America's monster megastore

By Drum Digital
08 October 2010

THEY’RE the biggest retail group in the world. Their buying power makes competitors tremble and their annual sales are three times our national budget. Four of their founders’ relatives are among the 20 richest billionaires in the world. And if they were a country they’d be among the 30 top economies internationally. Much of America boasts their blue and yellow “Save money. Live better” logo and they already trade in 14 other countries. And now they’ve got their sights set on South Africa.

Walmart, the American retail giant, is aiming to do business right here in Mzansi. And while economists and business leaders are excited, there’s also concern over the potentially negative effects on SA’s labour, supplier and manufacturing landscape.

Union body Cosatu is already asking for a campaign against the “Walmartisation” of our retail sector...

It’s a sign of growth

Walmart’s entry into a country is often a sign its economy will grow. Thirteen of the countries where the group has started trading in the past 20 years have experienced an economic upsurge. And with saturated markets and weak economic growth in the developed world, Walmart has long been eyeing emerging markets such as ours to achieve its profit goals.

The group has offered about R30 billion for South Africa’s Massmart group, which has about 290 shops in 14 African countries, the majority of them in South Africa. Massmart incorporates Game, Makro, Dion Wired and Builder’s Warehouse.

In their enormous American supercentres, Walmart stocks everything from electronic goods, food and clothing to beauty, dieting and health services (including pharmacies and a cheap prescription medicine shop). Walmart’s interest is “a vote of confidence in South Africa as well as in Massmart and its employees”, says Grant Pattison, CEO of Massmart.

Walmart are “big players and they’re serious about this, which makes you sit up and say ‘Wow’,” economist Dawie Roodt says. From a purely economic perspective, you have to admire their efficiency and productivity, he adds. “For consumers it’ll probably mean more product variety and lower prices.”

Where does this leave sa firms?

SA firms can’t hope to compete with Walmart’s buying power, economist Mike Schussler says. In America, Walmart’s prices alone were responsible for a significantly lower inflation index. If they’re prepared to take a lower percentage point profit on sales, for instance, other companies will be forced to begin to compete.

Walmart could well make things difficult for big local groups such as Shoprite and Pick n Pay, not so much in the area of food but when it comes to durable goods such as household electronics.

Read the full article in DRUM of 14 October 2010

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