What Founders Can Learn From Mr Price's Value Creation Strategy

The retail industry is arguably one of the most integral industries in any society today: consumers all over the world flock into retail stores every day searching for the latest deals for products that they struggle to live without: from food to clothing to general household products, the retail industry is embedded into the multicoloured fabric of our lives. Globally, the retail industry is valued at approximately $30.5 Trillion. One of the major retail brands in South Africa is the Mr Price Group. In this article, I will share some key insights about the retail powerhouse:

• The History
• Financial Performance
• Value Creation Strategy
• Key Practical Lessons You Can Implement in Your Business Today

Background

Birthed by Laurie Chiappini and Stewart Cohen in 1985, Mr Price is a good example of what is possible when people who dare to dream actually launch into the unknown. What started as a small apparel store has now grown into a retail behemoth spanning across segments such as homeware, financial services, and telecommunications. Its phenomenal growth is due to the incorporation of both organic and inorganic growth strategies. Despite its success, Mr Price Group has ensured it hasn’t strayed away from its founders’ vision of providing quality products at affordable prices. This is an example of having unwavering conviction about your strategy- no matter the shifts, disruptions and challenges you have, don’t compromise when it comes to your core. Below is a timeline of significant events since 1985.

Financial Performance

Mr Price’s retail revenue increased by 57.5% between 2018 and 2023 at an annual rate of 7.87% per year. Net profit fluctuated over the years ranging from R2.6 Billion to R3.3 Billion. The net profit margin in 2023 was just under 10%, meaning Mr Price made R0.10 of net profit per R1 earned in retail revenue.

In comparison, Woolworth’s Fashion, Beauty and Home division net profit margin in 2023 was approximately 8%. Benchmarked against Woolworths and the Foschini Group, Mr Price is in second place. Mr Price’s revenue (excluding revenue from Mr Price Money) was double Woolworth’s in 2023 (R30.4 Billion* vs R14.8 Billion). However, the Foschini Group’s revenue is 1.7 times more than Mr Price’s.

Below we see that the driving force behind the Group’s stellar financial performance is understandably Mr Price, Mr Price Home & Mr Price Sport- collectively contributing 58.9% of the Group’s retail sales.

Value Creation Strategy

Mr Price believes 5 core things drive consumer value:

• Price: Mr Price realises its primary target audience values competitive pricing strategies and getting trending items at reasonable prices.
• Quality: Mr Price realises that offering affordable products isn’t enough- the quality of products must consistently be improved.
• Fashion: Mr Price is passionate about releasing fashion that’s aligned with the latest trends
• Convenience: Mr Price delivers convenience by providing an omnichannel experience.
• Experience: Mr Price focuses on delighting customers with memorable shopping experiences.

Strategy Analysis

Mr Price’s vision is to become “The Most Valuable Retailer in Africa”. While there’s been tremendous progress towards this vision, Mr Price hasn’t arrived yet. By market cap compared to retailers with clothing brands, Mr Price has not claimed the top spot yet. But I am a fan of Mr Price’s strategy and I have learned a lot from it. Let’s take a look at The Group’s key strategic pillars:

1. Growth and Innovation: This pillar focuses on expanding profitable market share in Southern Africa, deriving value from acquired businesses, introducing new concepts, and innovating in new non-competitive categories to increase the average basket spend.
2. Brand Promise: The group's brand promise and purpose, "Your Value Champion," remain steadfast. This pillar focuses on enhancing brand value by delighting customers with desirable items at great value and providing a satisfying overall customer experience.
3. Stakeholder Engagement: This pillar prioritizes the group's distinctiveness, setting the goal of fostering stakeholder relationships rooted in genuine partnership. Additionally, it aspires to position the group as the top retailer in terms of engagement and delivery. Mr Price regularly surveys relevant stakeholders such as investors, suppliers, and landlords to get a better understanding of how to serve each stakeholder group well.
4. Strategic Enablement: The strategic enablement pillar encompasses technology advancement, improving logistics, and investing in real estate to ensure the group has the capacity to fulfil its strategic objectives. The approach involves researching and adopting trends that align with the group's vision, leading to continued investment in business intelligence and data analytics for data-driven decision-making. Mr Price has also increased investments in AI and machine learning. This pillar ensures the brands are not left behind and have the capabilities to innovate and grow by leveraging increased capabilities.
5. People: The group recognizes that achieving its vision relies on attracting, developing, and retaining top talent within the retail industry. The group's distinct and special culture guides the integration of acquired or newly launched businesses and other operational activities. Mr Price has intensified its efforts in this area by establishing frameworks to measure Organisational Health and increase associates’ capacity, improving employee engagement to over 70%, and creating a more equitable workforce.
6. Sustainability: The group firmly believes that the ESG strategy is crucial for safeguarding and enhancing its brand reputation, attracting and retaining key talent and investors, and building a sustainable value chain that positively impacts the socio-economic landscape.

What Can You Learn?

1. Make organisational health a priority: As noted above, Mr Price is intentional with ensuring their brands are healthy- one of its key strategy outcomes is to maintain operational excellence. Mr Price also value employee wellbeing and engagement as two key metrics to measure organisational health. But organisational health is so much more than that for early-stage entrepreneurs…You may not have thousands of employees but are your startup’s vital signs healthy? Ensure you monitor things such as sales growth, customer satisfaction, and market growth potential. To find out how to measure your startup’s health read my article
2. Listen to people with a vested interest in your business: As a market research professional, I cannot emphasise this point enough: you must regularly be in tune with what your stakeholders’ expectations. Ask for feedback after every customer transaction, meeting with investors or contract renewals. This can help you develop new products, set SMART goals, and formulate growth strategies for your business. It also reassures your stakeholders that you value their opinions and it can help you identify any blind spots or operational inefficiencies.
3. Create an enabling environment: You can’t grow within an environment that isn’t conducive to growth. Mr Price is increasing investments in technology to grow and adapt to the market. Search for tools that will help you achieve more by automating certain tasks or embrace technology that will accelerate growth.
4. Explore external growth strategies: Mr Price adopted external growth strategies such as acquisitions to achieve rapid growth. Entrepreneurs can use external growth strategies such as franchising, partnerships or joint ventures to grow their businesses as well. In fact, mergers within Africa’s startup ecosystem are becoming popular as startups realise they can gain market share by joining forces.
5. Embrace innovation: Mr Price was birthed by disrupting the status quo. As an entrepreneur disruptive innovation can be your secret weapon. Explore creative ways to create solutions for overlooked or underserved market segments within your industry. Learn more about innovation.