It is no secret that Walmart has been evaluating an acquisition in South Africa for a number of years. A number of local retailers have informed Planet Retail that Walmart executives from the US and UK are not an unfamiliar sight at stores and head offices.

Of the takeover possibilities, Massmart is generally a good fit, and this week Walmart made an indicative, non-binding offer for the 290-store general merchandise retailer, which has shops in 13 African countries. The only question mark hangs over Walmart’s credentials or ambitions for running home improvement and building supply channels.

The alternatives on offer could also have provided a strategic fit with Walmart: Shoprite, a large network of assorted grocery and non-food banners in more than 15 markets; Spar, which has grocery and DIY chains in a handful of markets; and Woolworths, which has a strong network of general merchandise and grocery stores in nearly 20 markets. All would have had something to offer the acquisitive global leader, but Massmart sits nicely alongside Walmart’s ethos of selling low-price general merchandise.

We would not expect to see any immediate changes to the consumer-facing side of the business for some time, save perhaps for the introduction of hugely successful Walmart global private labels, such as George. Indeed, it sounds likely that the acquired African operations would sit with Asda in terms of Walmart International’s structure, so it would be more likely that South African shoppers would see Asda private labels on offer.

What Walmart International will undoubtedly bring to the party is its expertise in areas such as systems, procurement and supply chain. While the South African market has its fair share of idiosyncrasies, Walmart should be able to deliver efficiencies and deliver the savings to consumers in the form of lower prices.

Massmart’s sales are dominated by its activities in cash and carries and warehouse clubs, with the Game variety store network providing the next biggest contribution to sales. Game sells a diverse mix of general merchandise and non-perishable groceries for home, leisure and business use and is positioned as ‘Africa’s largest discount retailer’. Home improvement stores are the third most significant segment in terms of revenue, while there are also activities in delivered wholesale through the Shield network of independently owned cash and carries and neighbourhood stores.

Robert Gregory, research director, Planet Retail. For more information contact us on:

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