As PnP and Takealot inch ever closer, would a merger make sense?
The announcement by Pick n Pay in May that it would launch an on-demand grocery offer on Takealot’s Mr D app caught the industry by surprise. The market originally saw this as a tidy, ring-fenced venture.
Since the Mr D offer went live in August, though, the two retailers have been inching closer and closer.
More than one experienced operator in the space has quietly questioned whether a deal between Pick n Pay and Takealot would make sense?
In many ways, an on-demand grocery partnership was a rare instance of a win-win partnership: Pick n Pay got access to more than 2,5 million active customers on the Mr D app, while Mr D got a scalable solution to its on-demand grocery and liquor problem.
Increasingly, consumers are leaning on the likes of Uber Eats and Mr D for convenience items like bread, milk, drinks (soft and otherwise), snacks and ice. This need has largely been filled by smart fuel station operators who have listed on the platforms, often with absurd mark-ups to make the model work.
Uber Eats has rolled out first-party ‘‘Markets’’ in key nodes with competitive pricing on a limited range of groceries and convenience products.
Enabling a selection of over 10 000 food and grocery items at more than 300 Pick n Pay stores on Mr D — crucially at the same price as in-store — was something of a coup.
For the country’s second-largest supermarket group, this deal meant additional scale for its in-store picking and packing teams who were already processing orders for its Pick n Pay asap! app, as well as its traditional online shopping offer. Whether an order is processed for one of its services or for Mr D is, operationally, irrelevant.
Because margins on groceries are razor-thin, scale is critical.
Plus, this partnership benefits PnP as it is already playing catch up to the runaway success of Checkers Sixty60 . . . recall, it was practically forced into buying the Bottles app from its founders during the Covid-19 pandemic.
This month, Pick n Pay said the Mr D service “has already been rolled out to over 300 stores with incredible success”.
Based on the very aggressive promotion of the offering, there are clearly some big turnover and order volume hurdles expected by both parties.
First-time shoppers can get R100 off their grocery order of more than R200 until the end of the month and stand a chance to win R10 000 each week. PnP is also offering incentives to members of its Smart Shopper loyalty programme, including discounts and free delivery.
Beyond just Mr D
The commercial services agreement signed between the supermarket retailer and Takealot was centred on scaling an on-demand grocery offer on Mr D, but it maintains that it is “open to new and exciting pilots that empower its customers with multiple options to shop online”.
Following the launch of a standalone Pick n Pay Home online store last year, it has also quietly listed more than 500 general merchandise products — such as fridges, microwaves, ink cartridges and pool floaters — on the main Takealot site.
Prices are very competitive, but the longer delivery lead times (sometimes upwards of five working days) versus Takealot’s own products remain a disincentive.
For Takealot, this fits into its standard marketplace platform which enables third parties to list and sell products on the site. The delivery lead times — especially for larger items — suggest that Pick n Pay is shipping to Takealot for fulfilment upon order (and not using the latter’s warehousing space). For Pick n Pay it opens another channel for general merchandise sales.
Extending physical reach
The latest move saw the two retailers pilot a Takealot pick up counter inside the Pick n Pay store at Table Bay Mall in Cape Town from mid December.
Both have been very careful to stress that this will run for a three-month period before deciding whether or not to extend this to more stores, but said “the results after two weeks [were] already very promising”. Notably, the counter launched one week before Christmas Day and reached collection capacity within two days.
Pick n Pay already has the space at its stores enabled for on-demand delivery (where PnP asap!/Mr D orders are staged) and these counters will drive additional footfall, which will translate into more baskets through the till. A reasonable occupancy fee will offset the rental costs.
For Takealot this solves a major headache as it expands its pickup point network. No rent, no building maintenance. A computer terminal, network connection and staff members on shifts to run the counter. — Moneyweb.