Pricing key to African giant Shoprite's success

Shoprite, Africa's largest retail chain, feels it can easily take on global majors like Wal Mart and Carrefour as it expands operations in India.

Running a $5 billion business with over 700 stores in 16 countries, Shoprite plans to provide "the lowest prices" to the price sensitive consumers in India.

Not only does the group expect to survive the entry of other global players like Wal Mart and Carrefour in India, but the group's CEO, Whitey Basson, stated that it is more a question of 'what the entry of the international retailers will do to the Indian Retail market'.

"We have extensive experience in food retailing in developing markets and have survived intense competition from local retailers," pointed out Brian Weyers, marketing director of the Shoprite group.

"With our 25-years experience in providing the lowest prices to price sensitive consumers in the developing world, we understands how to use the buying power to source products internationally from the lowest cost suppliers, without compromising on quality," Weyers told Business Standard.

Speaking on India's plans, Weyers said that considering the changing scenario in the Indian retail space with the establishment of shopping centres, "anchor tenants" are needed which will create opportunity for groups like Shoprite to enter the market. It sees the Indian retail sector growing from the current $ 200 billion to $ 300 billion by 2010.

The group's decision to expand to India is also justified by its predominantly Indian management team, which operates very successfully in the large Indian market of KwaZulu-Natal in South Africa. Shoprite's long-term aim is to increase the operating income from its non-South African operations to more than 50 percent of Group revenue.

Capitalising on its success in the financial capital of Mumbai, Shoprite is investigating potential opportunities for further expansion in the country.

"We realise that we need to change the buying habits of the Indian population so that they change their ratio of formal to informal buying to 50:50 or 70:30," said Weyers.

The group sees this taking place with more stores and keener pricing.

The Shoprite group started just about two decades ago with 8 small stores in Cape Town, South Africa with a combined turnover of $ 1.8 million. Today it is Africa's largest retailer running a $ 5 billion turnover business across 16 countries.