Global retail giant plans to roll out new stores in South Africa’s largest cities

Walmart is set to open its third store in South Africa this weekend, with the company looking to go toe-to-toe with the country’s largest retailers. 

The company also recently confirmed that it will launch 21 new stores in Gauteng, KwaZulu-Natal, and the Western Cape.

This expansion appears to be perfectly timed, with the retailer’s Every Day Low Prices philosophy likely to be a strong advantage in the South African market. 

While this philosophy has been Walmart’s historic competitive advantage and should not come as a surprise, the particular characteristics of South Africa’s retail landscape should exaggerate this edge. 

South Africa’s retail landscape is dominated by discounts and other promotional activities, which retailers use to drive foot traffic and sales. 

This has historically been highly beneficial for retailers, with the country’s most successful retailers, such as Clicks and Shoprite, leveraging scale to offer discounts and promotions. 

However, Trade Intelligence research indicates that South Africa’s promotional activity has saturated the market, with the effectiveness of discounts and campaigns decreasing in recent times. 

Furthermore, promotional activity is now widely spread and common, with it being the norm rather than an exception, which drives a boost in foot traffic and sales. 

This translates into declining loyalty, as customers search around for the best deals at that point in time and for specific items, Trade Intelligence said. 

It also narrows the product range that sells in high volume, potentially undermining the benefits of economies of scale that enable retailers to run regular discounts and promotions. 

Local retailers have been forced into this strategy to some extent, with South Africa’s stagnant economy and consumer spending pushing companies to find other means to drive sales growth. 

In this kind of environment, discounts and promotions help protect volumes, drive foot traffic, and ‘value’ becomes interchangeable with clear price cuts. 

However, there are signs that this strategy has been overdone in South Africa, with the country having one of the highest levels of promotional intensity in the world. 

As a result, retailers’ sales have become increasingly sensitive to promotional activity and aggressive price cuts. This squeezes margins and declining consumer loyalty. 

Walmart’s big advantage

In this environment, Walmart’s focus on Every Day Low Prices may find a captive audience and build a loyal customer base. 

This philosophy enables the retailer to be less reliant on promotional activity and discounts to drive foot traffic and sales at its stores. 

Customers at Walmart do not have to wait for a sale, collect rewards points, or only shop during high-promotion periods. Rather, they can shop at the same store on a regular basis to get the best possible price. 

This builds an incredibly loyal customer base that does not shop around for promo buys or discounts, but regularly purchases products from the same retailer. As a result, the company can also have more stable margins. 

Crucially, this approach also results in Walmart being able to win large-basket shoppers who buy everything in one trip, rather than only buying products that are on sale or promotion. 

This results in larger average basket sizes, which have the potential to be more profitable for the retailer and are likely to translate into higher trading density than competitors. 

All of this is based on what Walmart terms a “productivity loop”, whereby it enters a self-reinforcing cycle, ensuring it can offer the lowest prices and remain profitable. 

This relies on the retailer first having lower operational costs than its competitors, which enables Walmart to have lower prices, which drives higher sales volumes. 

These volumes then enable the retailer to lower prices further through enhanced bargaining power with suppliers. 

This requires immense scale, which it is not clear that Walmart will achieve quickly in South Africa, with the opening of its third store on 28 February 2026. Currently, the retailer does offer cheaper prices for staples, a Daily Investor analysis earlier this year showed.

One way in which Walmart can achieve scale rapidly in South Africa is by replacing its struggling Game stores with Walmart outlets. 

Doing so would give Walmart 122 sites across South Africa, giving it significantly more scale relatively quickly. The company has already replaced two of its shuttered Game stores with Walmarts in Clearwater Mall and Fourways Mall. 

MyBroadband reported earlier this month that around 20 Game stores across South Africa are set to be closed and could potentially be redeveloped into Walmarts. 

The retailer told the publication that it will not close down the Game business completely. 

“We continue to invest in the future growth of Game, including through the rollout of our pantry merchandise proposition, which is enjoying high demand from Game customers,” the retailer said.

However, it did reveal that it converted existing Game stores into Walmarts to enable the American brand to have an accelerated rollout. This indicates that it is willing to flip Game stores into Walmarts to “move at speed” and achieve scale. 

Checkers and Pick n Pay can crush Walmart

However, the former Shoprite CEO and South Africa’s premier retailer, Whitey Basson, has said that Walmart might struggle in the local market. 

Interestingly, Basson pointed to South African retailers having an edge with customers who are used to the country’s promotional culture. 

He also noted that customers are used to loyalty programmes, which have become increasingly entrenched in recent years as a way to build a captive audience.

These loyalty programmes have also become increasingly sophisticated, involving participation from South Africa’s largest banks and financial service providers. 

This has the potential to create an ecosystem in which South Africans get locked into particular retailers, limiting the ‘shopping around’ effect. 

Despite this, Basson has said that if Walmart can get its model to work in South Africa, which is heavily reliant on it having high sales volumes to drive down prices, it can present a substantial problem for local retailers. 

If it proves successful, other retailers may have to adjust their pricing strategies and lower their ‘normal’ prices to compete, eroding margins.

Sasfin senior equity analyst Alec Abraham told Daily Investor that it is unlikely Walmart will displace the country’s largest retailers any time soon. 

Abraham pointed to Massmart, Walmart’s South African subsidiary, and its failed attempts to take on local retailers once before. 

“I struggle to see how Walmart will pose any threat to the listed food retailers,” Abraham said. He emphasised that the retailer lacks a substantial and reliable distribution network. 

“Just like Massmart’s half-baked, Johnny-come-lately, failed attempt with Cambridge, Walmart lacks the distribution network,” Abraham said.

“In food retail, convenience is important, as demonstrated by the success of Sixty60 with the ultimate convenience (the palm of your hand).”

Abraham also noted that the retail market in South Africa is highly competitive, with Walmart facing challengers in all segments. 

“You’ve got strong competition in the form of Woolworths Food – with its excellent shopping experience, quality and innovative range – and Shoprite – executing flawlessly – and even the laggard Pick n Pay trying gallantly to win back at least some of its lost market share,” he said.

“Against the background outlined above, I don’t believe Walmart will be anything more than an ‘also ran’.”