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Massmart would press ahead with its new-concept Dion Wired pilot to lure top-end shoppers away from specialist audio and kitchen appliance stores, the high-volume retailer said this week.

September 7, 2007

By Tom Robbins

Cape Town – Massmart would press ahead with its new-concept Dion Wired pilot to lure top-end shoppers away from specialist audio and kitchen appliance stores, the high-volume retailer said this week.

Massmart chief executive Grant Pattison said the pilot project, which launched late last year with two stores in Gauteng, aimed to put competing top-end brands such as Gaggenau and Miele side by side with prices displayed.

The chain was targeted at “techies”, with strong product knowledge, entertainers who wanted friends to admire their big screen TVs and independent modern women, “perhaps wary of being taken advantage of because of a possible lack of product knowledge”, said Pattison.

At present, many stores in the fragmented audio and kitchen appliance market favour particular brands and do not display prices.

The pilot, which was already profitable, aimed to compete with independents such as Hirsch’s and Fotocats, and included categories such as computers, cameras and gaming.

Although the format will retain Massmart’s high-volume, low-margin strategy, it is a departure from its pure discount approach in some areas. It is the retailer’s first venture into the top-end retail market, which requires higher levels of staff service than a traditional Game store.

Massmart recently discovered that its Builders Warehouse chain required staff trained to deal with customers’ home improvement needs.

Pattison said the biggest problem the pilot project had faced was a reluctance by some suppliers to have brands displayed next to those of rivals, citing the example of the Yamaha audio brand, which is distributed by Bidvest.

Massmart said another two stores would be added this financial year – in Gauteng and in Durban – while a site is being scouted in Cape Town.

At this stage, there were no plans to move outside these three big metropolitan areas. The company said in its vision for 2010 that it was looking for about 10 more sites.

RMB Asset Management retail analyst Evan Walker said the new format was “a very clever idea” as it combined the concept of the JD Group’s Incredible Connection computer chain and middle to up-market specialist hi-fi stores.

But while it opens the Dion Wired stores, Massmart will collapse stores in the underperforming original big-box Dion format, closing them or converting them into Game stores by the end of June 2008.

Walker said while Massmart’s Game and Makro stores sold many of the same product categories as Dion Wired, there were opportunities to sell slightly more up-market goods, backed by higher service levels than those offered by the company’s existing chains.

Yesterday Massmart lost 0.04 percent to R85. The general retailers sector lost 1.27 percent.