Africa shoprite

FoundedastheNewBauhausin1937,Chicago’sInstituteofDesign,IIT
isacenterforadvancedstudyinhuman-centeredinnovation.
Learnmore:www.id.iit.edu
May 8, 2007
The SHOPRITE group.
“Design thinking business approach”
Emerging Markets study case
Elisabeth Martinez De Morentin
Paper developed for: ID Strategic Design Research course. Using a
design thinking approach, to help develop a design research plan for
The Institute of Design to conduct research in the near future.
Professor: Patrick Whitney

Elisabeth M de Morentin, The Shoprite group
InstituteofDesign,IllinoisInstituteofTechnologywww.id.iit.edu

May8,2007
Abstract
The objective of this paper is to summaries Shoprite current situation, study Shoprite
successfully expansion, identifying emerging markets across Africa countries, under
political corruption and social poverty obstacles. This paper revels, Shoprite initiatives
and models, analyzing them employing a design thinking approach.
Design/methodology/approach. Web-based secondary external research,
newspaper articles, magazines stories and case studies, references are included. The
paper provides an overview of the company’s products/brands, distribution channels
[purchase points], operating markets, company organization, growth history and key
events. The paper presents how Shoprite maintains its position on the cutting age of
Africa’s food retailer Industry, their future expansion plans, and design implications
related to their internal and external plans that could affect their long-term growth.
Findings. Shoprite group has been growing primarily on the southern hemisphere of
Africa continent. From its launched on 1979 with the acquisition of eight Cape based
supermarkets to 886 corporate outlets on 2006. Slow grow, a key social and cultural
pattern, to learn about the different local consumer [users] throughout their Africa
continent expansion.
Covering a big range of all consumers’ income levels, targeting primarily low-income
market a huge base of potential customers and large untapped market opportunity in
Africa.
And exploratory analysis of results, suggest that the success of initiatives targeting
low and middle income markets and variety of product on one stop shopping, is
enhanced by recognizing that Western-style model of economies [retail] are placing
a role of African’s life stile costumer behavior thanks to the embedded globalization
“web trend”. Shoprite recognized it, and implemented it as a platform on all their
purchase points.
Business strategies include developing relationships with non-traditional partners, co-
inventing custom solutions, needs, and building local capacities/relationships [social],
elaborating cultural localization approach on their purchase points and products.
Political and governmental affairs, partnerships and alliances had been one of the key
Shoprite’s forces to position them-shelves as the Africa’s food retailer industry leader.
Alliances with non-governmental organizations to address social “issues” has been
and other Shoprite value strategy to gain consumer trust i.e.:
-Encourage and support Africa’s employment and economic growth to rural areas and
promote black economic entities.
-Developed and implemented an HIV/AIDS educational program for its workforce.
Value. Design thinking approach on the content interpretation, and paying specific
attention to human factors implications, and by understanding how Shoprite
successfully grow over time through Africa continent, the paper provides a model into
what cultural, and social human factors may need to be considered by businesses
to vision potential emerging markets, and demographic extension to enter into new
markets.

May8,2007
Keywords. Design, slow grow strategy, untapped emerging Markets, low-income
markets.
Article Type. Viewpoint, [secondary research].
Introduction
Summarize report to examining and understanding The Shoprite Group, providing an
overview of the organization. Identify research and design thinking initiatives in their
organization business model that can drive us to potential new opportunity spaces on
the market place; “untapped emerging markets”
The Company
The Shoprite Group of Companies, Africa’s largest food retailer, operates 886
corporate outlets in 17 countries across Africa, the Indian Ocean Islands and southern
Asia, and reported turnover of *R19,105 billion ($2,624,2772) for the six months to
December 2006 (2005: R16,621 billion). The Company’s head quarters are situated
in the Western Cape province of South Africa. Shoprite Holdings Ltd is a public
company listed on the JSE Limited, with secondary listings on both the Namibian and
Zambian Stock Exchanges. Its ownership therefore lies in the hands of its almost 500
shareholders.
* R = Rand, ISO currency code ZAR. Currency of the common monetary area between South Africa, Namibia, Swaziland and


May8,2007
The Shoprite Group History
1979 - The Shoprite Group of Companies is launched with the acquisition of eight
Cape-based supermarkets for R1 million.
1983 - The Group opens its first branch outside the Western Cape – in Hartswater in
the Northern Cape. At the end of that year, Shoprite opens its 21st outlet in Worcester
and celebrates an increase in turnover of almost 600% over the four years of its
existence.
1984 - Shoprite speeds up its growth by buying six food stores from Ackermans.
1986 - The Group expands to the Free State, opening a store in Bloemfontein. Shoprite
lists on the JSE Securities Exchange South Africa with a market capitalization of R29
million. It now owns 33 outlets.
1988 - Shoprite ventures over the Vaal River and opens two stores in the former
Transvaal province, the first of which is situated in Polokwane (Pietersburg).
1990 - The Group gains control of Grand Bazaars with its 27 stores and expands its
store count to 72.
1991 - The chain of 169 Checkers stores is acquired. Overnight Shoprite trebles in
size to 241 outlets with a staff of 22600.
1995 - The first Shoprite store begins trading in Zambia. Locally the Group acquires
Sentra, a central buying organisation for 550 owner-manager supermarket members.
1996 - The Group launches the Woman of the Year Award to mark National Women’s
Day. It becomes South Africa’s premier accolade for achievement by women and
seeks to focus attention on issues that are of importance to the women of South Africa.

May8,2007
1997 - Shoprite acquires OK Bazaars consisting of 157 super and hyper-sized
stores and 146 furniture stores – the legendary “R1 deal”. It opens its first outlet in
Mozambique. Chief Executive Whitey Basson earns the Western Cape Business
Man of the Year Award as acknowledgement for his pioneering work in supermarket
retailing. The Group invests in a development in Mozambique and opens its first store
in Maputo.
2000 - The Group opens its first supermarkets in Zimbabwe and Uganda.
2001 - The first of seven supermarkets opens in Egypt, taking Shoprite into the North
African market. The Group starts operating in Malawi.
2002 - The Group acquires five stores on Madagascar, opens the first Shoprite Hyper
outside South Africa on Mauritius and moves into Tanzania. It is listed on the Namibian
Stock Exchange.
2003 - The 2003 Markinor-Sunday Times Top Brands survey identifies Shoprite and
Checkers, individually and combined, as South Africa’s most trusted supermarket.
Shoprite Holdings is listed on the Lusaka Stock Exchange and the Group opens
its first stores in Ghana and Angola. A start is made with the rollout of the highly
successful new Usave format.
2004 - The Group expand into India market, opening his first shop, which measures
about 55,000 sq. ft, located at Nirmal Lifestyle Mall in Mumbai.
2006 - The group launches an end-to-end EMV-certified payments environment,
piloted test at five Shoprite stores and full-scale roll-out commenced in May 2006.
EMV is the global standard which dictates the design, security and functionality
of smart card terminals and applications and was developed by the major card
associations in an effort to reduce fraud.
The Shorpite group composition
Shoprite Holdings Ltd comprises the following entities; The Shoprite Checkers
supermarket group, which consists of 360 Shoprite supermarkets; 113 Checkers
supermarkets; 24 Checkers Hypers; 92 Usave stores; 20 distribution centres
supplying group stores with groceries, non-foods and perishable lines; 165 OK
Furniture outlets; 12 OK Power Express stores; 29 House Home stores; and
92 Hungry Lion fast food outlets. Through its OK Franchise Division, the Group
procures and distributes stock to 29 OK MiniMark convenience stores; 27 OK Foods
supermarkets; 58 OK Grocer stores; 53 Megasave wholesale stores; 3 OK Value
stores and 90 Sentra stores and buying partners.


May8,2007
SHOPRITE
Positioning - The Shoprite chain is the original business of the Group and its main
brand. It is by far the biggest business unit. It is also the brand used predominantly
outside the borders of South Africa spearheading the Group’s growth into new
markets.
Target customer - It draws its customers from the middle-income consumers in the
living standards measurement 4 to 7.
Shopping experience - Its market positioning has remained unchanged: to provide
millions of customers with everyday low prices while offering the lowest prices on
basic foods.
CHECKERS
Positioning - Acquired in 1991, Checkers is the major brand after Shoprite. It operates
stores throughout South Africa and in some neighboring countries. It focuses more
strongly on fresh produce and offers a wider range of choice food items to a more
affluent clientele.
Target customer - The brand has recently been repositioned to cater for customers in
the upper-income groups and targets living standards measurement 7 to 10.
Shopping experience - Checkers is becoming a preferred shopping
Destination for time-pressed consumers. It has strongly developed lifestyle
departments such as for wine, cheese and meat.
CHECKERS HYPER
Positioning - Located in areas with high population densities, the positioning of the
large-format Checkers Hyper stores is very similar to that of the main Checkers
brand. However, they carry a much larger product range, especially non-foods, and
encourage bulk rather than convenience shopping.
Target customer - Its target customer is the same as for Checkers: living standards
measurement 7 to 10.
Shopping experience - These stores offer the customer low prices on a wide range of
foods and non food products in a pleasant environment.

May8,2007
SHOPRITE USAVE
Positioning - Usave is a no-frills discounter offering a strict selection of 1000 basic
lines. Not only is it an ideal vehicle for the Group’s expansion into Africa but also
allows far greater penetration of the lower end of the market within the borders of the
country.
Target customer - Living standards measurement 1 to 5.
Shopping experience - A limited range of essential fast-moving products offered in a
functional environment at the lowest possible prices.
OK FURNITURE
Positioning - The chain, with its wide geographic spread of stores, offers a range
of furniture, electrical appliances and home entertainment products at discounted
prices, for cash or on credit.
Shopping experience - The focus is on essential products offered in a standardized
in-store environment on easy payment conditions. Customers can also buy online,
selecting from an extensive catalogue.
OK POWER EXPRESS
Positioning - This new chain of small-format stores located mainly in high-density
areas sells a reduced range of white goods and home entertainment products in
addition to bedding and carpeting.
Shopping experience - It offers a pleasing ambience coupled with compact ranging
and personalized service.
HOUSE AND HOME
Positioning - It offers a larger selection of contemporary quality furniture, white goods
and home entertainment products for more affluent consumers.
Shopping experience - A highly amenable shopping environment with well displayed
products.


May8,2007
OK FRANCHISE DIVISION
Positioning - Through OK Franchise the Group gained a foothold in smaller,
convenience oriented markets. The OK brand, awarded only to outlets meeting certain
requirements, encompasses three formats –OK Grocer, OK Foods and OK MiniMark.
Target customer - Every franchise store aims at satisfying the needs of the community
in which it is located.
Shopping experience - Conveniently located stores offering time-saving shopping at
competitive prices.
Costumer range
The Shoprite Group has a broad customer base consisting of some 10 million people,
which closely mirrors the demographic profile of the country. The various store formats
within the Group cater for all income groups with the Checkers, Checkers Hyper and
House Home stores focusing on the higher income groups and Shoprite and OK
Furniture focusing on the broad middle to lower market. The latest format introduced
by the Group, Shoprite Usave, focuses on the lower-end of the market.
Growth
Shoprite is a business truly “made in SA”, having grow from a small eight-outlet chain
with a R12-million ($1,6 -million) turnover in the mid-eighties to the largest supermarket
group in Africa today, with a turnover exceeding R26-billion ($3.57-billon)
The Shoprite Group has reported turnover growth of almost 15% to R19,105 billion for
the six months to end December 2006 despite 12 weeks of industrial action during
that period that affected in particular the operations of the Shoprite brand. By the
end of December 2006 it had substantially recouped the market share lost during the
strike.
The 14,9% increase in turnover was supported by higher food inflation, which reached
8,0% for the six months compared to 2,8% in the corresponding period, and the
turnover generated by the additional 40 outlets opened during the reporting period.
The group’s internal food inflation rate was 5,6%.
The group was able to grow gross profit by 20,0% to R3,840 billion by boosting
turnover in higher-margin perishables as well as increasing our non-food participation.
At the same time costs were managed well within budgeted parameters.
The strong growth in turnover, the higher margins achieved and the slower increase in
overhead costs combined to raise trading profit 27,9% from R560,9 million to R717,3
million.

May8,2007
Diluted headline earnings per share from continued operations rose 26,0% to 82,8c
and the board declared an interim dividend of 35,0c per share, an increase of 29,6%
on the dividend declared for the corresponding period.
The group’s supermarket operation in South Africa, generating more than 79% of total
turnover, performed well by growing sales by 13,9% to R15,111 billion.
The number of customer transactions increased by 6,1% to 42,8 million per month and
the value per transaction by 7,3% as against the group’s internal inflation rate of 5,6%.
The repositioning of Shoprite, recently named South Africa’s number one retail brand
in the annual Sunday Times / Markinor Top Brands Survey, and Checkers, which
targets higher-income earners, has been completed, with each now operating in its
own market segment. The differentiation between their customers has grown to the
point where cannibalisation between the two brands has been virtually eliminated.
The group’s supermarket operations in the rest of Africa as well as India fared
extremely well, growing turnover by 28,0%. Its first store in Lagos, Nigeria, performed
well in its first year of operation. Its franchise store in Mumbai reported substantial
increases in turnover and customer numbers.
Although consumer spending was most marked in the case of durable and semi-
durable goods, the furniture sector had to contend with deflation in the case of
particularly appliances and home entertainment items. The group’s furniture division
nevertheless reported sales growth of 14,2% and profit growth of 14,8% despite
margins being under pressure in a highly competitive environment.
Market positioning
The primary business of the Shoprite Group of Companies is food retailing to
consumers of all income levels. Management’s goal is to provide all communities in
Africa with food and household items in a first-world shopping environment, at the
lowest prices. At the same time the Group, inextricably linked to Africa, contributes to
the nurturing of stable economies and the social upliftment of its people.
Market standing
Shoprite enjoys a reputation for offering best-value merchandise to consumers at the
lowest prices. Not only has this been substantiated by independent market research
companies, but price surveys conducted by consumer groups and the media
regularly confirm that the Group remains the price leader in its field. Through the years
supermarkets in the Shoprite stable have proved to be firm favorites with South African
consumers. The latest Trade Search Omnibus study conducted by internationally
acclaimed research company AC Nielsen, revealed that 65% of South Africans prefer
to do their shopping at the Group’s food stores.

10
May8,2007
Organizational structure
Shoprite has a functional structure that can be defined as “tree” main central structure,
aligned core activities, and branches for each country/community to learn about social
and cultural and market and demographical sources to achieve: “Social and cultural
adaptation to obtain consumer trust”.
Organizational Share values
“Share values” refers to the underlying attitude of the company; a combination of core
values and core purposes.
Shoprite group, implement common goals and strategies in order to function
efficiently. Unifying all workforces group under the same Shoprite culture.
-Sustainability local cultural Development Planning.
Understanding environmental and local cultural issues and sharing information with
the partners group.
Core Competencies
One stop shopping. Food retailing.
Africa as a developing country, is undertaking some type of reform to decentralize
public decision-making. The rational behind decentralization is that these reforms
foster increased efficiency and equity in development activities. Shoprite by virtue
of their proximity to the people they serve, democratic local communities are likely
to have access to better information, about local conditions, better understanding of
local needs, and to be more easily held accountable by local communities.
Corporate Objectives Future expansion plans
- Continuing its implementation of strategic expansion program to maintain its position
as the food leading food retailer on the continent.
- Shoprite as the biggest exporter of local products into Africa, will explore
opportunities of promoting South African products beyond its borders.
- Offer South African consumers a wide range of locally sourced quality goods at the
lowest prices, and also promote job creation, fair labor practice and environmental
responsibility.

Elisabeth M de Morentin, The Shoprite group 11
May8,2007
Partnerships and Alliances
GOVERMENTAL INSTITUTIONS
Proudly South African. The Shoprite group, has joined forces with the “Proudly South
African Campaign”, launched by Government, business labor and community to
promote quality South African companies and product, this milestone agreement will
offer south African consumers a wide range of locally sources quality goods at the
lowest prices and also promote job creation, fair labor practice and environmental
responsibility.
“75% of the population of South Africa are aware of the campaign and support its
objectives, the real challenge is to ensure that when those consumers walk into a retail
store, they can follow through on they positives feelings by choosing Proudly South
African products” Martin Feinstein, CEO Proudly South African.
Project Nyama-Nyama. In co-operation with the Departments of Agriculture and of
Trade and Industry, this project aims to bring employment and economic growth to
rural areas by creating opportunities for black farmers to deliver meat to supermarkets
in the Group. A budget of R350 million is available for procurement of the meat. This
project is not only aimed at the production of meat, but will help establish viable and
sustainable secondary industries in rural areas such as processed meat products as
well as the manufacturing of leather goods and furniture. A strong emphasis will be
placed on especially the development of enterprises owned by women.
NON-GOVERMENTAL INSTITUTIONS
Project Greenfields. This project is aimed at empowering new entrants into the
business world and to assist them in becoming suppliers to the Group. This is
expected to lead to the establishment of viable new black economic entities. Many
small businesses have already benefited from this program.
“Woman of the Year Award 2007 “. On 1996 the group launches the Woman of the
Year Award, The initiative is gained and continuing acquiring a strong reputation,
community and government support.
The search is on for South Africa’s most outstanding woman of the year in 2007 who
will receive the country’s most prestigious award for women, the Shoprite Checkers
/ SABC 2 Woman of the Year Award. The Award pays tribute to women who have
achieved success in their respective fields, have made a difference in the broader
South African community and have inspired others to follow. http://www.sawoman.
co.za
Nirmal Lifestyle group. Shoprite group open first location in India, Mumbai, a joint
venture with the Nirmal Lifestyle group, to get into Indian market. Mr Ram Harishankar,
Executive Director, Shoprite group said, “Seventy-five per cent of the range of
products is sourced from India. We work on the philosophy of offering the lowest price
possible”.

12
May8,2007
New Initiatives; Value added
Shoprite CEO Whitey Basson said: The group was increasingly benefiting from
management’s decision to position the major brands as chains of destination stores
offering consumers enhanced levels of convenience. “Although our primary business
will always be food retailing, our offering spans an ever increasing range that now
also encompasses furniture shops, in-store pharmacies, liquor stores, and consumer
convenience services.
VALUE ADDED
One stop shopping; adopting western-style model economy.
MedRite
Following the change in legislation allowing non-pharmacists to own pharmacies, the
Group in 2004 was the first South African retailer to incorporate a dispensary within
the Health and Beauty section inside its stores.
This has been in line with the international trend of incorporating an increasing number
of specialist departments within supermarkets to satisfy more of customers’ needs
under one roof.
The MediRite pharmacies have the lowest dispensing fees in the market, whilst the
consumer also benefits from the convenience of having their scripts filled while they
complete their shopping.
By the end of the financial year the Group opened 33 MediRite pharmacies. Growth of
more than 30% was achieved in stores that have been trading longer than a year.
Due to a shortage of pharmacists the expansion program is experiencing a slight
delay, but the contingency measures planned by the Group will soon see the rollout
returning back on schedule.
The Group however remains positive about the prospects of an expanding pharmacy
business that will enhance the shopping experience of its customers.
Money Market
The Money Market counter has become an integral part of consumer services offered
by the Group. As a result of the advanced information technology platform the extent
of services is continuously expanded to give customers added convenience and time
saving when selecting the Group’s stores as their preferred shopping destination.
The known services of account payments, lotto prizes, cell phones, bus tickets and
insurance were complemented with a retail first when the Group launched a low-cost
money transfer system that allows customers to transfer money between stores.
This service is safe and immediate and therefore has not only attracted some of the 18
million unbanked adults, but people in all walks of life requiring cash at short notice.
This, together with the fact that 21 million customers already make use of the Money
Market services each month, have created a platform for the possible introduction of a
range of banking services.
During the period under review Computicket, the countries foremost booking agency,
was acquired, following the previous year’s launch of the Group’s own ticketing system
Ticket Shop. This increased the Group’s range of ticketing services, particularly in
the theatre and entertainment fields. As one of the most recognizable brands in the
country, the Computicket brand will be retained.

Elisabeth M de Morentin, The Shoprite group 13
May8,2007
The process to integrate Computicket into the Money Markets of all Shoprite,
Checkers and Hyper Stores will be completed during the first half of the 2007 financial
year.
This will increase the distribution outlets of Computicket to over 500, greatly extending
the convenience factor to the public.
Company Design Evaluation, Diagnostic and Conclusion
Design thinking, can be defined as an integrative thinking method, involving a whole
set of factors that affect how people conduct their lives and interact within their
environments.
Integrating design thinking approach, into Shoprite group organizational culture,
enabled them to develop an integrate system with specifics services and functions to
reach users needs.
Shoprite started placing those systems within the organization. These deal primarily
with employers, fulfilling their cultural and social needs, services and environments
and then applying the system to the costumers.
Staff/Employers [social, cultural]
Employment equity forms, an integral part of the Group’s overall philosophy and is an
ideal pursued on a daily basis. This involves advancing black people, and promoting
carriers on woman, especially in management positions. Statistics of Department of
labor show that in every category of female and black male equity of Shoprite Group
exceeds the wholesale and retail sector norms.
Shoprite social sustainable approach:
The Shoprite Group of Companies, together with its HIV/AIDS.
Committee, which represents its total workforce, took a stand and developed a
program to equip staff with the knowledge on how to deal with HIV and AIDS.
Launched in 2006, Life Lessons comprises monthly modules in DVD format that is
supported by collateral material, incentives to Branch Peer Educators to motivate
participation, and opportunities for the trained staff members to enter the World AIDS
Day Lucky Draw, where Shoprite gave away CASH prizes to those who took part
and entered. What makes this program so effective is the unique way it educates the
viewers. As one of the largest HIV Aids Awareness and Training Programs in the retail
sector in South Africa, Life Lessons aims to stop the spread of HIV and end prejudice
within the Group. From the participation levels, it is clear that the program is making a
difference.
The content of Life Lessons is being supplied by Careways, a provider of corporate
well-being services, and is being administered by LogoGistics, a creative and
specialist communications company. LIFE SENSE is supplying the 24-hour help line
service that provides counseling and information to Shoprite staff.
Social and Cultural Values
With the yearly “Woman of the Year Award “ Shoprite had got into a major social issue
of Africa society. Getting into a very difficult Africa social community mind set arena:
empowering the woman figure. Shoprite did it through an “award competition”, as a
starting point, following western models.

14
May8,2007
Conclusion
Africa as a developing country, is undertaking some type of reform to decentralize
public decision-making. The rational behind decentralization is that these reforms
foster increased efficiency and equity in development activities. Shoprite by virtue of
their proximity to the people they serve, democratic local communities are likely to
have access to better information about local conditions and better understanding of
local needs, and to be more easily held accountable by local communities.
Shoprite has been trying to achieve that throughout the slow long-term growth
throughout Africa continent, training local communities, and understanding and been
part of they daily live needs.
That help them to recognize a large untapped market opportunities. i.e. “The Money
Market counter”; 18 million unbanked adults.
Recommendations
The results of this case study suggest various actions that could be taken by diverse
entities to realize the potential of local community on the lower end of the market,
those initiatives like educating and promoting local small rural communities can
approach to enhance International non-profit Institutions participatory i.e. ONG. And
to join a mutual benefit, for both parties, society and Shoprite growth [business].
Developing a community-based planning throughout Africa and other develop
countries i.e. India.
Over 25 million people are living with HIV throughout Africa, and the number is
increasing, ignorance and prejudice are the main causes to non stop the spread of a
preventable disease. Shoprite already started to educate their workers, now they can
spread the knowledge.
Community 101 assistance. Shoprite workers can share their HIV/AIDS knowledge to
their community through their daily activity of shopping. Social networking is an easy
way to approach a social/cultural ”Taboo” theme.
Sources
-Anna Peter, “African retailer Shoprite set to open first shop in Mumbai” Business Line,
Financial Daily THE HINDU group publications, Mumbai, December 13, 2004.
-Prism, NET 1 UEPS Technologies,I Inc. “Shoprite is the first retailer in Africa to be
100% ready to accept smart card payments” prism.co.za, current news, June 5, 2006.
-Frank R. Turyatunga, “Tools for Local-Level Rural Development Planning: Combining
use of Participatory Rural Appraisal and Geographic Information Systems in Uganda”,
ISBN 1-56973-571-9, World Resource Institute, 2004.
-Environmental Accountability in Africa (EAA): Legislative Environmental
Representation. World Resource Institute, 2007
-White Basson, CEO Shoprite “Repotting season interview” Face to Face, on Summit
TV, February 20 2007.

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