Dina Perry

Professor Heather Elms

IBUS-244-001

February 7, 2017

Pick N Pay Marketing Analysis

Executive Summary:

Pick N Pay is a South African grocery and general merchandise retailer. The companys

revenues have been increasing over the past 5 years, along with other financial indicators such as

the number of shares sold and gross profit margin. The company focuses on low to middle

income consumers throughout South Africa, hoping to build a trusting relationship to increase

their profit potential. This is the one unique identifier that the company prides itself on. Their

marketing and advertising focuses on exemplifying their care for their customers, whether it is

through their loyalty program benefits or one of the giving back campaigns. When compared to

their two main competitors, Shoprite and Massmart, Pick N Pay shows an advanced use of

social media tools and is able to reach a wider range of consumers. In order to improve their

marketing efforts, Pick N Pay should consider expanding their social media uses and improve

the messages that are being sent through these social media channels.

Company Overview:

The organization began in 1967 when Raymond Ackerman purchased the first stores. The

company has grown and now operates stores in South Africa, Namibia, Botswana, Zambia,

Mozambique, Mauritius, Swaziland and Lesotho. Pick N Pay also owns 49% of the

Zimbabwean supermarket business. The company prides itself on being a good place to work

and a good place for their customers to shop. In South Africa alone, there are 297 supermarkets

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opened through the franchising efforts. Pick n Pay retains 1.25% of revenues from each

franchise, which is the main source of revenue for the company. The number of group stores has

increased significantly from FY13 to FY15 from 991 to 1,189. In March 2014, the total African

stores was 108, with only 8 owned by Pick N Pay and 43 franchise locations. The constant

growth in number of stores also shows a strong backing for franchise opportunities. In 2011,

there were 789 stores, and this number increased to 891, 991, 1,076, and 1,189, respectively from

2012-2015. In 2016, Pick N Pay reported 72,445M ZAR or 5458.86M USD in revenues (at 1

ZAR=.075 USD, 02/05/17). This was a large increase from their revenue in 2015, which was

66,941M ZAR or 5044.12M USD (at 1 ZAR=.075 USD, 02/05/17). With net income at 1,065M

ZAR in 2016 or 80.25M USD (at 1 ZAR=.075 USD, 02/05/17), the return on sales for the past

year was 1.47% (MyFT. 2017. Financial Times Pick N Pay.).

Target Consumers:

Pick N Pay focuses on affordable food, but seeks to build a trusting relationship between

the brand and their customers. They target low to middle income consumers, which can be seen

through their store placement throughout South Africa. There are over 10 stores in Johannesburg

alone, with one located in the Township of Soweto to allow lower income families to shop and

receive affordable groceries and other general shopping items.

Unique Selling Proposition:

Pick N Pay: Always There For You. This is the slogan for the company that

exemplifies the unique selling proposition that upper management focuses on. When meeting

with Pick N Pay management, they stated that the main priority was customer service and that is

how they beat their competitors in terms of sales. While they sell groceries, clothing, and general

merchandise, the company representatives felt their most loyal customers stayed with them due

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to the focus on customer service. Their customer loyalty program allows customers to earn

rewards and discounts on their products. Their high customer service can be seen through the

December 2015 Gift Groceries to Surprised Shoppers (as shown in this link

https://www.youtube.com/watch?v=kmC5hSxSUds) (Pick n Pay, 2015). The YouTube video

shows loyalty program customers who were surprised and gifted their entire shopping trip for

free to show the companys loyalty to their customers. The unique selling proposition focuses on

this, and the marketing for Pick N Pay exemplifies this to try and bring in new customers.

Competitor Analysis:

The main competition throughout South Africa is Shoprite, Massmart, Spar group Ltd,

and Usave for the food service industry.

Shoprite

Shoprite is comprised of three supermarket chains: Shoprite, Checkers, and Usave. This

business model has allowed the company to target all consumer groups throughout South Africa.

Shoprite targets lower to middle income sectors, while Checkers focuses on higher income

consumers. Usave is an option for those in the lower or below low income levels, offering

comparable products in local markets. With over 500 outlets throughout the African continent,

the store offers a quick and easy shopping experience for people with busy lives. There are 2,041

stores reported throughout South Africa (Fastmoving, 2017). The stores offer products such as

general food items, money market services, small appliances, and hair and beauty products.

Revenues have grown between 2015 and 2016 from 113, 684M ZAR, or 8566.29M USD (at 1

ZAR=.075 USD, 02/05/17) and 130,028M ZAR or 9797.84M USD (at 1 ZAR=.075 USD,

02/05/17) respectively. The net profit in 2016 was 4,841M ZAR or 364.78M USD (at 1

ZAR=.075 USD, 02/05/17) with the revenues for the year equally 130,028M ZAR or 9797.84M

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USD (at 1 ZAR=.075 USD, 02/05/17). The return on sales was 3.72% for 2016 return on

investment for Shoprite in 2016 was 20.37% (MyFT, 2017. Financial Times Shoprite.).

The current marketing strategies for Shoprite focus on corporate social responsibility

efforts. The website shows different efforts such as drought relief, supporting students higher

education efforts, and mobile soup kitchens. They also have a moderately high presence on

social media. They have 852,379 followers on Facebook, where they post 4-5 times a day

showing deals on products. Figure 1 shows an average Facebook post for Shoprite, where they

show what specials are available in the store and encourage consumers to go purchase them.

They have 103,000 followers on Twitter, 890 on YouTube, and do not have an Instagram

account. Their YouTube videos are different from Pick N Pay, where they only depict pictures

of products with the special deal that is being offered, as shown in this ad

(https://www.youtube.com/watch?v=oe4iPZaPlZg) (Shoprite South Africa, 2016). Overall, Pick

N Pay has a more strategic approach to social media marketing, while Shoprite prides itself on

low prices. Their slogan Lower Prices You Can Trust Always (Shoprite, 2017) exemplifies the

business model and explains why their advertising efforts focus solely on showing the discounts

and sales being offered.

Massmart

Massmart is the second largest distributor of consumer goods in South Africa. They are

comprised of nine wholesale and retail chains. Their business model focuses on high volume and

low cost distribution, where consumers can buy products in bulk at lower prices (Massmart,

2017). They are known for their wholesale basic foods, general merchandise, liquor and home

improvement equipment and supplies. The company operates nearly 400 stores throughout South

Africa with 523 buying group members. They are based in South Africa, but operate throughout

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other countries in Sub-Saharan Africa. Revenues have grown between 2015 and 2016 from

38,980.7M ZAR, or 2,937.27M USD (at 1 ZAR=.075 USD, 02/05/17) and 42,466.3M ZAR or

3,199.91M USD (at 1 ZAR=.075 USD, 02/05/17) respectively. The net profit in 2016 was

377.4M ZAR or 28.44M USD (at 1 ZAR=.075 USD, 02/05/17) with the revenues for the year

equally 42,466.3M ZAR or 3199.91M USD (at 1 ZAR=.075 USD, 02/05/17). The return on sales

was 0.889% for 2016 (Massmart, 2016).

Massmart has virtually no marketing, as their business model focuses on low cost, and high

volume sales. They do not offer sales such as Pick N Pay and Shoprite because consumers are

meant to purchase products in bulk at lower, wholesale prices. The only social media tool that

Massmart utilizes is Twitter with 367 followers and no tweets. Their YouTube channel has two

followers and one video about their investors. With no Facebook, Instagram, or Pinterest

presence, Massmart needs to develop a plan to improve the use of these tools to compete with the

advertisements and online presence of their competitors.

Current Marketing Strategies:

Pick N Pays current business strategy focuses on five areas: promoting healthy living,

supporting local and ethical suppliers, being environmentally responsible, employee opportunity

and diversity, and doing good in the local community. Their main marketing techniques include

billboards posted around cities and word of mouth from loyal customers. Billboards similar to

the one shown in Figure 2 are posted around Johannesburg, as well as other South African cities.

The advertisements do not show any specific campaign, but rather demonstrate the quality and

low price options that the store has for their consumers. Their hope is that their loyalty programs

and marketing campaigns, where they give special promotions or free items to the customers,

will bring in more customers so that they can stay ahead of competitors such as ShopRite. In

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2007, Pick N Pay went through a rebranding effort where they began to focus more on social

media and reached out to customers through other efforts. They began a Fresh Living

magazine, which is sent to their loyalty program customers, and shows them options for living a

healthier lifestyle (with items purchased from their stores). Their focus on corporate social

responsibility also builds their brand name and encourages consumers to purchase from them

because they know the company is involved in philanthropic efforts. Some of the few things the

company has done is aiding breast cancer survivors, stepping in for drought relief, and

sustainable seafood efforts. A lot of these socially responsible efforts are documented through

their social media channels. The company currently has 1,634,144 followers on Facebook,

197,000 followers on Twitter, 50,200 followers on Instagram, and 8,604 followers on Pinterest.

While they do post on these social media sites, there is a lot of room for expansion in the

messages that are posted. Figure 3 shows the most advanced social media posts that the company

has. The Instagram video shows four different options for chocolate desserts, with a link to

recipes for the items. Posts like this can be beneficial to show consumers how the stores

products can be used, but there is no reinforcement that the items should be purchased from their

store.

Future Marketing Strategies:

Expanding the marketing opportunities for Pick N Pay will be a focus on social media

marketing. As many companies and businessmen/women have stated, the South African people

are very involved with technology, specifically their cell phones. With the number of followers

Pick N Pay has on Facebook, Twitter, and Instagram, these platforms are a gateway for the

company to expand their client base and reach more consumers with their campaigns and deals.

Setting a schedule for posts should be the first step in expanding their consumer market. The

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current posts occur every 2-3 days, with 4-5 posts hitting each site that day. Setting a schedule so

that one post is put up every day or two will encourage followers to read the posts or react to

what is in the post. Another strategy could be to create 30 second videos showing how to prepare

a recipe using different Pick N Pay ingredients. Figure 4 shows a Facebook post where Pick N

Pay gives a recipe to their followers for an onion marmalade. They could take posts such as this

one and turn it into a video where consumers can watch the marmalade being made, while

allowing the company to show each ingredient in the recipe with the current sale price to bring

those customers watching into a store. Another possible campaign through Instagram could

include a photo competition where customers can post pictures of them wearing Pick N Pay

clothing and the customer with the most likes would win a gift card to the store. These

promotions drive consumers to become more active with the company and will increase the

visitors on all of their social media profiles and company website. Other platforms may become

useful to the company such as Snapchat or expanding their Pinterest and YouTube channels.

Pick N Pay has begun to catch up with the technology savvy South African consumer market,

but there are small steps that they can take to take their campaigns to the next level and increase

their brand awareness.

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 References

Fastmoving, 2017. Shoprite Holding LTD. http://www.fastmoving.co.za/retailers/shoprite-

holdings-ltd-2), February 6.

Massmart, 2016. Interim results for 26 June 2016. http://www.massmart.co.za/wp-

content/uploads/2016/08/Results-Booklet-final.pdf), February 6.

Massmart, 2017. Massmart home page. http://www.massmart.co.za/iar2014/our-business-

model/, February 6.

MyFT. 2017. Financial Times Pick N Pay.

https://markets.ft.com/data/equities/tearsheet/financials?s=PIK:JNB&subview=IncomeSt

atement, February 6.

MyFT, 2017. Financial Times Shoprite.

https://markets.ft.com/data/equities/tearsheet/financials?s=SHP:JNB&subview=IncomeSt

atement), February 6.

Pick n Pay, 2015. Integrated Annual Report 2015. http://www.picknpay.co.za/news, February 6.

Pick n Pay, 2015. Pick n Pay Gifts Groceries to Surprised Shoppers.

https://www.youtube.com/watch?v=kmC5hSxSUds), February 6.

Pick n Pay, 2017. Pick n Pay home page. http://www.picknpay.co.za/news, February 6.

Shoprite, 2017. Shoprite home page. https://www.shoprite.co.za/contactus.html, February 6.

Shoprite South Africa, 2016. Festive favourites for less from Shoprite.

https://www.youtube.com/watch?v=oe4iPZaPlZg), February 6.

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 Appendices
Figure 1

Figure 2
http://albertonrecord.co.za/wp-content/uploads/sites/35/2015/11/DSC6008-Custom.jpg

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Figure 3

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Figure 4

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