Shoppers may be in for a clothing bonanza

2011-04-02 13:19

South African shoppers could get access to low-priced clothing brands if the ­proposed merger between US retail ­giant Walmart and local retailer ­Massmart goes ahead.

Walmart International vice-president of Integration Kevin Harper said in a recent interview that he thought ­Massmart’s apparel and fresh-produce divisions could be strengthened, a move that would make the general ­merchandiser a stronger competitor to local food and clothing retailers.

Local food retailers rake in about R416 billion in yearly sales while their clothing counterparts generate roughly R104 billion in annual turnover.

Massmart, which owns Makro and Game stores, sells apparel on a small scale and it is growing its fresh-produce ­business.

Intensifying its apparel unit could see the retailer climbing into the ring to wrestle with heavyweight clothing ­retailers such as Edcon’s Edgars and Jet, Mr Price, Ackermans, Woolworths, Foschini and Pep Stores.

If Massmart imports clothes, it could put pressure on the local clothing and textile industry, which has been shedding jobs over the past decade due to the massive ­inflow of cheap imports from China and other low-cost Asian manufacturers.

Walmart’s South African media ­representative, Julian Gwillim, said the US retailer had not held discussions with Massmart about its apparel and fresh produce strategy.

“There hasn’t been a transaction yet between Massmart and Walmart, and ­Walmart has not discussed any growth strategies with the Massmart ­management,” he said. “If the deal goes through, the topic on the expansion of the Massmart’s ­apparel and fresh produce divisions will be two areas of possible discussions.”

Gwillim said the reason Walmart was comfortable to acquire Massmart, rather than other South African ­retailers, was that the two firms had a common interest in ­expanding their general merchandise ­divisions to also offer fresh produce.

Pick n Pay and Shoprite are heading in the opposite direction by also ­growing their general merchandise units beyond food. Gwillim said Walmart did have a fair knowledge of the local fresh produce ­industry as the firm had been purchasing tons of apples and pears from Stellenbosch and distributing the products to its international outlets for a decade.

Massmart communications executive Brian Leroni said the company was ­refining its apparel strategy.

“Massmart is still developing its thinking in the apparel area and we have made significant progress in ­expanding our fresh produce offering,” he said.

“This includes introducing fresh ­produce into our new Makro store in ­Vereeniging and launching Game’s new ­Foodco proposition in three stores in the Western Cape. We are continuing with ­development of our 21-store ­Cambridge Food retail chain,” he said.

As the fresh produce and apparel were relatively new areas of focus for Massmart, Walmart’s expertise would play a major role if the deal was ­approved, said Leroni.

Pep Stores spokesperson Mariki ­Schwiebus downplayed Walmart’s entry into South Africa, saying the retailer would ­focus on its own strategy instead of watching what Walmart was up to.

“We can’t control what our ­competitors do or plan.

“We will focus on aggressively ­implementing our own strategy instead of looking over our shoulders the whole time,” she said.

Nedgroup Securities retail analyst Syd Vianello said expanding the apparel ­division would improve the overall clothing business of Massmart, but would not lead to a serious shake-up of the market.

“I doubt there will be a massive effect on the apparel industry as a whole,” said ­Vianello.

Walmart currently sells a Chinese-manufactured clothing brand called George in its UK subsidiary, Asda.

The George clothing line could also be shipped to South Africa if the ­merger ­succeeded, said Vianello.

Madre Engel, assistant leasing ­manager at property leasing group Eris Properties, said Massmart’s scaling up of its apparel business could be positive for consumers as it would introduce more competition and possibly lower clothing prices.

“It could also have a positive effect on employment creation because the ­apparel industry has shed many jobs in recent years,” she said.

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