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DIY Retail Offers Good News for South Africa

DIY Retail Offers Good News for South Africa

In September 2018, Leroy Merlin entered South Africa with the launch of its Greenstone branch. Leroy Merlin arrived with a huge investment of approximately R1 billion, over 1-2 year period, with a total 4 envisioned stores initially. This is significant because it’s a clear vote of confidence in South Africa as an investment destination.

At a recent “meet the retailer” event arranged by SACSC (South African Council of Shopping Centres), Guillaume Beaubreuil, General Manager of Leroy Merlin, describes South Africa as an ideal country to invest in. He pointed to excellent road and transport infrastructure throughout the country for shipments; SABS approval standards that are navigable and easy to work through; good custom and freighting capabilities; a banking system that is superior to that of the entire European Union; and a marketing environment that is comprehensible

Leroy Merlin did their homework before moving in, researching in excess of 600 households to identify what the market needs here and how to meet it. Their aim is not to steal market share from competitors, but to grow the size of the DIY market by training households in DIY applications.  In the first few months of their opening, neighbouring retailers (Builders Express, Jack’s Paint and various other DIY on the block) reported an increase in sales of up to 30%.

The arrival of Leroy Merlin brings with it the expansion of this type of market, which seems to be beneficial for all; foreign investment into the country as well as a whole variety of new DIY equipment brands. Approximately 30% of their stock is imported from European markets in the form of brands not yet known to South Africans.  With this competitive edge comes more affordability in this space for the South African homeowner and contractor.

The online market for DIY is also becoming a vital element to this market and here again with an excellent on-line offering Leroy Merlin has ensured that its competitors cannot remain stagnant and has forced them to innovate their offering.

Leroy Merlin’s arrival was not a surprise as it was well planned and anticipated, but it has prompted the dominant market player Massmart (Massbuild) to sit up and take note. Recently Massbuild launched its “store of the future” in Boksburg, which marries the digital and the in-store experience to ensure market leadership and a competitive edge.  The new store will differentiate Builders Warehouse in the following areas: smart home (security retail), flat pack furniture (assemble at home), room inspiration (bathroom and kitchen mock–ups), integrated retail with a higher range stock in-store and online additional options which it refers to as the “extended aisle”, as well as a speedier shopping experience.

In the past, SA’s DIY market has been fairly robust and resilient to economic downturns. However this year SA has suffered a severe knock to the economy and the first couple of months saw the worst ever retail experience for the DIY market in South Africa.  The difficulty was evident in total retail sales growing only 1% to December 2018 and a decline of 1.5% for hardware, paint and glass retailers. This was evidenced in the financial results of Massmart’s Massbuild with a rise of 5.9% in sales receiving only a 1.8% gain in profit in results to December 2018. Cashbuild by contrast showed profit decline of 12% with revenue increasing by 3%  Italtile as part of its overall plan intends taking more of competitor market share by getting buyers to buy all materials from its store.

Whilst nobody enjoys an economic downturn, one thing is certain: it can bring out the best in business leadership. In spite of a very stressed environment, it would seem that all the main players in the DIY are sharpening their pencils and demonstrating innovation and leading retail into the future in our changing world.

Further reading:

https://diytradenews.co.za/retail-outlook-2019/

https://www.moneyweb.co.za/news/companies-and-details/how-builders-is-fighting-back-against-the-french/

http://www.sabuilder.co.za/2019/08/31/leroy-merlin-opens-second-store-in-south-africa/

 

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