Determining the business impact of retail store openings on a sales and distribution company
Breedt, Abel Daniël Petrus
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The retail environment is experiencing some difficult challenges lately. Consumers are under threat due to the current economic situation in South Africa with rising inflation and increasing utility costs such as water and electricity. This scenario has an affect the consumer’s disposable income that affects what they spend with retailers. Sales growth for retailers is ultimate, what the industry is all about. The sales growth in the past is not as desirable lately, and retailers are seeking other ventures to get growth. They are targeting to increase their footprint into South Africa as a way to seek growth. New retail stores in South Africa is increasing rapidly. South Africa is one of the six biggest countries with a number of retail stores and shopping centres but on the other hand, have one of the highest unemployment rates in the world. Retailers among themselves are very competitive, and the biggest retailers are trying to get a market share of the industry. With the store openings, retailers try to achieve that. It is evident that five years ago Pick n Pay was the largest retailer in South Africa, but Shoprite has captured market share through the years and is now the leading retailer in South Africa with 27% market share. Increasing in the number of retail stores affect companies that need to service the retailers. With increasing of stores comes increasing costs. Sales growth from new store openings is not sufficient to cover costs and with retailers’ strategies to continue increasing footprint, will have an unfavourable effect on sales and distribution companies when it comes to their profitability and future. Over the past five years from 2011 to 2016, retailers increased their footprint dramatically. Retailers such as Shoprite have increased store openings by 40.9% over the five-year period and Pick n Pay by 29.4% over the same period. This shows that retailers were aggressive to obtain growth, but results show a different story. This study will determine what effect the store openings have for a sales and distribution company.