08:21 JUL24-OSA-FINAL-QUESTION-... 30 Done Moir's strategy oozes retail savvy by targeting both ends of the consumer market at the same time. The group differentiates its offerings based on whether it is a core item or more of a luxury. - It has reduced prices in some areas and placed bulk selling in the mix — packages of potatoes, onions and butternut. It also provides a wider offering with more products and brands from popular detergents to freshly sliced mangoes. "And we're making the clothing business more appealing and fashionable to a younger black customer," said Moir. That too is a smart strategy because clothing has always been a far more profitable business than food. Perhaps, more than any other company, the chain's success in recent years says much about the shifting sands of the modern South African. Daniel Silke, director of the Political Futures Consultancy, says Woolworths has succeeded because it tapped into an empty void in the retail menu. Its products are now affordable yet aspirational, straddling both the developing and developed worlds. "It has cleverly read the dynamics of what is a very divided and unequal society in sub-Saharan Africa. Its success is probably a result of understanding these two diverse segments of the consumer. Woolworths neither priced itself out of the market, nor is it a cheap offering and it understands the price points of divergent consumers. "Moving its grocery product to a much broader base has very clearly positioned it as the go-to store for an aspirational South African," said Silke. Yet Moir does not see a paradox in being a retailer to upper-income earners and having something euphemistically termed 'value offerings', targeting the bottom end of the market. "Everybody, no matter what LSM, wants value. And you want value in the right article. I might want to spend more on a suit with a great cut, but when I buy a T-shirt or essentials I want great value. Everybody expects value these days. Our opening price points need to be very precise." Of course, Moir believes this equality gap needs to be narrowed for the good of the country. "We need to take a more collective responsibility ... a greater dialogue has to be better for business and the economy and the government and the people it represents," he said. Roger Tejwani, retail analyst at Noah Capital Markets, said Woolworths had improved on many fronts. The speed-to-market of its products improved: for example, back in 2008, all its clothing was purchased based on an 11-month cycle, but today this was far faster, similar to Truworths and Foschini. "The fast fashion content has increased and that's broadened the appeal," he said. Gill Marcus's recent interest rate hike will inevitably hurt Woolworths' food business, which is interest-rate sensitive, but even this business is less cyclical than in the past. Still, the richer consumers are likely to feel some pressure. "Woolworths will have its share of pain. But they have made the food business more defensive by significantly increasing stock-keeping units, investing in price and adding more long-life product," said Tejwani. Unlike the likes of Richemont, Woolworths does not punt itself as a company focused on the "luxury" market, although some experts describe it as "soft-luxury". Thanks largely to its unequal economy and gaping divide between rich and poor, South Africans are not soft on luxury. Global consultancy Bain & Company said last year South Africa's luxury goods market was expected to grow between 20% and 30% during the next five years. By niching itself at the top, and hammering a space for itself lower down the chain too, Woolworths still appears to be in the sweet spot. BDLive.co.za. This article was first published in Sunday Times: Business Times Source: https://www.foodstuffsa.co.za/woolworths-little-secret-to-big-success/ QUESTION 1 (20 Marks) From the above case we can see Woolworths Food is really taking off and is contributing significantly to their financials and bottom-line. As mentioned in the case Woolworths food is known to traditionally target the upper middle class and higher earners in the country. They are one of the few FMCG companies, if not the ONLY company in South Africa, that charges the same or MORE for their internal products vs external branded products. Woolworths foods has taken control and ownership of the supply chain from agriculture to final retail sale to customers. They have taken quality control to a whole different level in the process by engaging with all partners along the supply chain. Critically discuss what makes Woolworths successful when dipping their hands in the supply chain, and thus better position themselves for differentiated competitive advantage, vs Checkers, Pick n Pay and or Shoprite. A 08:20 JUL24-OSA-FINAL-QUESTION-... SECTION A Read the Article below and Answer ALL the Questions that follow [40 MARKS] Woolworths' little secret to big success The story of Woolworths - a company whose value soared from under R6bn to R51bn in a decade - is one that has confounded pundits and sociologists alike. 30 Done How is it that Woolies, which you would think would have a market consisting mainly of the country's wealthiest executives, the sort of people you see milling about the aisles at 7pm on a weekday buying ready-made meals, appears to have outstripped its rivals at both ends of the market? Especially at a time when the economy has ground to a near-halt and the growth of rivals such as Shoprite and Pick n Pay has slowed markedly. This week, Woolworths provided part of the answer to that question when it released financial results that showed how it has firmly clasped hold of the wealthiest consumers while aggressively spreading its tentacles into the "value-oriented" lower end of the market. The emerging black middle class has proved especially valuable. Twenty years ago, black customers accounted for less than 10% of the chain's business: today, they amount to more than 55% of its customers. This reflects the growth in the number of people now in LSM 8 to LSM 10 - a demographic not as affected by the rising cost of living as poorer South Africans. Woolworths CEO lan Moir describes how there is a strong polarisation among consumers -the poor have been hit by the squeeze on unsecured lending, while the rich remain resilient. "There are a great many problems in South Africa right now - unemployment, especially youth unemployment. Education in South Africa is a big issue, but there's recognition of that," said Moir. "But stand back and say where has South Africa come from in the last 20 years, and you forget just how much it is changed. GDP is two-and-a-half times more than it used to be, people are wealthier than they used to be. LSM 8 to 10 looks completely different from 20 years ago," he said. However, the more surprising part of the reason for Woolworths taking the lead among the pack lies in the complexion of the queues in its stores. You will often find hassled executives waiting behind domestic workers, or others further down the LSM scale - reflecting how Woolworths is now an aspirational brand that has eaten into the traditional market of rivals like Pick n Pay. At the same time, Woolworths has also used slick marketing to change people's perceptions of it from being an unaffordable "rich man's shop" to one that also provides "quality, value offerings". For example, it aggressively touts promotions for specific products each week, which are alarmingly often cheaper than at Shoprite, Pick n Pay or Spar - something it never would have done years ago. Also, every week, it benchmarks 500 products against its rivals to ensure they are competitively priced. The foods on Woolies' promotion sell four times more than their normal volume. Some even blow the lights out - Jacobs Coffee increased volume sales by 1100% when it was on promotion. C E