The listing of Boxer on the JSE in the final months of 2024 marked South Africa’s largest IPO since 2017, attracting significant media attention. Much of this interest stemmed from the long-standing ambiguity surrounding Boxer’s position within the Pick n Pay stable. For years, analysts speculated that Boxer was the hidden gem of Pick n Pay, and its listing provided much-anticipated clarity. The market was eager to see whether Boxer could stand on its own and deliver the growth potential that had been long assumed.
Understanding Boxer’s business model
To grasp Boxer’s success, one must first understand its customer profile. The typical Boxer shopper values proximity to transport hubs, making accessibility a key driver in store placement. Historically, Boxer’s management has excelled at identifying high-traffic locations, ensuring the stores are strategically positioned. What’s more, many customers rely on Boxer for social grant collection, reinforcing its role as a community hub. Given that Boxer primarily serves price-sensitive consumers, offering the lowest possible prices is a fundamental part of its value proposition.
Boxer operates as a soft discounter, a model that provides it with a distinct competitive advantage. Unlike larger competitors such as Shoprite and Checkers, a typical Boxer store is smaller and carries fewer stock-keeping units (SKUs). SKU refers to the unique alphanumeric code businesses use to track inventory.
By limiting its product assortment, Boxer benefits from a simplified supply chain, streamlined inventory management, and lower distribution centre costs. And having fewer products strengthens its relationships with suppliers, increasing Boxer’s bargaining power. This lean operational model results in lower store-level operating expenses compared to its competitors, driving significant operating leverage and allowing for scalable expansion.
While Shoprite’s Usave follows a similar discount retail model, there are key differences. Usave primarily focuses on convenience shopping in close proximity to residential areas, whereas Boxer’s strategy centres around planned basket shopping, catering to a different consumer behaviour pattern.
Capturing the informal market
Boxer currently holds an estimated 4.2% share of South Africa’s formal grocery market, which translates to a dominant 68% share of the discount retail segment. The formal grocery market has grown at a compounded annual growth rate (CAGR) of 6.2% since 2019, while the informal market has expanded at a slightly faster pace of 7%. Looking ahead, the informal sector is expected to continue outpacing formal market growth.
Boxer has two potential avenues for expansion: increasing its market share within the formal sector or capturing a portion of the informal market.
One of Boxer’s biggest competitive threats – or opportunities – lies in its potential to disrupt traditional spaza shops. As more consumers transition from informal to formal retail, Boxer could capture this migration by offering lower prices and a more reliable shopping experience. South Africa presents a significant growth opportunity in the discount retail segment, with relatively low penetration compared to emerging-market peers. Additionally, demographic trends are in Boxer’s favour, as most future population growth is expected within lower-income groups, expanding Boxer’s total addressable market.
To capitalise on this opportunity, Boxer has set an ambitious store expansion plan, aiming to triple its superstore footprint in the medium to long term. While this target is aggressive, Boxer has demonstrated its ability to execute expansion strategies effectively, achieving new store sales growth of 8.7% CAGR over the past three years. If it maintains this momentum, Boxer could solidify its position as a dominant force in South African retail, reshaping the competitive landscape in the process.
Leveraging vouchers and private-label growth
Boxer has also excelled in leveraging vouchers and combo deals, which expose customers to bundled goods at a discount. A key strategy involves pairing private-label products with well-known brands, making the bundle more attractive while increasing private-label product exposure. This approach has proven successful, as many of Boxer’s private-label products are no longer perceived as store brands but as equivalent to name brands in terms of quality and value.
This presents another avenue for growth: expanding private-label penetration and further familiarising customers with these products. By increasing the adoption of private-label goods through strategic bundling and discount initiatives, Boxer can drive higher margins while reinforcing its reputation as a value-driven retailer.
Boxer’s successful listing has provided much-needed clarity on its market position and growth potential. With its efficient discount retail model, strategic expansion plans, and ability to cater to price-sensitive consumers, Boxer is well-positioned to capitalise on South Africa’s shifting retail landscape. By leveraging its competitive advantages – such as private-label growth, store expansion, and supply chain efficiencies – it has the potential to not only strengthen its market presence but also disrupt traditional retail structures.
If Boxer maintains its current momentum, it could emerge as a transformative force in the South African grocery sector.
Merchant West Investments is a holder of Boxer, recognising its long-term growth potential and strategic positioning in the market.
Alyssa Viljoen is head of equity research at Merchant West Investments.
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