How Checkers keeps cranking trading margins higher

Its newest Hyper is but the latest illustration of the strategy in action... Not only is the newest Checkers Hyper at Irene Village Mall in Centurion an enormous store, it also perfectly illustrates just how the Shoprite Group is able to consistently deliver trading margins that are among the highest globally for a grocery retailer. Sure, it does the basics – like relentless execution, precision retailing (a major focus under CEO Pieter Engelbrecht since he took over in 2017) and pushing its suppliers hard – very well. But it is increasingly actively using its real estate and shelf space to expand margins… In the 2026 financial year, it reported a trading margin of 6.6% for its core South African supermarket unit. This is greater than Boxer’s 5.7% (its most recent full-year) and is among the highest among supermarket retailers globally. To achieve this on annual revenue (in SA) approaching R230 billion is some feat, especially when its Shoprite and Usave brands sell lower margin staples. It does not disaggregate the margin between its Checkers and Shoprite/Usave units, but the former is growing its top line far more rapidly than the latter (10% versus 4.3% for the full year, or 9.6% versus 3.6% when removing the contributions from Liquorshop). Brand – and store – divergence The sales mix in the Checkers business is very different to that of Shoprite and the divergence is even more extreme when one considers Checkers Hypers (with a far larger contribution of higher margin general merchandise items). As Checkers has aggressively pursued its FreshX strategy, it has added a number of elements and concessions into its stores that rather obviously have far higher margins than a typical shelf of pantry staples. This is particularly true of Checkers Hyper, but it has extended this into ‘normal’ neighbourhood Checkers stores too. The Checkers Hyper at Irene Village Mall (owned by property giant Resilient Reit) has many of these, including in-store Krispy Kreme and Kauai outlets. It has the format’s now-standard, branded Checkers Indoor and Little Me stores-within-a-store. And it has an in-store coffee shop, sushi bar, hamburger bar, smoothie bar and milkshake bar (it is Irene, after all). These are all operated by the group and surround a seating area for customers near the very front of the store. This is one of the first rollouts of a seated in-store offering this comprehensive – a mini restaurant, if you will. Restaurant offerings at grocery store rentals Ironically, this actually harks back to something Pick n Pay popularised in the 1980s and 1990s with its in-store coffee shop/restaurants inside its Hypermarkets. Those have all but disappeared. The Shoprite Group is not the first to have figured out that cups of coffee or smoothies can be far more profitable per square metre than selling washing powder or tomato sauce. The added benefit of having these offerings inside and part of the store is that they will operate at the same lower rental per square metre that the group will pay for the entire store. This is regardless of whether they are operated by the group or via a third-party. Ever wonder, for example, why Food Lovers Market acquired Seattle Coffee Company and then opened these in many of its stores? Selling coffee at a supermarket rental is a great business! (The maths behind the Vida e Caffè acquisition is brilliant …) Woolworths has had its coffee counters/carts and W Cafés in stores for decades and growing this has been a major focus for the group in recent years. Pick n Pay has been adding in-store coffee counters wherever it can and many Spar operators have Bean Tree coffee shops in their stores. Checkers has taken this to another level entirely. And it’s not slowing down. There are Starbucks counters in some stores (in areas where this makes sense) and it has been adding Lego shop-in-shops to its Hypers. In April, it opened its first Nespresso shop-in-shop at its Checkers Hyper store at Redefine-owned Centurion Mall. (That Starbucks partnership will surely slowly unwind as those concessions expire.) On the one hand, this obviously makes sense from a customer preference perspective. It is really convenient to visit a single Hyper and be able to grab premium coffee or lunch while doing a grocery shop. On the other, it’s great for margins. This article was republished from Moneyweb. Read the original here.