Our Customers section

MASSMART BUSINESS MODEL
Massmart has evolved a business model that empowers its Divisions to take trading decisions
suited to their individual operating needs but within a strategic operating and financial framework
set by the Group.
This has several advantages:
The framework guarantees consistent compliance with the best governance standards and national legislative requirements. It commits each Division
to implementing Massmart’s core strategy of being a high-volume, low-margin distributor of quality branded consumer goods for cash, and ensures
expansion plans add net value to the Group.
At the same time, Divisions can extract greater value from being part of a larger Group with greater access to goods and services or negotiating better
terms and rebates with suppliers and service providers. The Divisions are differentiated as retail or wholesale formats that address different customer
and market profiles.
Decentralised decision-making is given effect through a Group Executive Committee reporting to the Group Chief Executive Officer (CEO). The
Committee’s members comprise the CEOs/Managing Directors of Massmart’s four operating Divisions and a Group Executive from each of Massmart
Holdings, Channel and Shared Services. Massmart Holdings’ Executives are also represented on each of the four Divisional boards as non-executive
directors.
The model operates through the following four units:
MASSMART HOLDINGS
MASSMART CHANNEL
Massmart Holdings performs the Group management role
and defines the strategic and broad operating principles
that guide the Group’s activities.
Massmart Channel consists of formal trading and
functional forums where ideas on collaboration across
Divisions are shared.
MASSMART SHARED SERVICES
MASSMART DIVISIONS
Massmart Shared Services implements collaborative
agreements reached by Channel. The most important are
Group supplier negotiations for all products sold across
the Group.
Massmart’s Divisions, who report directly to the Chief
Operating Officer, comprise Massdiscounters,
Masswarehouse, Massbuild and Masscash.
AFRICAN STORE MAP
SOUTH AFRICAN REGIONAL STORE MAP
MASSDISCOUNTERS DIVISIONAL REVIEW
GENERAL MERCHANDISE DISCOUNTER AND FOOD RETAILER
FINANCIAL PERFORMANCE
STORE HIGHLIGHTS
The Massdiscounters’ brands
Massdiscounters operates two retail formats: Game and DionWired. Game is a discount retailer
of General Merchandise and non-perishable and dry groceries for home, leisure and business
use, operating throughout South Africa and in 14 cities in sub-Saharan Africa. Traditionally
Game has been a discounter of General Merchandise, but our format renewal, with the
introduction of perishable food has intentionally pushed the brand towards a multi-category
format.
We now have 107 Game stores in South Africa and 14 in Africa, bringing our total footprint to
121. We also have 22 DionWired stores, which sell middle- to upper-end electronics and
appliances across South Africa.
The Game positioning offers customers the widest range of branded products, at the best price
for a given set of product specifications and a quality guarantee for customers . We ensure that
customers are assured of the best value at every logical price point. The Game trading model is
promotionally-driven, with five million copies of our weekly promotional leaflets distributed in
South Africa. By working closely with our suppliers and benchmarking ourselves against
competitors, we are able to offer our customers well-priced products representing great value.
Currently 48 Game stores provide a perishable food offering adding further everyday value to
our customers. Over the next few years, we intend to roll out perishable food to most
Game stores.
Divisional Strategy 2014
Focus on Game SA brand promise – lowest
prices, focused ranges and quality
guarantee
Improve in-store shopping experiences
Improve IT and Supply Chain efficiencies
Continue roll out of food
Increase Game Liquor stores
Improving Efficiencies
Our Regional Distribution Centres (RDC’s) have
helped to:
Improve business efficiencies
Improve in-stock level
Leverage supply chain
Game Liquor was included with the format renewal to complete our offering and increase foot
traffic. We now have 30 Game Liquor stores, which are performing in line with expectations.
DionWired’s product displays create an easy, exciting and interactive shopping experience,
offering the latest in-home entertainment, computing, video and digital photographic
equipment and appliances. DionWired sells complete technological solutions, often
demonstrating the interconnectivity of the latest innovations and products in-store. The Tech
experts manning our in-store Hi-tech Smart service centres are on hand to offer the best advice
and onsite repairs and services.
Although all our products are competitively priced, DionWired’s proposition is not founded on
price alone. Our main proposition is to offer the widest range of some of the world’s leading and
discerning brands such as Apple, Smeg, Miele, Marantz, Bose and Onkyo to the South African
higher-income consumer.
Future outlook
Over the next financial year, Massdiscounters will focus on bedding down and leveraging many
of the changes implemented over the past three years. With seven Game stores to open in
South Africa, three Game stores to open in the rest of sub-Saharan Africa, and one new
DionWired store planned, we expect our growth strategy to continue to take market share and
deliver our low-cost, low-margin, high-volume business model to more customers in a highly
competitive retail sector.
At Game we will continue to seek out and introduce the world’s leading consumer brands
alongside our roll-out of Private Label and perishable food to ensure that we offer the range of
products required to attract customers in this challenging market. We will partially reduce our
exposure to HiTech and Multimedia and will introduce limited ranges of Baby and Clothing.
At DionWired our focus on a unique customer experience, as well as our extensive bouquet of
services, will differentiate the brand on a national basis as discerning customers seek value
and solutions in their purchases.
We plan to open or convert 13 more stores in the next 12 months, bringing the total to 61 Game
stores selling perishable food by December 2014.
INVESTING IN OUR COMMUNITY
Now in its seventh year, Amalunchbox was born from the belief that “you can’t teach a hungry
child”, and we work together with the Department of Education to make their national School
Nutrition Programme more effective.
INVESTING IN OUR
HUMAN RESOURCES
B-BBEE LEVEL 3
Living Standards measure (LSM)
READ MORE:
The South African Advertising Research Foundation (SAARF) Living Standards Measure (LSM) has become the most widely
used segmentation tool in South Africa. It is a means of segmenting the South African market that cuts across race, gender,
age or any other variable used to categorise people. Instead, it groups people according to their living standards.
Letter to Stakeholders
Financial Director’s Review
MASSWAREHOUSE DIRECTORATE
Grant Pattison
Chairman
Robin Wright
Chief Executive Officer
Norman Drieselmann
Financial
Richard Fuller
Store Operations
John Hart
Logistics
Guy Hayward
Non-executive
Mark Huxtable
IT
Andrew Jackson
Dion Wired
Rogany Ramiah
Human Resources
Mike Spivey
Non-executive
Mark Turner
Africa
Alan van der Bergh
Food
Tyrone Vieira
Merchandise
Ilan Zwarenstein
Non-executive
MASSWAREHOUSE DIVISIONAL REVIEW
WAREHOUSE CLUB
FINANCIAL PERFORMANCE
STORE HIGHLIGHTS
The Masswarehouse brands
The Makro model is unusual in that it sells General Merchandise primarily to retail customers
while much of its Food and Liquor is sold to wholesale customers, although increasingly retail
customers are taking advantage of the low food prices afforded by the warehouse model. This
blend gives the brand a robustness that enables it to trade comfortably through most economic
cycles. The big-box warehouse club format with our no-frills approach keeps costs down and
provides the platform for our high-volume, low-margin sales offering of quality branded
merchandise. Our customer database of Makro store cards used at the point of purchase helps
us to keep track of the spending patterns of our 2.4 million active members and we
communicate regularly with them through targeted promotional material.
Fruitspot is an established wholesaler and distributor of fresh and cut fruit and vegetables, and
was bought by Makro in 2012.
Divisional strategy 2014
Get new stores to trading maturity
Enhance Food Retail offering, and refine
Fresh and Butchery offering
Gain market share in Food and Liquor
Widen Baby category
Increase number of commercial customers
Supply Chain and Inventory optimisation
Leverage CRM
Refocus on low cost, high volume business
model
Relaunch web site in support of omni
channel strategy
Makro’s offerings are tailor-made to fit a variety of customer needs across all our
merchandising categories.
Our Food offering caters to wholesale shoppers ranging from informal traders and grocery
store owners to hoteliers, restaurateurs, offices and schools. Wholesalers account for the bulk
of Makro’s food sales and most shop during the week for the convenience of our wide range of
good-value, quality consumables. At weekends, our focus shifts to promoting good buys for
retail food and grocery shoppers who can achieve substantial savings on their monthly
household basket compared with other traditional food retail outlets.
Our Liquor offering also caters to both the retail and wholesale customer. Makro’s liquor
outlets, immediately adjacent to our main stores, carry a range of standard and premium
brands especially in wine, champagne, whisky and brandy. These products are sold at a low
margin to maintain and grow our share of the market. At the same time we have maintained a
strong presence in beer and budget brands for liquor wholesalers looking for good value.
Future outlook
Initiatives for the year ahead include the continued focus on Food Retail, including the addition
of a fresh fruit and vegetable offering as well as a redesigned butchery format in all Makro
stores. We also plan to continue to drive the performance and growth of Fruitspot by ensuring
that it becomes the supplier of choice to Gauteng-based businesses across the Massmart
Group.
Our e-commerce plan is underway with the launch of our online retail store having happened in
Q1 2014. This will provide access to our General Merchandise proposition for customers in the
channel of their choice, at a time most convenient to them, while also allowing the brand,
through the use of social media and digital direct marketing, to drive footfall into our stores.
Having launched a mobile solution to facilitate sales and improve customer service to
commercial customers, we now look to the next level of servicing our corporate and business
customer by implementing a Business-to-Business solution.
In the year ahead, Masswarehouse will continue building momentum to maximise operating
income, exploring new business areas and product categories, and optimising the returns with
particular focus on the new online business.
INVESTING IN OUR COMMUNITY
The SUCCEED (Supporting Caregivers and Centres in Early Childhood Development) Project is a
collaboration between Makro and Hope Worldwide, and has as its objective the building of a
capacity of Early Childhood Development Centres that serve vulnerable children, so that the
children in their care receive the stimulation, education, protection, development and nutrition to
fulfil their potential. As at the end of 2013, the SUCCEED Project was supporting 4,016 young
children through 44 ECD (Early Childhood Development) Centres.
Through supporting the ECD Centres, this initiatives set specific overall ECD Centre norms and
standards, trained some of the Practitioners working at these centres in NQF Level 4, improved the
overall infrastructure at these facilities to make it more conducive to early childhood development,
conduct ECD parenting workshops and monitor the overall nutritional intake of these young
children. This Project is in the process of being expanded to the Eastern Cape and Western Cape to
expand the reach and to better serve the communities in which Makro operates.
INVESTING IN OUR
HUMAN RESOURCES
B-BBEE LEVEL 5
INVESTING IN OUR
ENVIRONMENT
Winner of the 2013 of the 2013
Eskom ETA award in the
Commercial category
DEFINITION: Trading Space (m2)
READ MORE:
Trading space excludes parking, yard, warehouse space, office space and receiving areas
Letter to Stakeholders
Financial Director’s Review
MASSWAREHOUSE DIRECTORATE
Grant Pattison
Chairman
Doug Jones
Divisional Managing Director
Guy Hayward
Non-executive
Garry Hendry
Food
Derick Kalan
General Merchandise
Jonathan Koff
Liquor
Gert Lourens
Operations
Melanie Louw
Marketing
Pieter Schoeman
IT
Mike Spivey
Non-executive Director
Julie Wilford
Financial
Donovan Wright
Human Resources
Ilan Zwarenstein
Non-executive
MASSBUILD DIVISIONAL REVIEW
HOME IMPROVEMENT RETAILER AND BUILDING MATERIALS SUPPLIER
FINANCIAL PERFORMANCE
STORE HIGHLIGHTS
The Massbuild brands
Improving efficiencies
Massmart, with its strategy of investing in the acquisitive and organic growth, previously made
several acquisitions in the home improvement sector. The acquisitions of Builders Warehouse
(2003), Federated Timbers (2005), De La Rey (2005) and Servistar (2005) have established the
group as the largest participant and, in many respects, the leader in this growing consumer
sector. In order to ensure focus and extract synergies these assets constituted the Massbuild
Division of Massmart. The division consolidated into one single legal entity in July 2010 which
houses all four formats, each clearly defined in its client focus and market.
RDC’s
In order to achieve its aspirations, Massbuild will continue with its four distinctive formats:
Builders Warehouse: One stop, big box outlets positioned in the major urban and
regional areas in southern Africa;
Builders Express: Small neighbourhood stores positioned to target the home owner;
Builders Trade Depot: Building merchant and truss manufacturing outlets ideally
positioned to target the contractor and tradesmen; and
Builders Superstore: Discount Home Improvement format in townships and towns,
servicing surrounding rural areas. Conveniently located, close to transport nodes and a
major food retailer.
Future outlook
Massbuild has now entered an accelerated growth phase with the aim of increasing its
footprint by opening new stores in South Africa and southern Africa. Furthermore the division is
intent on increasing its market penetration through its 4th format, Builders Superstore.
Massbuild’s objective remains to be South Africa’s market leader in home improvement, DIY
and building materials.
INVESTING IN OUR COMMUNITY
Builders and Ripples for Good joined forces in 2012 with the main objective of assisting schools
with building and renovation projects specifically targeted at impoverished South African
communities. In just under 2 years we have managed to reach 100 schools with another 70
schools identified for 2014. One such project was Lebowa Primary School. This school caters to
over 650 learners, predominantly from Sharpeville and is a no-fee school. Massbuild together with
Ripples For Good, carried out extensive renovations including repainting of both boys and girls’
bathrooms, installation of 21 new toilet seats as well as the fixing of 18 leaking toilets. We
replaced leaking taps and changed all lights to energy savers. We furthermore installed 18 chalk
boards, built library bookshelves and sanded and varnished school desks for the library.
Improve utilisation
Reduce costs
Improve in-stock levels in stores
Less promotionally driven
Promotions last for longer periods
Less marketing spend
Divisional strategy 2014
New stores roll-out: grow southern Africa
store footprint.
Optimise Builders Trade Depot: inventory
range, IT platform value extraction,
contractors.
Optimise Superstore offering and grow the
brand.
Leverage RDC including Western Cape.
Focus on Trade Customers and Businessto-Business (B2B).
Everyday low price (EDLP).
INVESTING IN OUR
HUMAN RESOURCES
B-BBEE LEVEL 5
DEFINITION
BWH: Builders Warehouse
BEX: Builders Express
Read more:
More detail relating to specific stores which
have opened or closed can be found in the
Group Financial Director’s Review
MASSBUILD DIRECTORATE
Grant Pattison
Chairman
Llewellyn Walters
Chief Executive Officer
Neville Hatfield
Merchandise Director
Guy Hayward
Non-executive Director
Diane Hoffman
Supply Chain
Chris Lourens
Operations Director
Zandile Manana
Marketing Director
Lizelle Petersen
Financial Director
Alex Rymaszewski
Store Development Director
Mike Spivey
Non-executive Director
Chris Tugman
IT Director
Simon White
Commercial Director
Ilan Zwarenstein
Non-executive Director
Andre Steyn
Builders Express & Builders Trade
Depot Director
MASSCASH DIVISIONAL REVIEW
FOOD WHOLESALER, RETAILER AND BUYING ASSOCIATION
FINANCIAL PERFORMANCE
STORE HIGHLIGHTS
The Masscash brands
Masscash consists of a Wholesale Division with cash and carry food and cosmetics
businesses, and a Retail Division which consists of food outlets which target the lower LSM
groups. Our Wholesale Division consists of CBW, Jumbo Cash and Carry, Trident and Shield
whilst our Retail Division is consolidated under the Cambridge Food banner and the Rhino
Group.
CBW and Trident wholesale food, liquor, groceries and cosmetics in bulk to independent
dealers, Government feeding schemes, franchise members, small traders and hawkers in
peri-urban and rural areas within southern Africa.
Jumbo sells mainly cosmetics, toiletries and hair-care products to individual customers and
independent general dealers.
Shield is a voluntary buying association that buys products in bulk on behalf of 431 members
who own wholesale or retail businesses in South Africa, Botswana and Swaziland.
Masscash offer wholesale customers with formal operations the ability to trade under national
retail brands such as Saverite, Multisave, Powersave Liquorland and Club 10 Taverns. Our
marketing team offers support to these supermarkets and bottle stores, assisting owners with
marketing initiatives such as designing of leaflets, signage and implementing national
television and radio advertising campaigns.
On the retail side, outlets are consolidated under the Cambridge Food or Rhino brands.
Cambridge Food’s mission is to help its customers save money every day so that they can live
better. Food Retail service departments, consisting of an on-site bakery, butchery and fresh fruit
and vegetable offering form an important component of our Cambridge Food retail offering.
Improving efficiencies
Forefront of energy efficiency in the retail
environment
Integrated stock system
Divisional strategy 2014
New store roll-out in South Africa
Expand into Southern Africa
Wholesale
Operate for less whilst improving customer
shopping experiences
Review store portfolio
Improve Supply Chain & Logistics capability
Focus on Saverite franchise
Retail
Grow profitable regions
Close smaller or less profitable stores:
closed three
Cambridge stores in Q1 FY14
Improve fresh food assortment
Future outlook
We anticipate a continuation of the aggressive trading from the corporate food retailers serving
the low-income customer. However, we are cautiously optimistic about our growth over the next
year. The LSM 2-6 market remains highly fragmented, and Masscash is well-positioned to offer
new retail formats and to expand our current footprint to better supply food, cosmetics, liquor,
cigarettes and cellular services to lower-income consumers.
To ensure future growth, Masscash will focus on building its Retail Division, expanding the
wholesale range to include meat as well as fruit and vegetables, growing the franchise formats
and expanding into Southern Africa. Our strategy is to open 10 more stores each year as we
seek to grow our footprint nationally.
INVESTING IN OUR COMMUNITY
Lily of the Valley has been rescuing, raising and restoring HIV/AIDS orphans for the past twenty
years in KwaZulu-Natal. The goal of the project is to raise children who are affected by the
HIV/AIDS pandemic, to be sustainable leaders in their communities. Partnered with Lily of the
Valley in KwaZulu Natal through an agricultural fresh produce project, Masscash sponsored the
construction of a hydroponic tunnel which is used for growing vegetables. The project seeks to
raise funds for the Lily of the Valley Children’s Home. Valley Fresh is the commercial hydroponic
farming enterprise built to sustain the work of Lily of the Valley and they currently produce around
5 – 8 tons of tomatoes a week, along with lettuce and salad herbs. The Lily of the Valley
orphanage is home to over 126 children and these children are the main beneficiaries of the Valley
Fresh enterprise. Over 500 people access medical services through a clinic facility in the
orphanage premises, which is open to surrounding community members.
INVESTING IN OUR
HUMAN RESOURCES
B-BBEE LEVEL 5
DEFINITION: DC Space
READ MORE:
Distribution Centre space excludes parking and yard
Letter to Stakeholders
Financial Director’s Review
MASSCASH DIRECTORATE
Grant Pattison
Chairman
Guy Hayward
Non-executive
Pearl Maphoshe
Non-executive
Mike Spivey
Non-executive
Robin Wright
Non-executive
Robin Wright
Non-executive
Jane Bruyns
Human Resources
Dino Holmes
Financial
Kevin Vyvyan-Day
Chief Executive
Bronwynne Bester
HR
Chris Knight
Regional Gauteng
Mike Marshall
Commercial
Andrew Stein
Marketing
Craig Surmon
Operations
Mncane Mthunzi
Non-executive
WHOLESALE DIRECTORATE
Neville Dunn
Managing Director
RETAIL DIRECTORATE
Eben Mare
Financial