Grocery wars

by Hilton Tarrant

South Africa’s online grocery market has been stuttering for years. All it took was a global pandemic to kick things into action.

'Last-mover advantage’ is the kind of description – defence, even – offered up by executives of companies that have lagged the market and are mostly up against the wall. Legend has it that the Shoprite group was simply ‘nowhere’ when it came to ecommerce and that rivals Pick n Pay and Woolworths had seized the market for themselves.

But the tall shelving units alongside till points stacked with trademark Checkers Sixty60 brown paper grocery bags and the swarms of branded motorcycles criss-crossing neighbourhoods tell a story. Following a modest launch in November 2019, it aggressively rolled out the service during lockdown, where it quadrupled the base of stores that offered Sixty60 in 12 weeks. Today, the service is available from over 150 stores across the country.

Shoprite chief executive Pieter Engelbrecht says the group used its “last-mover advantage in the digital space to go straight to on-demand execution with the launch of Sixty60 one-hour on-demand fulfilment.”

He says it’s well-known that the most difficult part of ecommerce is the last mile, or to-the-door delivery. “It’s very expensive, and (difficult) to get fresh right.”

The proposition is simple: a mobile app-only service that promises grocery deliveries in as little as one hour. The group, like its competitors, is guarded. However, it has positioned this as ‘on-demand’ from the start and has poked holes in its competitors’ offerings predicated on pre-booked delivery slots at least a day in advance; this is not how normal people shopped for groceries, was one of the first pitches from Checkers. The group worked backwards from the customer’s point of view – how to place an order within 60 seconds and receive it in 60 minutes – and engineered a process that leverages its existing store estate (265 stores in total, of which 57% are live) to achieve that.

The service has won numerous awards in the past year, including many for innovation. Engelbrecht says its ‘quite unique for a supermarket to win innovation awards’ and adds that Sixty60 is ‘something that came at a time when I think no one expected it’.

Beyond the accolades, though, he makes the point that ‘it didn’t come at an exorbitant cost (in terms of capital) and is profitable’. Shoprite partnered with on-demand delivery service Zulzi to build the app (effectively a white label of the Zulzi app) and uses cloud-based delivery platform Cowabunga for its delivery monitoring. The actual deliveries (bikes and drivers) are outsourced to courier service RTT, while picking in store is done by its staff.

Lockdown was, in many ways, the perfect storm for delivery services. Many that were hesitant to use or even try ecommerce, especially for groceries, did so and new habits were formed. This is why Sixty60’s growth has been so meteoric. By August last year (level three lockdown), weekly orders were more than double the level of April (level five). Industry sources suggest Sixty60 is delivering 10 000 orders a day.

Picking up bottles

The partnership between Checkers’ main rival Pick n Pay and delivery app Bottles was precipitated by lockdown. Before this, Bottles delivered alcohol only (and had been in partnership with the supermarket group since 2018). With the sale of alcohol prohibited, Bottles effectively had no business. Within the first week of the hard lockdown, it launched a ‘grocery essentials’ delivery service. Both parties benefited, as Bottles had items to deliver and Pick n Pay had a handy solution to what customers were increasingly demanding (and an answer to its rival’s service).

Usage of the service continued to grow to the point where it dwarfed Bottles’ original business once alcohol sales were again permitted. In October, Pick n Pay announced it would buy the business and integrate it into its online offering. By December, it had rebranded as ‘Bottles by PnP’ and cut its delivery fee to R35 (the same as Sixty60). The cost of the acquisition was disclosed in its financial statements in April. At R33 million, ensuring it would be able to compete against Checkers – with a proposition it had not even considered – it did not come cheap.

Slow burner

Outgoing chief executive of Pick n Pay, Richard Brasher, says Bottles has been ‘integrated into the business’ and that the group is ‘excited by the talent we’ve acquired and capabilities that gives us’. It saw a 700% increase in on-demand deliveries over the last year. However, there remains work to be done to integrate it properly into its store estate. There is no dedicated staging area for prepared parcels in stores, with the process fairly haphazard at present.

It will soon launch, an ‘over-arching banner’, which will offer all three services: ‘on-demand, express delivery on a bike’, a ‘scheduled delivery in a lorry’ and ‘click and collect’, says Brasher.

Woolworths entered the now fiercely competitive space in December, with the trial of its Woolies Dash same-day delivery service. It is remarkable that Woolies was late to the party, given that it pioneered online grocery shopping in the early 2000s with inthebag.

The differentiator of its offering is that it promises a ‘store-to-door cold chain’, meaning that orders remain chilled throughout the process. The company says customers have responded well, but it is understood that the trial hasn’t gone entirely smoothly. Of the three retailers, Woolies now offers the most options for shoppers: online shopping, shopping via its app (a markedly different experience to the former), click and collect, and Dash. It faces a real challenge to differentiate these options and make them easy to understand for customers.

While this on-demand battle will intensify in the months and years ahead, the more affluent part of the food and grocery market in the country is estimated by Pick n Pay at R105 billion in 2020. To put this in context, Brasher says the middle market is estimated at R100 billion, but the real opportunity is in the ‘less affluent’ part of the market, which was R390 billion last year. This on-demand and delivery battle will be waged in just a small segment of the market.


Checkers Sixty60

  • Delivery fee: R35
  • Over 15 000 groceries, including drinks from LiquorShop
  • Coverage in most major centres of eight provinces
  • Xtra Savings promotions not available

Bottles by Pick n Pay

  • Delivery fee: R35
  • Over 8 000 groceries, including drinks from PnP Liquor
  • Coverage in Gauteng, Western Cape, KwaZulu-Natal, East London, Gqeberha and Bloemfontein
  • Smart Shopper not yet integrated Woolies Dash
  • Delivery is free for orders over R75 during trial
  • Range not disclosed, but ‘the full range of your nearest store’ is available
  • Generally, from larger stores serving upmarket suburbs in Joburg, Pretoria, Cape Town and Durban. The trial is from 18 stores only.

Woolies Dash

  • Delivery is free for orders over R75 during trial
  • Range not disclosed, but ‘the full range of your nearest store’ is available
  • Generally, from larger stores serving upmarket suburbs in Joburg, Pretoria, Cape Town and Durban. The trial is from 18 stores only.

Republished with permission from ITWeb Limited

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