Reeza believes that Woolworths’ investment into online services has pointed the business in a new direction.
Woolworths has embarked on the next phase of its growth journey, turning towards online to streamline and modernise its operations. CFO South Africa chatted to CFO Reeza Isaacs about the retailer’s plans for a digital future.
“Covid-19 has accelerated the shift to online in both our food and clothing businesses, and we’re looking at accelerating our investments in those particular areas,” Reeza says, explaining that they are looking at hiring specialist teams, bringing in consultants and going overseas to see how other big retailers are doing it. “It is an investment in people, systems and infrastructure, as well as best practice knowledge.”
Reeza details that part of this shift to online is Woolworths’ new on-demand, same-day delivery service, called Woolies Dash, that launched in South Africa in December 2020. The delivery service will give customers access to fast delivery of Woolworths quality groceries, including a wide range of fresh produce, pantry staples and household essentials directly off the shelf to the customer’s door.
Woolies Dash will see Woolworths become the first retailer in South Africa to offer store-to-door cold chain within an on-demand service of this kind. The retailer has even designed and manufactured high-tech cooler boxes to make sure that deliveries – via motorcycles – stay refrigerated, setting a new benchmark for cold-chain.
The launch of Woolies Dash comes on the heels of the successful introduction of Woolworths’ kerbside Click & Collect that allows customers to order online and pick up the completed order from a store, which launched in 75 stores this year.
“Woolies Dash will be available as a separate App to start with, which aligns to the broader shift to mobile that Woolworths has driven over the years,” Reeza says, adding that over 75 percent of Woolworths shoppers already access the retailer’s regular ecommerce channels via mobile phone, either on its website or via the main Woolworths App.
Reeza is also excited about Woolworths’ two new, innovative digital beauty experiences, Virtual Try On and Virtual Consultations, which will help customers reinvent their beauty shopping experience at home and gain more confidence before making a purchase.
He explains that Virtual Try On gives customers the opportunity to try on hundreds of shades of lipsticks, eye shadows and mascaras. The feature creates realistic applications of these products through augmented reality that can be tested on any skin tone and allows customers to assess textures, colours and looks.
Reeza adds that, based on this initial app rollout, Woolworths will then look to extend the Virtual Try On offering into its stores, providing interactive screens for customers to trial beauty products.
Woolworths has also partnered with Estee Lauder and Clarins to give shoppers access to one-on-one, digital-based beauty consultations with beauty specialists from the comfort and safety of their own homes.
Reeza says that the unprecedented growth of online shopping over the past 12 months, alongside the health and safety protocols of testing samples in store, has ushered in a new opportunity for Woolworths to transform the beauty shopping experience while continuing to build the differentiated capabilities across the retailer’s digital platforms.
He adds that these new investment areas in digital and online are what’s going to make a difference in this new world for Woolworths. “It will catapult us into the 21st century,” he adds.
As the group moves to a more online and digital approach, it is also looking to reduce some of the space in its clothing businesses. “We've seen that we are over-footage in our clothing businesses and will continue to close stores and reduce space in David Jones in Australia and in South Africa,” Reeza says, explaining that it will improve Woolworths’ productivity and trading densities.
A period of significant change
These bold new steps come after a challenging year for the retail space in general – and Woolworths certainly wasn’t spared. In February 2020 the group appointed a new CEO, only to enter a period affected by Covid-19 thereafter, to which it responded with a whole new business outlook.
Woolworths’ clothing business had to stop trading for the five months of hard lockdown, as it wasn’t considered an essential service. “This introduced some significant liquidity and balance sheet challenges at the time and we had to pull out all the stops in terms of cash generation, and preservation to improve our liquidity position,” says Reeza, who won the 2016 CFO of the Year Award for his role at Woolworths.
The group also had to deal with additional challenges in Australia, where its Country Road and David Jones businesses are located. The group had to temporarily close all its Country Road Group stores in Australia for four weeks.
“While we were managing the operational impacts of Covid-19, we were also focused on shoring up our balance sheet and ensuring a healthier business to see us through the challenging period. Part of this focus was the need to reduce our debt and we therefore took the decision to sell two of our David Jones properties, one in Sydney and one in Melbourne,” he says.
The proceeds of the sale were used to repay some of the group’s debt in Australia after a review of its capital structure of the Australian entities. “The sale and refinancing have facilitated the separation of the combined Australian debt and financing facilities of the David Jones and Country Road Groups, including the termination of cross guarantees between the two groups,” Reeza explains. The two companies are now financed separately.
However, Covid-19 didn’t only deliver challenges, as Woolworths’ food business proved to be more resilient. “It has been the underpin to our performance, because while most people cut down on their discretionary spend, like fashion purchases, the opposite was true for food,” he says. Reeza explains that the food business did extremely well during the time.
He adds that, with the new direction the group is moving in, there is a bit more breathing room as far as the balance sheet is concerned.
“It’s been an exciting journey and a good 12 months despite Covid-19,” Reeza concludes.
