The new Clicks venture, KwaMakhi — a small-format retail chain built specifically for township and lower-LSM markets — says as much about where South African retail is heading as it does about Clicks itself.
Launched two weeks ago, the brand, whose name loosely translates to “at my neighbours”, is designed to compete directly with spaza shops and discount retailers and capture the huge amount of money moving through townships.
The Cravenby outlet in Elsies River, Cape Town, has wide aisles and a large number of KwaMakhi branded products — for example, tissue oil for R19.99, toilet paper at R39.99 for a pack of eight, and hair braids from R23.19 apiece. Hair dye, from beach blonde to blue black, sells for R37.99, while tokoloshe salt sells for R19.49. The music in the background is kwaito or R&B. The colours are bright red and yellow, and the store just happens to be next to Shoprite, arguably the original red and yellow mix.
The Clicks approach echoes a strategy Unilever pioneered years ago in markets such as India and to a lesser extent in South Africa: “sachet marketing”, or selling products in small, inexpensive portions so households can buy with daily or weekly cash rather than paying upfront for a large bottle or box.
Cutting out the middleman
Face wipes, for instance, come in packs of 10. This is a direct response to how spaza shops operate — buying in bulk from wholesalers and breaking stock down into small marked-up units. KwaMakhi is trying to offer that same affordability without the informal middleman, fusing the economics of a spaza shop with the distribution and systems of a corporate retailer. Even the store size is smaller — about 280m²–300m², making it small enough to fit into the compact township malls that dominate these areas, where landlords often can’t offer the 550m²–650m² a standard Clicks needs.
However, Anchor Capital investment analyst Sean Culverwell notes that by not carrying pharmacy licences, KwaMakhi is going head-to-head with two giants in township retail — Boxer and Shoprite. He believes the key edge for Clicks will be an unusually high private-label mix — up to 40% of the total range — which should protect gross margins even as KwaMakhi competes on price. He cautions, though, that integrating distribution with the existing Clicks network will take time to mature, so store economics might improve only gradually.
More strategically, Culverwell reads the move as a tacit admission that Clicks’s core pharmacy rollout is running out of room. Most attractive nodes are already covered and further openings risk cannibalising existing stores, given how costly it is to open a full-format Clicks with a licensed pharmacist. A smaller, cheaper format such as KwaMakhi gives management a way to keep its store-opening pipeline growing without those constraints.
Minimal risk, maximum opportunity
And with only about 10 stores planned this year and about R30m in initial capital committed, the financial risk is minimal. “It has potential, but nothing material near term,” he says. “It’s not nearly big enough to move the needle, given Clicks’s current store base across the country.”
Culverwell notes that Clicks could easily walk away if the model doesn’t work after two or three years.
Which is not to say it shouldn’t: for starters, the store has a dedicated personal care focus as a point of differentiation from the other players. And then there’s the sheer size of the informal retail economy, which both Capitec and Standard Bank have put at about R900bn and growing fast, much faster than the formal retail sector.
Andrea Slabber, insights lead at research firm Trade Intelligence, calls KwaMakhi a canny move: “I think only time will tell, but Clicks has spent years building deep consumer trust through its private-label health, wellness and personal care products. Transporting that brand equity directly into underserved communities through a dedicated format is a masterclass in market expansion.”
Clicks CEO Bertina Engelbrecht says the concept has already drawn interest from prospective partners in Zambia, Zimbabwe and Ghana, just days after the first South African stores opened.
Certainly, Engelbrecht sees potential for many more stores nationally over the long term, calling it one of the biggest growth opportunities in the group’s history.
