Grocers look to trim costs in their distribution systems
Feb 05 2009
Retail Wrap >>

Shoprite confirmed last week that it was buying land in Durban to develop a distribution centre as grocery volumes rose. Spar's recently completed Gauteng and Cape Town facilities cost more than R200 million, suggesting that Shoprite would be in for at least as much.

Shoprite said the terms associated with the purchase of a 20 hectare property off the N3 highway, in part to cope with higher food imports through the port of Durban, had yet to be met. If the deal fell through, the company would look for another property.

While Shoprite has argued in favour of the efficiency benefits of its centralised distribution system, the system also allowed the company to stock up during the grocery shortages of the retail boom. In the period of high food inflation that followed, the company was able to stock up ahead of price increases.

Competitor Spar, which, like Shoprite, has been growing volumes as opposed to simply growing rand value sales through inflation, has already broken ground on a property in Durban. It was building a R240 million distribution centre for perishables, said Mike Prentice, Spar's merchandise executive. Spar, as a pure distribution business - as opposed to a retailer - has always operated a centralised model to service Spar-branded stores, which are owned by private businesses.

Shoprite adopted the centralised model a decade ago, arguing that ending store deliveries by its myriad suppliers had created a less disruptive system and reduced its out-of-stock positions.

Pick n Pay will be investing in a centralised system over the next three years. It will benefit from centralised distribution as it allows busy stores to expand into their storage areas, making the space earn money. The group is already distributing perishables centrally from its new Longmeadow facility in Gauteng. This is being extended to dry groceries.

Adapted from Source: http://www.fastmoving.co.za, 2 Feb 2009.