/ short notice availability). Family outing/ shopping experience/ social experience

Yes. Sometimes you just want to get out and experience the "shopping" feeling.

Yes, there is an emotional / psychological aspect to physical shopping

Bricks and mortar should survive, but they may have to get much smaller and move to cheaper retail space. I read that in Australia, clothing stores are starting to charge customers who want to try on clothing, as so many people try on the clothes in the store and then order on-line from a competitor.

Yes. The why I say that is because in most instances I like to see what I am purchasing. Commodities sometimes look so different on a picture.

They would but with different offerings, e.g. as a delivery point for on-line products e.t.c.

Yes, shopping is an experience - not only a fulfilment of a need

Yes. Bricks and mortar will survive because they will adapt their offering to meet emotional and status needs of customers.

Yes. 1) Groceries and fresh produce stores will survive, unless on-line stores make guarantees that they will select the freshest produce in store (i.e. that pickers will select the latest sell-by dates) 2) Clothing and apparel - people still like to browse until they find a "style" that they are familiar enough with to purchase on-line. However, fashion changes and therefore this will mean that customers continue to shop in store. 3) Do i see myself purchasing a big ticket item (car, house, etc.) without inspecting it thoroughly first and doing a test drive? Not likely. 4) However, due to the fact that customers will get more and more comfortable with on-line shopping, combined with the efficiency that one checks out with in an on-line environment, this will likely lead to customer expectations rising incrementally (considering the high mobile penetration, etc.)

In my opinion - no. I think on-line shopping is quicker and eliminates the long queues. The shopping bags, people, driving long distances to stores etc.

They won't survive because their service is poor and their prices high.

Yes, because although it is sometimes more convenient to shop on-line, it is also much better to be able to go into a store and physically hold and look at the product before you buy it.

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Yes, there are still a lot of people that like to see the physical product before purchasing. The on-line shops doesn’t always give you the info needed to do a purchase

Yes, there will always be people who prefer the touch and feel before they buy

Yes, due to its traditional customers and people who spend time outside the home by shopping calling it a relaxing experience or an outing.

Yes I do, especially with clothing, shoes, etc., a lot of people are still not comfortable with on-line purchases. Even if you are comfortable, people still like try on things before they buy. Retails therapy with friends will never fade, I don't think so

Yes they may have a foot print

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APPENDIX VI

POP UP STORES

The pop-up store concept has been rapidly growing within the mainstream retail environment. This

refers to temporary retail spaces that spring up in disused premises or purpose-built venues, before

disappearing—often without warning. The concept extends to restaurants, galleries and even

nightclubs, but has previously been seen as an option for up-and-coming businesses, not multinational

corporations. This has now changed with major retailers also using the opportunity to generate interest

and entice customers. Of course, this helps to relieve the pressure on long term leases in traditional

shopping centres. This “popping up” in a small space with limited stock creates a sense of urgency,

anticipation and valuable brand/product recognition.

On-line stores too are proving to be exciting new adopters of the pop-up idea by creating limited edition

products or collections.

The supermarket giant, Tescos, set up a version of its fashion store, F&F in Covent Garden, central

London, for four days during Queen Elizabeth II's Jubilee celebrations in May, and recently opened a

temporary grocery store in east London, near the site of the Olympic and Paralympic Games. A

spokeswoman for Tesco said the F&F store had been visited by more than 2,500 customers over the

four days; however actual sales figures were not provided.

The Tiffany Tuck Shop by Tiffany & Co appeared outside a skating rink in London and provided Tiffany

branded cupcakes and hot drinks. The result is a humanizing of a large company without the scary

security of pop-up shop diamonds! It also showcases that flash retail products don’t need to match in-

store items. The Adidas pop-up in Buenos Aires is a clever play on their iconic shoebox. These boxes

were placed in different unpublicised places in different cities.

It appears that pop-up stores starting to take off in South Africa, as well. TLC had planned to sell their

furniture solely on-line but customers wanted to see what they were buying in person so they opened a

pop-up store at Space Station for Life. Unknown Union have partnered with Topshop and Topman to

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launch a shop-with-a-shop. A selection of men’s and women’s fashion is on show and they guarantee

that there is only one of each style.

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APPENDIX VII

STATEMENTS MADE BY BIG SOUTH AFRICAN BUSINESSES ON THE FUTURE OF ON-LINE RETAIL

“Smart phone penetration will reach 80% in south Africa by 2014.” Gartner

“The future of retail around the world, including South Africa is inextricably connected to technology and

the internet.” JP Morgan

“Over the past 12 months, we have seen increases in e-Commerce sectors : Fashion (78% growth),

Health & Wellness (59% growth), and Automotive Accessories (56% growth)” Visa

“On-line purchasing would account for 1.5% of all retail shopping in South Africa by 2016.”

Fontera

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When I first heard that I was accepted on the programme I was not quite sure what to expect. I was always concerned that this was going to be a typical management programme with lots of theory and limited opportunity for application. Was I in for a surprise!!The ILDP program is nothing short of life changing. It has shifted my paradigms, challenged my thinking and repositioned the way I look at myself, my job and my future.

The biggest part of the learning experience has been through the ALP project. It has allowed me to meet and engage with some of the greatest minds in industry and in the academic world. Through this program I have been afforded the opportunity to travel to the ends of the world and to engage with individuals who are leading world authorities in their fields. This was certainly a once in a lifetime opportunity.

Whilst the project topic was not our first choice, we soon realized that as a topic it was probably the most powerful and spoke to genuine concerns and opportunities with respects to brick and motar stores in South Africa

Through the project I have learnt about benchmarking and about opportunities that exists for us in our retail space. I have learnt about problem solving and about the methods to identify opportunities.

Through my learnings from this ALP project, I have changed the way I approach my role as a business leader. I now look at leadership in a new context. I have learnt to better understand the external environment and appreciate the root causes of issues as opposed to what I see on the surface. I have been equipped with the tools and the skills to redefine my purpose in my organisation.

My learning’s have not just been limited to the workplace. I have gained a deeper understanding of this country and the challenges that we face, I have learnt the role that I can play in influencing change.

With respects to people dynamics, the ALP project taught me the power of multiple perspectives. We have gone through a journey as a team from norming to storming and we eventually came through performing. It has been a remarkable process.

As a nation we have begun a journey of change. Upon completion of this course we all face this country as new agents of change. Each of us aspiring to become the new building block of a new future. I now take with me a dutiful obligation to plough back into our great country the learnings , teachings and experiences that I have gained on this incredible ILDP journey.

I truly feel privileged and grateful for being given this outstanding opportunity. My expectations from this course were met and surpassed. I am a better individual, I am a more effective retailer, I am a more informed citizen and most importantly I am now a catalyst for change in this great nation.

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PERSONAL REFLECTION – ACTION LEARNING PROJECT (ALP) – LAWRENCE PILLAY



It is no doubt to me, that some of the greatest learnings out of the programme came of out the work that

we did in the ALP. Our topic on the future of Bricks and Mortar (B&M) was our second choice and after

getting over the disappointment of not getting the topic that we wanted, we started our research into the

topic. I was really amazed at the number of articles and papers that were out there on the topic. It also

seemed that everywhere I went, the topic was being somehow discussed and debated – perhaps, it

was just that my awareness was now raised around this very issue. Being from a predominantly

printed media company, we have already felt the impact of digital and online media on the sales of our

printed copies of magazines, books and newspapers.

The interesting thing is that when I started off thinking about this topic, I believed that B & M would be

seriously threatened and there would be no future. However, the more I read and coupled with our

international store visits, I realised that there was a great future for B&M formats – they would just need

to look different and appeal to the very high expectations of customers.

Apart from the learnings around the topic, we had a fair amount of learnings around team dynamics and

trying to achieve the best outcome. The biggest challenge was the fact that the six of us were based in

4 different provinces and we had limited time to engage with each other face to face. We had to rely on

telephone and email contact when we needed to talk through issues on the project or had questions. It

was tough to try and keep everyone engaged as once everyone went back home after a Study Block,

the main priority was catching up on work priorities. However, it was gratifying to see how everyone

pulled together and took collective ownership for the deliverables.

In short, the ALP experience was just as significant as the international study tour as well as the formal

Study Blocks. I think we had a great team and believe that we worked well together to deliver a sound

and credible project.

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PERSONAL REFLECTION – ACTION LEARNING PROJECT (ALP) – NADYA HOOSEN



Team Dynamics

Our syndicate comprises of 5 people with vast knowledge and experience in various fields of retail,

Human Capital [HR], Merchandise Sourcing [International Sourcing], FMC Operations [Branch

Management], Furniture Retail Operations, FMCG Operations [Africa] and Procurement [SETA].

Our team managed to pull together right from the beginning with setting the ground rules, great

leadership. It is an experience that shows a high level of maturity when one as a leader in own right

allows to be led by another person in a diverse environment. This made each member of the team

understands his/her role and the deliverables expected. Through consistent communication, sharing of

information and own internal expertise of team members, as a team member this made me understand

the topic even better than I initially did.

International Exposure

Northern America. Penn State * the Supply chain course attended, it played a major role in

understanding the international standards, taking a tour through REI Bedford a Green Distribution

Center. This is a centralized distribution that works efficiently and effectively to feed the Brick and

Mortar retail stores with merchandise as and when need arose to be sustainable in their operations.

My understanding from this experience was that for the B & M store to be effective in its service and

to offer a fast and efficient consumer experience, critical is the supply of merchandise to the end

destination [customer] on time.

Retail Safari in New York– walking the streets of 5th street door to door was a highlighting

experience of how retailers respond to customer expectations/behaviour. * Visiting Nike store, their

entrance was so theatrical and inviting to customers. * ZARA store, in the lead time given to

customised customer order, staff product knowledge was immense which makes customer

engagement with them an easy one.* DMD Retail Design confirmed that when designing stores

they create the environment the customer would want to in. This was followed by visits to other

companies such as Planet Retail which confirmed the importance of keeping the customer in mind

with the development of any product or design of the store and its location for that matter, all the

industry leaders we engaged with emphasised the importance of a customer in mind. All the

research, information and knowledge acquired internationally made it more feasible to work on the

South African retail environment to get both the business view and the customer’s view.

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PERSONAL REFLECTION – ACTION LEARNING PROJECT (ALP) – VELAPHI FISHER



South African Retail. Working on an ALP can be very difficult, fulfilling and educating at the same

time. When I had to do a research with the industry leaders in the country, it was somehow difficult

and I believe that this was more due to lack of dedication to researchers by leaders. While not

comparing directly the level of knowledge about retail surely I understand that South Africa was

responding in the way they do because Brick and Mortar is not as yet in threat as it is in the first

world countries who are well developed. As an industry leader myself in a lower level, I can apply

what I have learned from the ALP.

At first, I was very skeptical not knowing what to expect and how our group will be able to pull things

together. Despite these feelings, the knowledge gained from Strategic Leadership, Personal Mastery

and ALP Methodology modules, made the transition period much more tranquil and shaped the context

for what was to unfold in the next few months. Getting to know my team and understanding their

background and personalities gave me the comfort that we will be able to achieve the objectives of this

project. The insights feedback assisted me in understanding my own personality and that of my other

team members

Coming from an environment where I have not been exposed with the dynamics and mechanics of

retailing industry my knowledge was very limited. It is for this reason that one of the biggest learning’s I

have gained from this project has been from my ALP team members and the extended group. I was

privileged to be part of team of knowledgeable retailers from various disciplines, who are truly

passionate and dedicated at what they do. I have learnt so much from my interaction with these

individuals. Through the continuous feedback and reflection sessions (which was really unbiased when

our ALP team) with the intent of continuous improvement, my strengths and weakness became

apparent and together with their support I have been able to overcome my challenges. This project has

made me realised the importance of team work, teams dynamics, scanning one’s environment locally

and internationally and the sheer importance of leadership how this can all assist you as growing at

becoming a better letter leader..

Our Action Learning Project, The Future of Bricks and Mortar, may seem simple to be a fairly simple

topic. The manner in which we approached this topic by first understanding the topic and thereafter

dissecting the areas of importance and sharing the responsibilities to eventually arrive at a solution was

61

PERSONAL REFLECTION – ACTION LEARNING PROJECT (ALP) – MUSHTAQ WAJOODEEN



a great learning experience. The idea of research has broadened my view of obtaining knowledge and

insights form all spheres of information. Team dynamics played a vital role in the success of this

project, the importance to leverage on individuals strength’s and very important, how to identify

weaknesses or challenges and thereafter providing the necessary support to overcome this has truly

grown me as an individual.

The concept of immersions was yet another new learning experience for me. While embarking on our

immersions locally and internationally our ALP topic was always at the forefront of our discussions.

During our international immersion what was profound to see was how generous and transparent the

leaders were (retailers and industry experts) in imparting their knowledge. What was also key, is the

value placed on the customer, understanding their needs and providing an in-store experience in order

to retain and appeal to future customers. In addition, what stood out for me was the leadership in

companies we visited. The concept of leadership lived across all levels of the organisation through their

sense of immodesty, their generosity in terms of imparting knowledge and sharing their lessons learnt.

What also struck me and has come out with all of my interfaces during this project was the key

importance and understanding of Innovation, collaboration and the value of human capital. This is

undisputable the secret to success and sustainable growth to any organisation.

This programme came with a number of challenges however worthwhile learning’s and experiences of

which will not be easily forgotten. I am of the opinion and convinced that his method of leadership

development will ensure that training remains relevant and practical.

Having been working in the retail industry since August, 1981, I always felt that there was always a gap

in my retail experience. I always felt I needed something that can enable me to become fully me,

something to create more zest and desire to do more than average and finally something to round off

this31 years of exposure to this dynamic industry. I’m pleased to say in ILDP I’ve found it.

I see ILDP experience as a bridge to take me well beyond my day to day duties in my current position

at work. Modules like strategic thinking, creative thinking and scenario planning have helped me

develop that extra eye to see what an average manager cannot see which I believe is one of the true

attributes and qualities of true leadership. The exposure to personal mastery and ALP have taught me

immensely the art of leading and developed the skill to effectively manage up, down and laterally. This

gave me the chance to experience the true sense of Emotional Intelligence and also to realize that to

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PERSONAL REFLECTION – ACTION LEARNING PROJECT (ALP) – ALPHEUS MSELEKU



create a strong team one requires a diverse group of people who bring in with them different strengths

and personalities. This creates stimulating discussions and shapes the group ideas which leads and

produces an aligned and successful team. This style of leadership makes people realize that there is

not just one idea but many. It is almost like taking a picture of an object at different angles.

The economic, supplier chain management, retail safari, plenary sessions and business visits modules

have made me realized the true sense of globalization, benchmarking, local opportunities, the future

and challenges of African economic as a continent seen by the powerful and influential economic

commentators and global players. Co-operation, trust, support, partnership and security seem to be the

most ingredients required in our country and the rest of the world as one of our lecturer pointed out that

the days of doing it alone are long gone. We are living in the age of partnership and co-operations.

I believe South Africa is sitting on immense opportunity in Co-operative businesses. It is my view and

other commentators that this sector could be the silver bullet we have to create new markets and new

jobs of which this country is so desperately in need. In fact the government is also pinning its hope in

this sector to create 5000,000 jobs. However this will require a great co-operation and trust among the

new business prospects, government and organized businesses. When I was in UK I truly fell in love

with this business concept because of its success in the country. I’m told that the fifth biggest retailer in

UK is a co-operative business operated by Co-operative Group. I was further inspired by the visit to The

People’s Supermarket which is operated by the members of the local community. These people have

economically empowered themselves and done so well that the Spar Group has taken them under their

wing and implementing world class stock management systems. I since obtained more information

about the possibility of this sector growth and found that today India has one of the biggest co-operative

business in the world. It is my sincere view that this sector should be thoroughly investigated for

possible opportunities of getting the masses into economic mainstream. There are many good

examples and models in the world from which as a country we can learn.

I personally want to pursue this idea with the people who are prepared to work hard and not looking for

immediate profit but prepared to invest in the future. I believe we have enough talent in the country may

be not so much skill but that we can easily develop.

All we need is to identify people with the right attitude and provide them with leadership and direction

then of course the resources which some of it our government has already set aside.

I knew it was never going to be easy to participate in this programme but it has been a pain worth

enduring.

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With that in mind I thank MassDiscounters Executive team and W&R SETA for affording me this lifetime

opportunity which makes me feel like the world is mine.

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