The world is changing fast and to keep up you need local knowledge with global context.
Steinhoff CEO Markus Jooste has been South Africa’s leading racehorse owner for most of the past decade. He never bets on them, one of the reasons for longevity in a sport with a higher churn rate than Pay-As-You-Go phone contracts. Jooste restricts his betting to people. And in former Asda CEO Andy Bond, Steinhoff put a staggering R10bn on the table. Bond is charged with turning the recently acquired 800 store Poundland chain into the jewel of Steinhoff’s rapidly expanding European retailing empire. A 51 year old fitness fanatic, he became one of the UK’s most recognisable CEOs when, soon after his 40th birthday, Bond was promoted to lead Walmart-owned Asda, the UK’s second biggest retailer (after Tesco) which employs 170 000 people. After five years in the saddle, the man who hails from the same town (Grantham) as famous grocer’s daughter Margaret Thatcher, quit because he didn’t want to move to the USA. Now he’s ended up working with South Africans. Here’s the inspiring story of a man who, famously, seemed destined for a much lower path after failing the UK schooling system’s infamous “11-plus” exam. – Alec Hogg
[soundcloud url=”https://api.soundcloud.com/tracks/296634163″ params=”auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false&visual=true” width=”100%” height=”450″ iframe=”true” /]
Andy you have quite a lot of South African connections, but the biggest one right now is your partnership with Christo Wiese and the Pepkor side of Steinhoff. Let’s just go back a little though. South Africans would have come across your name at the time of the acquisition by Walmart of Massmart; you actually drove that whole deal.
Yes, I did. At the time I had actually stepped away from being the day-to-day Chief Executive of Asda, but we’re still employed by Walmart and it was very much Walmart’s ambition to enter the African market and asked me to have a look at that for them. We looked at a number of different entry strategies and that’s how the deal with Massmart came about, so yes, I was actively involved in that.
Now Asda’s not well known by South Africans, but it’s a huge business, second biggest retailer here in the UK. You worked there for 16 years, ran it for five years, why leave?
I’m very consistent now in terms of why and it’s consistent with what I said then really, which is I’d just come to the end of the journey with Asda and Walmart. The next obvious choice for me was to go and work for Walmart in the US and whilst it’s a brilliant company (I remain consistent with that), that wasn’t for me and so I chose to step away. I also have the privilege and choice to work slightly less hard for periods of time, so I spent a bit more time with my family, which was an important part of the decision-making. It wasn’t a fall-out or anything like that. I just wanted to do other things, have a slightly different balance in my life and I enjoyed that period of time. Fortunately, or unfortunately, I’m now working very hard again.
It’s an interesting part of your life. To get to the top of that tree must have taken an enormous amount of focus, energy, effort, did you feel you were a little burnt out perhaps, or where does the motivation come from?
No, I’m not burnt out at all. It was very, very clear to me as a guy who was climbing that corporate ladder that I was at that moment to take the next step up, but that next step up within Walmart would have meant physically moving and it was a choice I wasn’t, (or ‘we’ as in myself and my family) weren’t willing to take, so it wasn’t a case of stepping off the ladder because I was burnt out. Yes, I then did decide to do a slightly less, all-encompassing set of things. Yes, I certainly didn’t feel burnt out but wanted to do something different and I guess it perhaps was slightly unusual, but then I’ve thought of myself as someone who has always had more interests than just work anyway. You know, I’ve always wanted to be reasonably balanced, so yes, I wanted to do some other things.
Then you get involved while you stepped down as CEO, you’re Chairman of Asda, a 170 000 employee business and Walmart, the biggest retailer in the world says “Go and do this deal for us in South Africa”. That must have been a challenge that you hadn’t anticipated given that you wanted to take things maybe a little easier.
Yes, absolutely, but it was a very exciting assignment. I personally really like South Africa and I found the time going there, looking at the different businesses, a very interesting time. It was quite challenging as you say, but yes, very good experience and a good outcome for Walmart in their acquisition of Massmart, so yes, a good time.
You say “a good outcome”; there are some who feel that Walmart got less than it bargained for.
Well, without seeming disinterested, I’m not at all close to the Massmart business today, so I generally can’t comment on how that’s gone for Walmart, but I reflect back at the opportunity at the time and there was definitely a business with opportunity that we bought. I can’t comment what’s happened since.
The departure of Grant Paterson and Mark Lamberti, the founder/chairman stepping off the board, it’s quite a big shakeup that happened pretty soon after the deal, was that always in the works?
No, it wasn’t. Although you know in retrospect these things should always be expected as one of the scenarios. It certainly wasn’t Plan A when we bought the company, but I look at Walmart’s acquisition of Asda, I look interestingly at Steinhoff’s acquisition of Poundland where we are today, a common thing, this churn in the senior leadership and I don’t think it’s ever Plan A, but you know you have to anticipate it as one of the things that will happen.
Moving onto a more pleasant development and as you say, Steinhoff’s acquisition of Poundland, it was third time lucky. There were two other big potential acquisitions, was this the one that you really wanted from the start?
Yes, well I think that first of all to clarify, in a sense it’s one of two activities here in the UK. The third activity I think you’re referring to is Darty in France, which was run as a very independent process through the Steinhoff business Conforama, so I’ve really got no input into that, but yes, in terms of the choices we had here, we were very interested in the Home Retail Group, but eventually felt that the price that was being considered was just not right for us. So we proactively stepped away from that opportunity and it’s an independent decision in that sense, whether we feel Poundland is or isn’t right.
As it happened, clearly we feel very excited about Poundland, so yes, it would have been nice to have been part of a family involving HRG, but at the right price and now this is a fantastic opportunity in Poundland, and it’s very much more clearly consistent with the heartbeat of Pepkor than the other opportunities. This is so comfortably about what Pepkor and what I personally am all about. You know, my own history in Walmart, Asda was all about providing people on a budget with very good value products and that’s really what Poundland does and that’s what Pepkor does, wherever it goes it provides amazing value to people struggling on a budget.
When did you meet Christo Wiese?
Well, I’d heard of Christo for some years before I first met him and then I actually met him during one of my visits to South Africa as part of that sort of journey to understand what the opportunities were for Walmart in South Africa, met him informally, both in terms of his position as a senior retail expert, but also in his position in Shoprite and you know, look it wasn’t a particularly formal or detailed meeting but it was an opportunity to at least understand South African retailing, but you couldn’t possibly go to South Africa and not meet Christo Wiese if you have the chance. So I met him there and then.
Did you click from the outset?
Yes, I think he’s a remarkably capable individual and I think he’s both very bright, clearly a very good invested, very good handle on retail, but he’s also one of these guys who manages to inspire and motivate people to want to work for him and with him, so yes I really liked Christo from day one. Nothing happened immediately at all of course, so you know, our journeys went in different directions. Walmart ended up with Massmart, which was a good deal as I say. Then I got connected with him again through a third party, someone who knew both of us and I was setting up an investment company and Christo was interested in investing some money in the UK, but he bluntly wasn’t interested in having another independent relationship, so he’s always organised most of his affairs around Brait, Shoprite and Pepkor and he encouraged me to leverage the retail expertise and relationship of Pepkor.
So actually when we set a company up here as an investment vehicle, it was actually called Pepkor UK, so it was technically a subsidiary of Pepkor and that’s how we then launched Pep&Co, our clothing brand that’s done very well since we launched it 18 months or so ago. We then launched another broader range discount business called GHM and then obviously, most recently have bought Poundland and all of those have sort have been under that same sort of relationship with Pepkor, so I remain in reasonable contact with Christo, but my primary relationship with his interest is Pepkor and now obviously Steinhoff.
Just to go back to Pep&Co, it was an incredible launch, certainly everything that I’ve read about it, 50 stores in, was it 60 days, how do you actually engineer the logistics around that?
Well, it’s hard work as we found because we cocked a few things up along the way, but yes, I mean look to go from zero to fifty in fifty days is hard work and you know, I think I should only take a very, very part of the pat on the back there. You know a lot of the team did a super job and worked incredibly hard.
So it was 50 days?
Well, no sorry, yes you’re right, I’m misrepresenting reality. It started at trying to do 50 in 50 days, but it ended up taking us nearly 60 days.
Why did you give yourselves such deadlines and such a heavy programme?
Yes, it’s a great question. I’ve asked myself that on dark night, but the honest answer is it’s essential because whilst Pepkor has some very good infrastructure that we were able to leverage off like good IT systems, good relationships with vendors. The reality is that the UK market has some degree of difference from other markets that Pepkor is in.
The consequence of those, we needed to go out and design and buy products specifically for the UK market and to get sufficient volume to get good prices to be able to compete at entry price point level, because we don’t want to be a midmarket retailer, we aspire to be low-price, very competitive family clothing brand. The answer is you need to go big or go home. You know you can open two stores and see how it went. This was a pretty big bet that myself and Pepkor and Christo needed to take. So it was literally a case of it was the only way of doing it really.
As you say, yourself, so you put money on the table.
Yes, I did. Compared to the amount that Pepkor put on the table it was a small sum of money, but my main stand was, yes it was a significant amount of my own wealth. So yes, I was willing to ‘put the skin in the game’ as the saying goes absolutely, yes.
Why Pepkor and I say this running the second biggest retailer in the UK puts you in a certain position of well, having to have a general managing a huge army. You resign from there, you take things a little easier, do a deal in South Africa on Massmart, put that to bed, presumably caught your breath for a little while and then next thing you’re popping up as a man who opens 50 stores in 60 days. How does the congruity come there or did you always want to be an entrepreneur?
Yes well, I will answer it but I’ll also give you time to reflect on a question I want an answer to, which is I wonder what you think the obvious thing I should have done would be? You know because a I would argue that what’s probably on your mind, in my view is just do more of the same, you know and I didn’t really ever intend to have a career where I would just see who’s Ground Hog Day, so wake up and I’m Chief Executive of another business, but actually it’s the same stuff, but it’s just a different name above the door. So for me I don’t get why it was obvious I should have gone and been Chief Exec of this business, why, I mean why is that? I mean I might as well have just stayed doing what I was doing, which in itself would have been a bit dull after a while, but yes, it may seem a change in career, but I wanted to do different things.
Well, were you always entrepreneurial, that’s really what I’m getting at?
I guess we all have a different view on what entrepreneurial means. I guess I’ve always been a little bit anti-establishment and a little bit willing to take a risk, so I’d certainly accept that, if they’re what entrepreneurs are like then yes, I’ve always wanted to be somewhat entrepreneurial, I’ve always wanted to take a bit of a risk and I’ve always wanted to sort of be more captain of my own destiny there, so yes, if that describes an entrepreneur, then yes, I’ve always wanted to be an entrepreneur, absolutely.
One of the reports at the time that you departed said it was a shock for the city and another of the reports said the reason why you left Asda was that you weren’t being given the fire power to be able to grow it into attacking the number one, Tesco, is there any truth in either of those?
No, absolutely not. I was extremely well-supported by Walmart. I still see it as a super company. There were no real constraints on what I was or wasn’t able to do. As I say, you know that there aren’t many people in my generation who spent 16 years at one company, so I did my tour of duty as it were and it just seemed like the right time, no fallout. I also don’t think it was a real shock, you know I’d spoken to Walmart for a number of weeks before it was announced, you know it was all very amicable and actually the reality that I stayed on as Chairman for a period of time demonstrates good relationships on both sides of the table. I didn’t walk away, they didn’t throw me out, and in honesty I was always going to leave. That period of transition was always a transition period.
It is exciting going into a start-up effectively because that’s where you were.
Yes, totally and as you say in some ways it’s incongruous because I was running a business with hundreds and thousands of people, but it’s super exciting being involved in a start-up. You know, it’s very, very appealing.
Onto the first attempted acquisition which was the brand here known Argos, when the numbers got out of kilter, was it an easy decision for you to walk away?
Oh yes, absolutely. As I say, the Home Retail Group is a good company and as you say, to clarify for people, it was called the Home Retail Group because actually I had two businesses Homebase and Argos. As part of this whole thing Homebase was going to be sold to someone else and so all that was left was Argos. Argos is a good company, is a good brand and what it does is good, and I think it’s a good acquisition for Sainsbury, so we didn’t walk away because we thought “Well, we’ve looked in the covers and it’s a rubbish business no one should buy it”. It’s a good business and I think Sainsbury’s have done a good deal. It just wasn’t quite right for us at the price that was being considered, so it was a purely logical financial decision. So yes, I think it was a good outcome for Argos, a good outcome for Sainsbury’s and a good outcome for us.
At the time were you already looking at Poundland?
I sincerely can’t remember where we were, but I think a broader way of answering the question is that we’ve wanted a scale investment in the UK for some time and this is a wonderful business and I certainly, look I’ve been in retail for 22, 25 years now, so I’m running a book on everything all the time as it were in my head. I visit High Street, I look at stores, I know the businesses I like and the businesses I don’t like, and I’ve liked Poundland for years.
Do you still do that, do you still go and visit stores and now in this case the Pep&Co stores and now presumably Poundland?
Oh yes, absolutely, totally. I mean bluntly I can’t imagine being a retail leader who doesn’t visit shops. You know I don’t know what you’d do if you don’t have insight into what’s going on in your shops.
Do you have a process?
Not particularly. I think there are two very different ways people visit shops. One is to assess the operational detail of that shop, is that managed, is that team running the shop well for its customers and then there’s another way of visiting shops which is to say the things we’re trying to do generally for customers are these things, are they working generally and I’m much more the sort of guy who does the latter rather than the former. I’ve never run a shop myself, so I think it would be quite disingenuous of me to try and tell a store manager how to run a shop, but also I think in a sense the bigger impact I’m going to have on the business is if I try and take away from that visit the things that can impact the business overall rather than that store specifically.
So you know, what’s a random example, that we’ve got some new products coming into the shops, I want to know if those products are selling well generally rather than just in that shop, what do they think about those products, what are customers saying about those products? It’s things like that, that’s my method of visiting stores is to try and understand about the business generally rather that that store specifically.
You’ve never run a shop, but you come from the same town that Maggie Thatcher, the most famous daughter of a shopkeeper comes from.
Oh yes, indeed. In fact, funnily enough her dad’s shop is a shop that I used to go past every day on my way to school. Yes, I mean it wasn’t a shop by then, but yes, I know that shop very well and obviously I know that story very, very well, so yes I am fortunately, or unfortunately. Yes, the town is well-known for being the town where Margaret Thatcher was born.
It’s also a part of your story that you failed your 11-plus. Now people in South Africa have no idea what an 11-plus is, can you explain what it is and why it is so important that you turned it around?
Yes, of course. I will try and give you the simple rather than the deeply socio-political answer to that question, but yes, until relatively recently people at the age of 11 had to do an academic exam. If you passed it you went to a highly selective school, which provided what you could argue was a better, certainly more accelerated education for the better students, if you failed it you went to the large majority of what would some people judge as the more second class schools.
You know if were being a little bit political about it, you could argue it was a somewhat elitist system because inevitably kids from a less privileged background would have less opportunity because of all of the social impacts that meant that they were less likely to, (and by the way I’m not saying that was my circumstance), but you know it’s certainly by a lot of people was judged as a very elitist system because it tended to be wealthy families whose kids managed to get through because they had private tutoring to pass the exams etcetera. So yes, I failed and I went to a secondary modern school, which I described probably slightly disingenuously as a second class school, certainly, you know your career and life opportunities statistically were poorer.
You knew this at 11 years old?
I’m not sure I was probably quite as articulate about it as I just have been, but yes you knew. I mean look, you’ve just said yourself, you failed, that’s what you knew. You knew you had not passed and you certainly could immediately tell the difference. One of the simplest differences is when I went to school, if you went to secondary modern school, your formal education finishes at 16, whereas if you went to a grammar school your formal education typically, not legally but generally everyone stayed on to 18 and then the vast majority of those kids then went on to university. So in really simple terms, if you went to secondary modern school, you left school at 16 and you went into some kind of apprenticeship, if you went to grammar school, you were educated all the way through to 21 and got a degree, and I know there were shades in the middle, but that’s roughly what it was like.
I’m trying to work out while I was doing the research here, here’s a guy who got four A-levels, you got a first class university degree, you were top of your class doing your MBA, how the devil did you fail as an 11-year old?
Well, I was 11 wasn’t I, I guess, but I don’t know, it’s a very good question. Well, I don’t know, I mean you’ll have to ask academics. I’m either a bit of an aberration or it shows the problems of that selective system, doesn’t it, you know, one or the other and certainly a lot of the kids who I met at secondary, not a lot, but there was clearly a substantial number of errors made in that system. Certainly, having been to secondary modern school and then to complete the story, I actually got transferred from the secondary modern school to the grammar school after a year.
That’s after working really hard no doubt.
Yes, so having been through both schools I can certainly assert strongly that the system did not act fairly. There were many kids at the secondary modern school who were better than the kids at the grammar school and vice versa, so you know I mean it’s not a fair system and I guess I’m an example of where it went wrong, you could argue.
Andy, for young kids who are perhaps stuck in the equivalent of secondary schools, what would you suggest to them because clearly your story shows us that, that kind of a selection of if you already put into the wrong stream, if you like, doesn’t mean that you haven’t got it; how would you advise someone who finds themselves, or parents who find their children in that position?
Yes, well it’s good that you differentiate the two, because I think both have an important role to play. I think as far as the kids are concerned, I think you’ve got to first of all not get your head in a place that you’re written off. You don’t want to permit yourself to feel you’ve been written off and you’ve also therefore, got to work. It’s your responsibility to work hard to sort of get yourself out of what could be a difficult situation. I think there’s not a lot more than a child can do other than work as hard as he possibly can and have some sort of hope and not allow yourself to get too despondent about it and then you mentioned parents. I was very lucky that my parents sort of fought hard on my behalf to move school and I think you have to feel the right and obligation as a parent to fight on behalf of your kids really.
You got into a school where Sir Isaac Newton was an ex –
Yes, Thatcher and so I often say, and Nick’s getting bored of me saying that. Yes, absolutely and it was interesting. Obviously it’s a consequence of that comment; you know it’s a very, very old school. I don’t quite know the exact history, but one of the kings of England many years ago set up geographically a number of schools and they’re all called the King’s Schools, so I went to the King’s School in my town and there are lots of them across the UK and these schools were all set up in the same era and they were all set up to educate the boys as it was in those days, certainly not the boys and girls, the boys of the middle class of that time.
Fascinating story, fast forwarding to Poundland today and you are, from your roots as it were, of knowing normal people, you are now very much plugging into that. We see Poundland and Pep&Co serving, is it Middle England, is that what you call it?
You know, it’s interesting; Nick and I were talking about this earlier. Our ambition and our purpose is to help people on a budget sort of live better lives by keeping the price of goods that they need at a low price, so on one hand that may give you a vision of someone who’s really struggling to make ends meet and certainly that would be our purpose and our aspiration, but actually brands that do a good job in that way tend to attract a very broad populace and it’s certainly not true today as it may have been 30 years ago that there’s a very segmented UK population, that if you’re wealthy you shop at Shop X and if you’re poor you shop at Shop Y.
Poundland, like other good discount companies like Asda, like Primark, like Aldi, attract a very broad spectrum of the population. In actual fact the research done here says that in any three-month period 56% of the whole UK population in terms of household shops in at Poundland and that is representative of the broad demographic spectrum. So there are as many wealthy people in proportion in Poundland as there is in the UK, so it’s a very, very broad church of people who shop at Poundland.
There are 400 outlets, are you intending making it bigger?
Well, no actually you’ve got the number wrong there in terms of 400, there’s actually in total 900 outlets. On mainland Great Britain there’s just over 800. There’s I think 56 stores in the Republic of Ireland, about 30 in Northern Ireland and then 11 in Spain, so certainly there are many new locations to build out in mainland Great Britain, but certainly there are some towns, as an example, the town I live in where there isn’t a Poundland. So there are still opportunities to grow, but selectively. I think the real opportunity, if we get the business back in shape is to expand the business, that’s where the real step change opportunity is.
Does it have a particular line that it focuses on? Again, talking to people who have never been to a Poundland, you can understand that there’s a lot of product there that sells for one Pound. What kind of product, you know the Pep Stores in South Africa, is it similar to that?
No, it’s not, it’s quite dissimilar actually. I mean the Pep business is a clothing business that services a family, you know you clothe your kids first, yourself as a mum and then something for dad and there’s a few other homeware items and a very small number of grocery items in a Pep and then of course it’s now very big in cellular phones, but its heartbeat is clothing and the heartbeat of Poundland is ambient grocery products and general merchandise, so confectionary, DIY, seasonal goods, so you know Christmas goods for Christmas, Halloween for Halloween, that’s really where it… Now one of the great opportunities we have is because we’re strong in clothing, to introduce clothing into the Poundland stores, so for sure over the next few months you see Pep&Co clothing start to appear on the shelves of Poundland stores.
The other question that always comes to people’s minds when you look at the low price retailers is where you get your products from because to be able to sell something for one Pound, presumably you buy it a lot cheaper and there are many products there that look like they’re worth a great deal more.
Yes, well first of all I’m glad you think they look they’re worth a great deal more. That is actually, in very simple terms exactly the strategy of Poundland, is to identify products where other retailers are making very large margins, charging people what we would argue is too much money and we can still make a reasonable amount of money and sell it for less. In terms of where we’d buy these products from, you know we’re now over the last few years all very aware of our obligations from a sourcing point of view and I’ve worked for Walmart, as we’ve already referred, which has been very, very strong on its ethical stance.
Former Asda boss Andy Bond is upping his assault on the UK’s discounter market with the opening a new chain called Guess How Much!
— Capital Moments (@CapitalMoments) June 6, 2016
I would have been anyway, but I think having worked in that environment makes me even more strong-willed about that and so I’m very comfortable that we are sourcing products from ethical places in ethical ways, but equally we are pretty tough-minded about getting the lowest possible price for stuff. So we don’t have any problem arm-wrestling vendors for the lowest possible price, but also as I say, I think it’s worthwhile recognising that even in today’s world, there’s still a lot of retailers out there selling goods much higher price than they need to be in my view.
So you have a margin and if you can see products that are being sold for above that margin there’s a market opportunity.
Absolutely, as you say, I mean what we’d love everyone to respond to when they see a Poundland, one Pound item is,”Gosh, I thought that would have cost me two Pounds” and interestingly we’ve just launched our first TV ad, the first time Poundland has ever been on TV and it was a series of unscripted scenes of an interview, going up to people and asking them how much they thought an item would be and then filming their response. You know you get people who have been shown a cushion and someone saying they think it’s going to cost four or five Pounds and then when it’s displayed that they think it’s worth, it’s actually cost a Pound, they can’t believe it and that’s the sort of way we design our merchandise, is actually the most important thing is that everything needs to look like it should cost significantly more than a Pound.
From an investor’s perspective it’s a big bet that the enlarged Steinhoff is making in the UK, Poundland has struggled. The acquisition of 99p Stores didn’t go that great. Do you have a runway to profitability that’s quite close?
Well, the company remains profitable. This is not a loss making business. People will easily be able to understand the history of the profitability because it was a listed company before I bought it, so anyone can access the information on the company’s profitability, but what is profitable, I agree and recognise your point that says the business should do better and you’ve also identified one of our critical issues, is in that it bought 99p stores and that acquisition was difficult. You know, it tried to eat something very big and has got indigestion. I think we understand what the issues of that have been and I’m very confident we’re working through those things and so I’m very confident that reasonably quickly we’ll start seeing improved performance.
I’m also confident that we can add value in other ways. We’ve talked about Pep&Co Clothing, where Pepkor is a business that sources a lot of very good merchandise that we can add to Poundland. Interestingly Poundland offers Pepkor some great opportunities. There are many items in stores here in the UK that we should be looking to sell elsewhere in the Pepkor Group. I think it’s a very good acquisition. I don’t disagree with you there that the business should do better and I’m very confident it will do better.
From a broader perspective though in retailing, the Amazon effect is easy to see here in the UK where you can order something for a very low price and it arrives at your door the next day, you’ve got to wonder where the profit margins are being made as a consumer and you’ve also got to wonder how stores like yours or companies like yours are going to be able to defend themselves against this.
Well look, I mean I think if anyone was to do a Google search on the stuff I’ve said I would certainly agree that online has been a major disruption factor, certainly across the world, but particularly here. You know the percentage of retail takings online in the UK is the highest in the world, so it definitely has disrupted the market, but I don’t think it’s disrupted it in an even way. Clearly some categories and some price points have been disrupted much more than others, so point one is that I agree that online is a very disruptive influence. I think that therefore every retailer needs to understand and have a response to that customer demand to shop online and at home. Now (I’ll come back to that point), as far as our business here, I think that we are a business that will be more shop-based for longer than the vast majority of companies. We sell everything at a Pound.
The average number of items people buy in our shop is five items, so people spend an average of five Pounds. The reality is that somebody has got to pay for that home delivery, whether it’s the retailer or the customer, somebody pays and on average that costs somewhere arguably between, let’s say two and four Pounds. Now that’s a very substantial proportion of a five Pound basket. I don’t think that we’re going to be as disrupted as companies that sell merchandise where you’re spending £1000 and it’s a two to four Pound delivery charge. So I think it’s obvious some categories are going to be disrupted more than others, there are white goods, electrical goods, you know things that are high ticket price, and reasonably priced, easy to price compare are going to go online most easily.
The way we will need to respond first is the fact that our shop is still shopping in that domain, so we need a presence, we need for people to be able to go onto our website and understand what we’re about, they need to understand the merchandise we sell, where our shops are and we need to have a marketing point of view online, we need to be involved in social media etcetera. So I certainly think even Poundland will need to be online and have a presence online quickly. We do have a transactional website, but that’s very small and I think it will remain very small for a long time, but all that said I go back to your point, I think online is the biggest disruptive influence that’s been in retail for a generation.
How did the Steinhoff acquisition of Pepkor affect what you’re doing here in the UK?
Yes, good question. I’ve got know Markus personally over that time, the top team. I rate them as extremely capable and good people, but that said it actually hasn’t affected my day-to-day life that much other than bluntly, we may not have bought Poundland if it had just been Pepkor, so as you said, it’s a large sum of money and it’s a sum of money that the balance sheet of Pepkor might have struggled a bit more with than the balance sheet of Steinhoff’s, so I’m very grateful for the support that the team have given.
Markus has been very supportive, but in terms of day-to-day operations, I mean one of the mantras of Steinhoff is it’s a very sort of strong local leadership, very heavily mandated to do the right thing for local customers and that’s the way it does work in reality. I see Markus reasonably frequently, but both him, Christo and Pieter Erasmus, the guy that runs Pepkor are all familiar to me, we all seem to have a good working relationship, but at the end of the day I run the business here in the UK and they back me to do that.
Just to close off with, the strategy up to this point has been 50 stores in 60 days, an incredible achievement that you did, but it did give you the scale, then to start a new brand alongside this and continue to grow Pep&Co. Now you have Poundland, which was a huge acquisition, which presumably gives you the scale. Is it time to digest or are you still interested in achieving even greater scale?
Yes, it is time to digest really. You know there are many things that we need to get right here in Poundland as we referred to earlier. My responsibilities also include the Pepkor business in Eastern Europe, so we now have two business of scale, one in Western Europe, one in Eastern Europe, so you know, one argument is that, you know let’s just grow organically from where we are. Another argument is we could do with some more acquisitions. I think both of those are options, but right now the focus is let’s get to grips with Poundland, let’s make this a success. It provides me; it earns me the right to have choices as to what we do in the future. If we make a success, both investors in Steinhoff, but equally important Christo, Markus, Pieter will back us to do other things, whether it be to grow organically or acquisition-wise. I’ve just got to prove that we can manage this business well right now.
Personally, are you having fun again?
Yes, I’ve never not had fun. I enjoy being involved in this business. It is the first business that I’ve run, as it were, day-to-day for a number of years. You know, Pep&Co was my baby, but there is a guy Adrian running that day-to-day, so that was very exciting, but someone else was running that. I’m actually right now running Poundland, although, as you know, as we said I’ve got some other responsibilities, so yes, this is the first time I’ve run something for all and it’s good. You know you get the email at 06:00 am with the sales results from the day before and it changes your mood one way or the other. Yes, it’s interesting getting back involved in that way, absolutely.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.