Retail Today- What is really happening!

It’s not the first time I have written about the changing retail landscape in South Africa and I am sure it will not be the last, as the metamorphosis continues.

If we go back +/- five years, the change process had already started. Edgars were involved in a private equity deal which had massive impact on revenue and the business started to drown in debt, loan repayments etc. Senior management made some critical errors with the merchandise direction and started flooding the stores with expensive branded product the South African consumer did not know or want to buy.  As sales began to drop, the business started to cut costs which had a major impact on the performance of the chain. Staff were reduced and customer service disappeared. Frustrated customers began to look for other retailers to buy from and moved away from shopping at Edgars.


Then came a killer blow to Edgars when management decided to sell its credit base to Absa to generate cash to help pay its debt. Absa immediately reduced the amount of credit Edgars was issuing to its customers, which meant consumers could not buy, and sales levels collapsed. Almost like cutting off the hand which feeds you.

Meanwhile as the Edgars soapie played itself out, local competitors such as Foschini, Truworths, and Woolworths, we’re all picking up extra sales from the turnover  Edgars was loosing. This however was a false performance situation as those retailers were also struggling but results did not look too bad as the Edgars sales were keeping them afloat.

The second biggest change for South African retail was at the bottom end where Mr Price was the King. This business continued to expand and move aggressively into the homeware market, and sports offer. Unfortunately they neglected thier core business and did not focus any energy on moving ranges forward, and upgrading stores to keep ahead of the pack. Slowly in the background Cotton On was eating away at Mr Prices lunch day by day, sale by sale. They opening bigger better stores with on trend merchandise appealing to the younger customer, right under the nose of Mr Price.

Cotton On being a privately owned company not reliant on board approval to expand, hit SA expansion hard. They opened a 2,400 m2 store in Gateway Durban the largest Cotton on not only in SA but in the world. Today its three largest stores in the world are all based in South Africa,: Mall of Africa, Gateway and Menlyn. A statement of confidence from this new dynamic player. Mr Price recently announced shocking interm results and blamed the lack of performance on weather and wrong merchandise assortments. The real reason was lost sales to Cotton On.

To further impact change many other International players have also joined the pack in our malls such as Zara, River Island, Forever 21, etc. All taking potential revenue away from our local companies. In my view the one which has done the best job and will hit the hardest is H&M.

1274470421store_details_hm This business has exactly the right merchandise assortments at the right price at the right time to satisfy the struggling SA consumer desperate for an alternative to the traditional credit bullies.

People  say to me “Yeah but H&M quality is poor”.  Just stop and think about that statement! It’s so old fashioned and really shows you are out of touch with retail today. Gone are the days consumers want to purchase a classic jacket which will last three or four seasons. Buy the item today at an affordable price, wear it now and get a new one next season, that’s the way the modern consumer is behaving. Hence the ques at H&M on Tuesday the 22nd November 2016. (See photo).


Sorry Edgars I know you are shouting we are back, but definately no que of customers buying at your point of sales.

The smaller International retailers such as Aldo, Guess, Mango, Nine West etc who have been around for many years are also fast loosing market share. They have not adapted to the changing game and continue with the same recipe season in and season out believing customers will still support them. The true story is the customers have moved on and have more choice today to find better fashion and value. In these stores the merchandise ranges are not purchased locally, all product is imported from overseas. This means as the rand gets weaker, the price points get higher putting affordability out of the reach of more and more customers.

I understand investing in the retail sector today is a risky business and not for the faint hearted. However My opinion is stay away from buying shares in the traditional companies, retail is too volatile. Having said that for me the only retailer I would be confident in purchasing stock would be the Foschini group.  This company has a very competent management team who unlike Edgars has made some clever strategic moves to protect the business in these difficult retail times. They have reduced dramatically the amount of sales they do on credit and have increased the sales on cash purchases, making them more liquid in terms of risk. They also have bought many retail businesses in UK and Europe which gives other income sources and not only relying on South Africa for performance.

As in life nothing stays the same forever, change is happening as we speak.

enjoy your shopping.



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