Big plans for smaller Makro stores in South African shopping malls

Massmart will be trialling small format Makro stores in four locations, and if successful, the concept will be rolled out to other locations.

Last month, Massmart announced it would be trialling the new Makro concept stores at existing game store sites.

“The challenge in developing a new concept store is finding suitable retail space in popular shopping malls,” Massmart group corporate affairs head Brian Leroni said.

“To overcome this, we have decided to test the concept in existing Game store sites that are located in popular shopping malls.”

Leroni highlighted that the plan is not to close down its Game stores. “The objective is not to convert Game stores,” he said.

He emphasises that their objective is to make Makro stores more accessible to a wider market through a small, mall-based Makro store concept.

The plan is to test the executability of the smaller Makro stores and assess the consumer response.

“If the concept is successful, we will follow our normal real estate procurement processes to secure the best sites most suited to the format,” he said.

Evan Walker, portfolio manager at 36ONE Asset Management, highlighted that this strategy is nothing new. It was considered ten years ago but never materialised.

He said the initial plan, which was to convert Game stores into small-format Makro stores, was not implemented despite significant support.

The reason for holding back was that the previous Massmart management saw value in the Game brand.

Massmart-owned Game store

It raises the question of why the plan is on the table again, especially in a challenging economic environment.

Leroni explained that their recent research had shown significantly more customer demand for the idea than was previously the case.

Walker said the plan to launch smaller-format Makro stores makes sense. “It is a very good business with a strong brand,” he said.

He added that the small-format Makro stores will increase the retailer’s walk-in customers and expand its distribution network.

Makro has a strong e-commerce focus, and having more stores to serve as distribution centres will strengthen its online shopping capabilities.

“We have seen what Checkers has done with Sixty60, and Makro has to match that on the retail component,” he said.

Walker added that the success of small-format Makro stores depends heavily on how competitive their prices are.

“Depending on where the pricing strategy is pitched at the retail level, it could be a very competitive offering.”

“It all depends on whether they can make their pricing strategy work in the smaller stores and reduce their cost base to support the lower-cost margin.”

Leroni confirmed that the new small-format Makro stores have the same pricing as the current Makro wholesale outlets.

“Promotional and on-shelf pricing will be consistent across the small and the large store formats,” he said.

“It’s an important reason that customers are enthusiastic about improved access to Makro.”