Today’s edition
Fee Delivery
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Good morning, it’s Tuesday the 3rd of November. South Africa’s biggest businesses are racing to turn us into paying members, with Pick n Pay the latest to join the subscription battle. Also in today’s roundup, Dis-Chem is feeling the pressure from Shoprite, and illegal mining and prostitution are now part of South Africa’s GDP calculations. Let’s get into it.
MARKETS
SIGNED, SEALED, DELIVERED
Pick n Pay is selling free delivery for R99 a month, betting you will stop shopping around
Big businesses don’t just want you as a shopper anymore. They want you as a subscriber. Takealot, Checkers, Amazon and Uber all sell memberships, and last Thursday Pick n Pay joined them with Smart Shopper Pro: R99 a month for free delivery on asap! orders over R350, extra points and an in-store discount.
For a retailer, an ordinary purchase comes with no guarantee of another one. A membership gives you a reason to come back before the next special even lands, which is why the fee matters less to these businesses than everything you buy afterwards.
Why everyone’s selling one:
- More orders: A shop can give up some delivery revenue if the membership brings in more orders, more often, from the same household.
- Staying put: Once you’ve paid for perks at Checkers, a special at Pick n Pay has to work harder to pull you away. Same goes for Takealot and Amazon, or Uber and Bolt.
- The bundle: TakealotMORE’s top tier covers Takealot orders, Mr D takeaways and Pick n Pay grocery deliveries. Amazon throws in Prime Video, and Uber One ties rides to takeaways and groceries.
Everyone is chasing the same household budget, and a TransUnion survey this year found 28% of South African consumers had cancelled subscriptions or memberships in the past three months alone.
BITTER PILL
Dis-Chem’s loyalty programme brought shoppers back, and the bill for keeping them landed on shareholders
Dis-Chem’s latest results show how the battle for repeat spending plays out at the pharmacy. Its loyalty programme, Better Rewards, is doing its job: sales rose 8% to R23 billion in the six months to August, and Dis-Chem credits the programme for most of that growth. Members now account for more than 86% of sales. Shareholders had less to celebrate: headline earnings per share fell 12.8%, and on Friday the shares dropped as much as 12%.
The pressure came from expenses growing faster than income. Dis-Chem opened 14 pharmacies, its staff bill grew and spending at X, bigly labs, its digital unit, doubled. Together they pushed expenses up 13.1%, ahead of a 9.0% rise in income, leaving less profit despite the higher sales. Chief executive Rui Morais says much of that investment is now built in, and he expects a stronger second half. Part of the urgency comes from a rival he says worries him more than Clicks: Shoprite, which could use Sixty60 to carry its Medirite pharmacies well beyond their own neighbourhoods.
Each pharmacy still needs its own licence, but delivery changes how far one can reach. If you’re going to deliver medication, Morais said, “you need to be at least as good as they are.”
BAGEL BITE
Which of these animals has thousands of teeth?
A. Snail
B. Leech
C. Sea urchin
DOING THE ROUNDS
The builder behind the Carlton Centre has been in business rescue since 6 October. Now, filings reported by Moneyweb on Monday reveal the strain within the Concor group. Its holding company disclosed just R4,000 in cash and potential liabilities exceeding R1.6 billion from project guarantees. Its construction business reported R218 million in cash, but also owed creditors about R483 million and employed more than 1,000 people. All four group companies are in rescue, with practitioners tasked with finding a way to keep the business going. Full story →
In case you missed it, South Africa discovered last week that its economy was about 5% bigger than it thought. Stats SA updated its calculations to better capture economic activity, but some eyebrows were raised at what the figures cover, most notably illegal mining, prostitution and electricity generated at home. Quite the mix of national contributors. The bigger GDP makes government debt look smaller relative to the economy, without a cent being repaid, but at the same time, last year’s growth was revised down from 1.1% to 0.9%. Full story →
SAA is going from bad to worse. In April, Matshela Seshibe stepped in to lead SAA while it searched for a permanent chief executive. On Friday, he was fired from Air Chefs, the airline’s catering subsidiary, which he previously ran. An independent disciplinary process found him guilty on four of six charges, including approving salary increases without board approval and failing to disclose a conflict of interest. We’ll take a deeper look at what’s been happening at SAA later this week. Full story →
Copper miners are struggling to get metal out of the ground, and that’s helping support prices. BHP’s output fell 19% in the three months to September following maintenance, lower ore grades and disruptions, including bad weather in Chile. All Weather Capital noted on Monday that these supply problems are supporting the copper market. The question is how long that lasts: the International Copper Study Group expects global production of refined copper to exceed demand this year and next. Full story →
WEATHER
BAGEL GAMES
Have you got what it takes to win today’s Wordle? Play here →
THE ANSWER
As for the Bagel Bite, the answer is: A. Snail
A snail has thousands of microscopic teeth on a flexible feeding ribbon called a radula. It uses its radula to scrape or rasp food into its mouth. As teeth at the front wear down, new rows move forward to replace them. The number and shape of the teeth vary between species. Some leeches have hundreds of teeth, while sea urchins have five.
That’s your Tuesday sorted. Enjoyed it? Forward it on, a friend can subscribe in a click. Written by the Business Bagel crew.
Views quoted from All Weather Capital are their own and not financial advice. All Weather Capital is an Authorised Financial Services Provider (FSP 36722). Full disclosures are available at allweathercapital.co.za.