Entrepreneurship Midterm
Introduction
After much deliberation of choosing an entrepreneur, either Taiwanese or foreign, I chose a
South African entrepreneur. Most of my classmates chose a local business venture or business
man from their respective countries. Hence the reason for me choosing someone who comes
from my country
The person I would like to introduce is Mr. Raymond Ackerman. He is a very successful
businessman and he is rated number twenty-three on the “Forbes Magazine” with a net worth of
about US$545 million. However, his success did not come easy, as he had to overcome many
obstacles in business and in life. He, like many entrepreneurs had to work hard, earn a little
money in the beginning, but in the end, succeed. This man proved that you need to have tenacity
in order to be a winner. This is the story of “Pick ‘n Pay”
Pick ‘n Pay
Mr. Ackerman was forced into becoming an entrepreneur. He was an executive at a supermarket
chain when he got sacked because his thinking wasn’t in line with that of the shareholders. He
returned from America with great ideas for the retail chain, but when his superiors heard them,
they were dismayed and inevitably he got the sack. At that time he was based in Johannesburg,
married with two children. Now he was unemployed, broke and had to fend to his family. He
returned to his native city, Cape Town, where he and a few of his closest friends decided what
would be the next step. His brother-in-law who is one of his closest friends motivated him to
pursue the dream of owning his own supermarket.
There was a man called Jack Goldin who wanted to sell his four supermarkets, named “Pick ‘n
Pay” in the Cape Town area. He wanted about R620 000 (NT$2,480,000) for all four. In the
1960’s this was an enormous amount of money to have in cash. So Mr. Ackerman and twentyfive of his closest friends managed to raise the money and buy the supermarkets.
“Pick n Pay’s” roots can be traced back to principles handed down to Raymond Ackerman when
he was a commerce student at the University of Cape Town. His lecturer, Professor WH Hutt,
believed implicitly in the principle of consumer sovereignty, and his words, “treat the customer
like a queen and she will make you a king”, made a lasting impression on the young student.
The Company’s mission is consumerism, which in simple terms, means to interpret and satisfy
customers’ needs by selling quality products at competitive prices, and providing courteous
service in stores that are well located and pleasing to shop in. In addition, a policy of refunding
goods without question has enabled Pick n Pay to establish long-term customer relationships, and
has ultimately lead to an incredibly loyal customer base.
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In its first trading year Pick n Pay achieved a profit of R310 000 (NT$1,240,000) on a turnover
of R5-million (NT$20,000,000). Turnover subsequently climbed to R10-million
(NT$40,000,000), and doubled the following year. Soon, “Checkers” and “OK Bazaars” took on
“Pick n Pay” and starting a price war in the Western Cape. At the height of the battle, Ackerman
received a letter from a Port Elizabeth businessman offering to sell him his small supermarket.
Taking the advice of a friend who had told him to treat the “Checkers/OK” attack as if it were a
military campaign, Ackerman immediately left for Port Elizabeth where he bought the shop the
same day. Two months later, a fully renovated “Pick n Pay”-branded store opened its doors for
business. Mr. Ackerman quoted: “It saved us because it meant that both chains had to fight in
Cape Town and Port Elizabeth. Their ultimate withdrawal was a real highlight.”
And so the scene was set for “Pick n Pay” to change the face of South African food retailing.
Trading was tough back then, with the industry characterized by ruthless cartels. But challenge is
what Mr. Ackerman thrived on. Not surprising, given his favorite saying is, “winning isn't
everything – it's the only thing”! Determined to fight for the consumers’ right to a fair deal, Mr.
Ackerman started cutting prices on basic items. He wanted to offer consumers basic commodities
at low prices, but everyone said the government wouldn’t allow them.
In 1969, only two years after the Company was founded, a leading financial publication
pronounced Pick n Pay “the star of the Cape supermarket scene”, and when the Company was
listed as one of the “Sunday Times Top 100” companies, it became clear that Pick n Pay had
truly come of age.
In 1973 Raymond Ackerman announced “Pick n Pay” greatest ever diversification – the
Company’s entry into the field of “Hypermarkets.” The first “Hypermarket” opened in 1975 in
Boksburg, bringing the concept of “one-stop-shopping” to the South African consumer for the
first time. The opening beat all previous “Pick n Pay” trading records with an estimated R350
000 (NT$1,400,000) being taken in the first two days alone. Today there are twenty
“Hypermarkets” located in South Africa.
In 1984 the Company acquired 50% interest in “Boardmans”, a chain of Cape-based home ware
stores. The chain was to become wholly owned by “Pick n Pay” two years later.
Later that year, the company’s contribution to community won international recognition when
the Marketing Institute of America honored “Pick n Pay” with a social responsibility award.
Despite political turmoil and economic downturn, “Pick n Pay” continued to forge ahead. In
1983 turnover for the year exceeded R1-billion (NT$4bn) for the first time, and three years later
the enormous expansion of the company was highlighted when turnover for 1986 doubled to R2billion (NT$8bn).
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However, it was not all smooth sailing, as “Pick n Pay” was forced to abandon its expansion into
Australia due to union opposition. “Pick n Pay” was on the verge of building a second
“Hypermarket” in Melbourne when the plumbers union rallied to bar them from the site. The
company eventually turned its back on one of its prime businesses, the superb Brisbane store.
Ironically, the store is still called “Pick n Pay”, and was subsequently sold to the original partner.
That year also saw the opening of the group’s 100th store. This coincided with a vigorous
program of new store openings throughout the country. The stage was set for the company's
entry into the ‘90s – a decade that was marked by significant political and social change,
mirrored by equally important changes within the company.
Why Pick ‘n Pay is So Successful?
The spirit that guides the company and gives it its unique character is driven by the values and
principles that inspired Mr. Ackerman to establish “Pick n Pay” in 1967. Those values and
principles are considered sacred and, despite changing times, new developments, improved
technology and radical strategies, they remain consistent.
Core principles
The core principles that constitute “Pick n Pay's” business activities include:
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Maintaining abiding values, in spite of business practices changing with time.
Fostering respect for individuals, not as a strategic advantage, but because it is morally
correct.
Acknowledging the difference between timeless principles and daily business practices.
Sticking to values – even if this appears to put us at a competitive disadvantage.
Sustainable business
For over four decades we have built a truly sustainable business. The growth and success of
“Pick n Pay” is attributable to two fundamental principles:
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An unwavering belief in consumer sovereignty
The application of the “four legs of the table” principle.
These principles were put into practice at the foundation stages of the company, and continue to
be the cornerstone of the business
The four legs of the table
The “four legs of the table” principle follows a simple analogy: The business is essentially
likened to a table supported by four legs, on top of which the consumer is positioned. Each leg is
required to be equally strong so that the table may remain balanced and upright. The four legs
comprise:
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Administration
Merchandise
Promotion and social responsibility
People
Each leg is equally important to the success and continued sustainability of the business. Each
requires, and continues to receive, equal focus and management support.
Building of sustainable communities
Sustainability businesses have an important role to play in the building of sustainable
communities – a responsibility “Pick n Pay” embraces wholeheartedly. It is not simply a
philanthropic way of thinking; it is an act of enlightened self-interest. The more economic
freedom that exists within South African society, the more scope there will be for growth in the
retail market. It is no surprise that our view is the same as it was at our inception – big business
must work together towards securing the economic security and social wellbeing of generations
to come.
Another major reason why “Pick ‘n Pay” has become so successful was owing to the fact that Mr.
Ackerman has opened strategic distribution centers across South Africa. There are about three to
four major distributions in the Western Cape alone. This means that the lead time when stores
order the inventory, will be reduced significantly should the stores order directly from the
supplier. This is the approach of “Walmart” in the U.S.A, where the distribution center is
strategically situated to service the stores. Therefore, most “Pick ‘n Pay” stores are never out of
stock of certain items; except if the supplier is out of stock.
Rebranding Of Pick ‘n Pay
At the end of 2007 “Pick n Pay” embarked on one of the most extensive rebranding exercises
ever undertaken in South Africa. The new “Pick n Pay” logo heralded an evolutionary change,
which while quite different from the original, retains the key features that have made “Pick n
Pay” distinctive in the retail environment.
The rebranding was an important signal of the deeper underlying transformation, change and
revitalization that the business was undergoing. Importantly it’s all about the customer – and
about turning insight into customer needs into action responses to those needs. The rebranding
process gave “Pick ‘n Pay” an opportunity to refresh, revitalize and re-energize the business, and
most importantly to refresh the customer shopping experience. New talent was brought into the
business to serve as a catalyst for the new culture of “Fresh Thinking” and innovation.
A tremendous amount of effort had been put into the re-energizing of the “Fresh Food” offering
in order to deliver at store level. Training academies have been established in both the Western
Cape and Gauteng to retrain all staff within these areas. The Western Cape facility has been
running for over four years and the facility in Gauteng has been open since September 2009.
“Pick n Pay” worked closely with a local packaging company in order to alleviate the confusion
surrounding all the house brands that existed under the Pick n Pay banner prior to the rebranding.
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A three-tier strategy under “Good, Better, Best” was clearly identified, with “GOOD”
representing No name Brand (NNB), which would offer excellent value for money, “BETTER”,
a “Pick n Pay” brand (PnP), which would incorporate the migration of all “Choice”
merchandised previously under “Groceries”, as well as “Food hall”, previously merchandised
under “Fresh.” BEST is still to be identified, and will be expanded during the course of 2013.
This strategy has now been implemented across the entire business, including “Fresh
Perishables,” “Groceries” and “General Merchandise,” which was previously not the case. This
total rebranding was completed towards the middle of 2009 and over the next two years “Pick ‘n
Pay” will launch approximately 650 new products under the “NNB and PnP” brands across all
categories. There was a consolidation of the “Fresh Convenience” lines due to the downturn in
the economy; however more exciting new products will be launched during the course of 2011
and 2012.
The new customer magazine, “Fresh Living,” designed to talk directly to a broad cross section of
“Pick n Pay’s” customers, is going from strength to strength and has already won numerous
awards. Latest figures reveal that “Fresh Living” is currently one of the top selling women’s
magazines in the country.
Pick ‘n Pay Today
Today there are bout eight-hundred and seventy “Pick ‘n Pay” stores in South Africa. The retail
chain has expanded significantly in almost fifty years. One has to acknowledge Mr. Ackerman’s
success just to merely survive in the beginning stages. To get into a market controlled by cartels
and price-fixing rife, proves that he is a true entrepreneur.
“Pick ‘n Pay” has now become a franchise. If you, as an entrepreneur, would like to own a “Pick
‘n Pay” store, you need to ensure that all the standards are adhered to. Should you decide to
purchase a franchise, it’s very expensive. In total, one percent of gross actual turnover you need
to pay Pick ‘n Pay. This fee is payable with post-dated checks prior to opening and adjusted at
the end of the financial year. This is reviewed annually in accordance with actual turnovers.
Should I have the resources and financial backing, I would definitely want to open my own “Pick
‘n Pay” supermarket. No “Pick ‘n Pay” store has ever closed down, owing to the fact that the
standards are set very high and the owner of the store is carefully scrutinized. Like every
industry there are competitors who would always compete with you on a daily basis, but “Pick ‘n
Pay” has stood the test of time and today “Pick ‘n Pay” is a household name across South Africa.
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