Is Pick n Pay losing the retail war? Analysing threats facing South African retailers

Pick n Pay, one of South Africa’s oldest and most recognisable retail brands, is grappling with a harsh retail environment. Its core supermarket operations recorded a 0.1% decline in sales over a 45-week period ending January 2025, despite inflationary pricing. This reflects not just a drop in real customer traffic, but a growing disconnect between pricing and purchasing power. The chain has already shut down 32 stores, including eight franchise locations, as it attempts to stop the financial bleeding. Even when excluding the impact of closed stores, like-for-like growth was a modest 1.9%, well below the pace of inflation.

What’s particularly concerning is that landlords are reportedly replacing Pick n Pay stores with competitors like Checkers and Shoprite, a sign that the brand is losing its grip in previously secure locations. This shift represents a significant erosion of market confidence and underlines the urgency behind Pick n Pay’s restructuring efforts.

Competitive Pressure from Rivals Intensifies

South Africa’s retail landscape has become more fiercely contested than ever. Shoprite and Checkers, in particular, have solidified their dominance, leveraging supply chain efficiencies, strong in-store execution, and aggressive pricing to attract middle- and low-income shoppers alike. Checkers’ Sixty60 delivery service and in-store experience continue to redefine what many consumers expect from grocery retail.

Meanwhile, Spar is undergoing a strategic re-alignment after international stumbles, doubling down on South African operations. Woolworths, though a premium brand, has also seen gains in food retail thanks to quality offerings and loyal customer bases.

But perhaps the most disruptive force is the rise of e-commerce players such as Amazon and Takealot, which are targeting essential categories like toiletries, cleaning products, and baby care items—areas traditionally dominated by physical grocery chains. These platforms offer convenience, price comparisons, and delivery—benefits that are rapidly appealing to South Africa’s growing digital consumer base.

Financial Pressure and Technical Insolvency

Pick n Pay’s financials paint a stark picture. The company reported a net loss of R3.2 billion for the 2024 financial year, largely driven by a R2.8 billion impairment charge related to underperforming stores. Debt levels have climbed to R6.1 billion, prompting the company to pursue a rights issue to raise R4 billion, while also planning to list its value-focused Boxer chain to unlock additional capital.

What’s even more alarming is the mention of technical insolvency in its supermarket division. This means the liabilities of the division exceed its assets—a dangerous position for any business unit. Although the company as a whole remains a going concern, these red flags signal mounting strain on its balance sheet and heightened urgency for its turnaround strategy to succeed.

Ekuseni: Pick n Pay’s Make-or-Break Turnaround Plan

CEO Sean Summers, who previously led Pick n Pay during more prosperous times, has returned to steer the company through its most turbulent phase. His recovery blueprint, codenamed “Ekuseni” (meaning “a new dawn”), focuses on three critical areas:

1. Store rationalisation: The group aims to shut, franchise, or convert over 100 underperforming stores, redirecting resources to more profitable ventures. The closure drive is expected to save R850 million annually.

2. Cost reduction: The goal is to strip out inefficiencies across the group and realise R1.3 billion in savings by 2027.

3. Boxer growth: The company’s discount division, Boxer, has shown resilience. Management plans to list it separately, creating a potential cash injection and greater strategic autonomy.

Summers has also started cleaning up the executive team, replacing long-time insiders with fresh leadership and realigning operations for agility. But analysts warn that the strategy’s success hinges on flawless execution and sustained customer loyalty in a volatile market.

E-Commerce Disruption Grows Louder

Digital disruption is not a future threat—it is already altering the game. More South Africans are purchasing daily-use goods online, especially after the pandemic normalised e-commerce habits. Giants like Amazon have announced expanded operations in South Africa, and Takealot continues to refine delivery services and bulk deals on consumer goods.

Pick n Pay’s Smart Shopper loyalty programme and online ordering system have struggled to keep pace with these changes. While the retailer has made strides in omnichannel service, its customer experience and digital convenience are still viewed by many as inferior to those of its competitors.

Unless Pick n Pay can match or exceed digital convenience and pricing offered by online platforms, it risks becoming obsolete in several product categories.

Oversaturation Looms Over the Retail Sector

CEO Summers recently warned that South Africa’s retail sector is approaching saturation levels, similar to what exists in the U.S.—but without the same consumer spending power. Over 700 new stores were opened across the country by major chains in just the past year. This aggressive expansion is increasing pressure on margins, eroding profitability, and driving up competition for shelf space and foot traffic.

Rather than racing to open new outlets, Pick n Pay is prioritising quality and profitability, opting to grow smarter instead of bigger. Still, this more cautious approach must yield results quickly, or the company risks falling further behind in a fast-evolving market.

Outlook: Can Pick n Pay Survive the Storm?

The future of Pick n Pay is balanced between risk and potential. On one hand, its deep roots in the South African market, experienced leadership, and the value of its Boxer brand offer a strong base for recovery. On the other, its financial fragility, intensifying competition, and lag in digital transformation present very real challenges.

Its ability to restructure without losing loyal customers, scale digital innovation, and attract fresh investment will determine whether it remains one of South Africa’s top retailers or becomes another cautionary tale in a changing consumer economy.

Summary of Key Risks