There’s a new Game in town

Walk into Game in Joburg’s Fourways Mall, and you’re immediately struck by the number of heaters and blankets packed in neat rows under a “how to beat winter blues” banner. It’s an impressive display — and carefully positioned to anticipate the direction shoppers will take through the store.

These promotional items on Game’s “racetrack” and “gondola ends” — the main thoroughfare of the store and shelf ends — account for 10% of sales, says group CEO Mitchell Slape, slipping into the lingo of US parent company Walmart. “The general rule in a Walmart store or Game store is that we sell 90% of our product off the side-counter.”

The aim, for Game, is volume. Over just one weekend recently, the retailer sold about 10,000 blankets, and during last year’s relatively mild winter, it sold 250,000-odd heaters. It also sold more than 200,000 bikes last year, and is the second-largest seller of supplements in SA.

But despite these positive-sounding metrics, the Massmart-owned business has taken heavy losses for years — and would have done last year too even without the July 2021 looting and Covid liquor sale restrictions factored in.

Walmart’s investment in Massmart, which includes Builders and Makro, has simply not borne fruit. Since buying the group in 2011, the global giant has seen the local share price plummet 80%. That’s why it started getting its house in order, closing all 23 DionWired stores in 2020 and selling the Rhino and Cambridge brands to Shoprite (pending Competition Tribunal approval). But the real “game-changer”, say analysts, would be if Massmart offloaded Game.

That’s certainly not Slape’s position. In fact, he seems quite irked by the suggestion, saying he believes the naysayers are picturing the Game “from five years ago”.

“My view is if you look at the Game brand and the power of it — all of our research indicates that our customers really respond to the Game brand.”

One of the great benefits of being part of Walmart is we have benchmarks all over the world from retailers that have done this for a long time

—  Mitchell Slape

Slape, like Walmart, sees potential in letting the brand trade unencumbered by “outlier” events, while doing the hard yards to make it a success.

He is speaking to the FM during a walkabout of Game — part of Massmart’s relaunch of the brand this month. The merchandising team has been through every item in the Fourways store, section by section. Twice.

It’s the culmination of a revamp, announced two years ago, to turn the business around. Since then, 5,000 customers have been interviewed, about 114 stores have been redone, and unsuccessful outlets have been (and still are being) exited. Importantly, the upgrade has homed in on the product offering, with some categories being dropped and others added to the mix.

One of the first changes, in early 2020, was to lose the fresh food section and add basic apparel. Clothing margins are not only traditionally higher, but an apparel section gives shoppers an additional reason to enter the store in the first place.

By January 2021, with about 70% of its stores selling apparel, Game had sold about 2.5-million units of clothing.

Not that food has been totally sidelined: dry groceries drive a lot of business — and in particular contribute to the profit line of outlying stores.

With the demise of DionWired, Game is stocking more premium brands — think 98-inch TVs and Nespresso machines, for example, and even R65,000 fridges. And there is increased focus on in-house brands and sister brands such as Walmart and Builders’ Design House. 

“We have industrial engineers who go into the factories and work alongside the guys to maintain the quality we’re looking for and to get the price absolutely right,” says Brian Leroni, senior vice-president for group corporate affairs at Massmart. “That level of intervention is very difficult to achieve unless you’re a brand owner.”

There’s also a move to shore up existing “power departments” — sporting goods, small appliances and electronics. And possibly launch new ones. In particular, Game is putting a lot more energy into babywear — beginning with a commitment to be the lowest-cost nappy provider in SA.

“We get moms in the store with our nappies and our formula pricing and they … do [their] whole shop with us,” says Slape. “That’s been a significant part of our strategy.”

It’s part of a longer-term plan for the company. Slape wants young families to begin their retail life cycle with Game — and the baby section is key to that.

“We’ve done a lot of research over the years to understand what retail customers are worth to us over their life cycle if they begin shopping with us, and it all depends on that department being the linchpin,” he explains.

It’s a move that seems to be paying off. Since the Game revamp, the baby department has shown consistent double-digit sales growth. At the Fourways store alone, it has doubled in size in just two months — and it’s growing sales at more than 50%, says Game MD Andrew Stein.

It’s not all products, though — there’s also a focus on new initiatives and services. Heralding the relaunch of the brand on July 1, for example, was “Halfway Day” (halfway through the year) — what Game hopes will become an annual one-day sale along the lines of China’s “Singles’ Day”, which was popularised by retail giant Alibaba in 2009.

Most stores also now offer in-store support for appliance and furniture installations and assistance with upgrades, and a “tech squad” is on hand to help customers set up their smart devices. That’s already paying off: after receiving tech guidance at the Mall of Africa outlet on a recent Sunday afternoon, one customer went on to buy R500,000 worth of laptops from the store.

Underscoring everything is a focus on price. Game’s “price-beat promise” means if a customer finds a product cheaper elsewhere, the retailer will not only offer the product at that price — it will also pay the consumer 10% of the difference.

More generally, it’s part of a move to becoming an extended discount operator, like Walmart. To this end, in February Game chose 80 in-demand items for a “low-price lock”, monitoring take-up on the products and keeping the price locked at the discounted rate if there was an uptick in sales.

“One of the great benefits of being part of Walmart is we have benchmarks all over the world from retailers that have done this for a long time,” says Slape. “So we take Walmart concepts, but we also have a very strong local mindset that goes into how we do layouts as well.” 

Customers are more strapped than they ever have been before. But I think that’s one of the strengths of Game from a pricing perspective. People still need apparel, baby[wear], school stuff, sporting goods for their kids for Christmas, they still need basic furniture

—  Mitchell Slape

Part of the turnaround has, of course, been operational. Game has not only consolidated locally; it’s also in the process of exiting East and West Africa, regions that Massmart COO Jonathan Molapo says were a drain on profitability and management time.

And there’s a renewed focus on the supply chain. “I think about two years ago, when we started the turnaround, one of the key issues was the supply chain,” Molapo says. “Everybody had their own supply chain — Makro had one, Game had one and Builders had one. The inefficiencies were just too much, so … we’re now building one group-wide supply chain to make it simple.”

To streamline operations, the group has centralised distribution, cutting the 17 centres serving its individual brands to just six serving the group, with plans to reduce that to five by November next year.

According to Stein, Game set two “audacious goals” at the start of the revamp: to relay every Game store in the country in eight months; and to change the look and feel of every store in just four. Both, he says, have been achieved.

Still, Covid lockdowns, riots and floods made it “one of the most difficult times” to relaunch, says Slape. And that’s not even factoring in the ailing economy.

“A lot of people ask me: ‘With all the inflation that you’re seeing, are you starting to see a de-emphasis in anything?’ And, certainly, customers are more strapped than they ever have been. But I think that’s one of the strengths of Game from a pricing perspective.

“People still need apparel, baby[wear], school stuff, sporting goods for their kids for Christmas, they still need basic furniture … Where we’ve got an advantage is the price, and the quality is right for the customer and they’re still going to buy it.”

He’s certainly determinedly upbeat about the trajectory. “I have to give this thing a chance, especially once we’ve relaid it, re-signed it, we’ve improved the merchandise assortment, and that’s where we stand today,” he says.

“People ask me why I believe in Game. I believe in Game because we’re seeing the results play out as these stores launch. And I’m convinced, as we continue through the rest of the year, this thing is going to fly for us.”

If the Fourways store is anything to go by, he may just be on the money. Since its completion a year ago, it’s seen constant growth in sales performance and customer traffic, says Stein. Transactions are up about 33% over the year and sales have grown 16% — “a sharp turnaround”.

So, if Game has reduced its losses by at least half, and looks on track to keep the trend going, when will it get back to profitability?

“That’s the million-dollar question,” says Slape. “It’s too early just yet to say exactly, but we’re on the right path. I can see the path unfolding before us.”