OPINION: No walk in the park for e-commerce organisers in Africa

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By Lexi Novitske , principal investment officer of Singularity Investments
JOHANNESBURG

Investors and entrepreneurs have eagerly anticipated the potential of e-commerce in Africa, where an increasingly young, digitally-savvy population is hungry for consumer options and connections to the global economy.

Last week Zinox Group, owner of more recent Nigerian e-commerce entrant Yudala, acquired Konga, a leading online retailer in Nigeria, for an unpublished sum. The sale is rumoured to be at a substantial discount to the estimated $385million (R4.6billion) valuation reported by investor Naspers in 2016, and underscores the difficulties of e-commerce giants’ expansion through Africa.

Stakeholders and consultants have fuelled excitement with projections that online shopping in Africa is projected to grow to $75bn by 2025, yet hopes have been tempered by high customer acquisition costs and a failure of consumer behaviour to live up to expectations. Konga launched in Nigeria in 2012, but after four years the company had a paltry 184000 active users, 1percent of Nigeria’s population.

In January, Rocket Internet’s Africa e-commerce giant Jumia announced they were closing their e-commerce platform in Rwanda and six months earlier announced they were closing Jumia Marketplace in Nigeria.

How did well-funded and talented teams miss such an opportunity?

E-commerce is a $2trillion global industry, but contribution from African markets has been weak. Headlines touting the rising “African middle class” omit that “middle class” in the region includes anyone able to spend $2 a day, and the consuming class – those able to spend $10 a day – makes up just 10percent of Africa’s population.

In 2013, Jumia was expected to become Africa’s Amazon and reach profitability within a year and a half by bringing shoppers online. Years later, however, 76percent of Nigerian consumers still visit traditional markets an average of 10 times per month and 67percent patronise local kiosks even more frequently.

Jumia and Konga offered incentives such as free last-mile delivery, but efforts soon fell flat in the face of widespread scepticism.

Low digital literacy and trust deficits mean that consumers value the experience of buying from familiar faces and purchasing small affordable quantities on a daily basis more than the convenience of going online.

According to McKinsey, 85percent of Nigeria’s social fashionistas would not go shopping alone. Shopping remains an important social experience, and person-to-person engagement, as well as direct sale through social media channels, drives decision-making behind purchases.

Dangerous game

Putting one’s eggs in a single geographic basket is a dangerous game in markets where economic headwinds and currency risk can be substantial drivers to already fragile consumer spending.

In 2016 Nigeria entered its first recession in two decades, costing some 8million people their jobs. Coupled with a 50percent devaluation of the naira, consumers’ purchasing ability, particularly for imported goods, was hit hard. Kenya and South Africa have recently felt their own shocks, and such economic waves are unlikely to completely disappear on the continent in the near-term. Investors looking for fast wins in concentrated markets and who are unwilling to ride market volatility have proven to be disappointed.

Large, foreign players looking to add top-line growth have set their sights on Africa, contributing to a fiercely competitive environment. With the evolution of payments products, including Flutterwave’s GetBarter, African customers are now able to shop on global online platforms, such as Alibaba’s AliExpress, with an almost-limitless inventory selection.

International apparel platforms such as Asos offer free international shipping to many African markets (making delivery cheaper from London than the minimum $2 charge for purchases within Lagos) and whispers in the the local market allude to Amazon opening warehouses in Nairobi and Lagos.

Local player Mall for Africa gives consumers access to a wide range of US retailers and allows them to pay using local mobile money, debit card, or a bank account. Unfortunately, local-only players are forced to “race to the bottom”, undercutting one another in high-volume, low-margin strategies dependent on large marketing budgets.

A lack of infrastructure can lower firm productivity by up to 40percent, eroding profitability in already narrow-margin e-commerce businesses.

Low internet penetration – only 22percent of Africans today have online access – the meagre availability of financial services (including supply chain financing for suppliers and penetration of payments products for consumers), poor logistics networks, and weak ICT systems remain obstacles in the region.

As long as these barriers persist local e-commerce companies replicating models from Seattle or Hangzhou without those companies’ resources and internal infrastructure will find it difficult to succeed. Jumia and Konga experimented with cash-on-delivery as a workaround for sceptical or unbanked customers found new challenges in terms of driver safety and theft as well as a high rate of rejected orders: Konga has since eliminated this service.

Courier fleets

The companies also found it necessary to build their own courier fleets, as the existing postal and logistics providers were unreliable.

Ultimately, the time may not be right for mainstream online retail in Africa. Winning online in Africa markets requires a long-term persistence to change (or adapt to) consumption habits, geographic diversification, and overcoming infrastructure gaps.

First-mover advantage can take time to manifest: this is as true in the US as in Africa. If the next wave of e-commerce companies can weather the coming years, learn from their peers and reform their models, they may survive long enough to reap the benefits of pioneering the wave.

Lexi Novitske is the principal investment officer of Singularity Investments, a Lagos-based investor in early-stage tech companies in sub-Saharan Africa.

Good news from Black Friday

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By Stafford Thomas for Business Live

RETAIL IS YET TO TURN THE CORNER

But December sales figures may show a slump if shoppers did a large portion of their spending during November frenzy


Black Friday did the trick for retailers in November, with shoppers scrambling for bargains and driving year-on-year sales 8.2% higher. It was the strongest rise in retail sales since June 2012 and trounced analysts’ consensus expectation of a 3.5% rise.

An overjoyed market responded by lifting the JSE general retailers index by almost 8% to its best level since August 2016 in the week of the sales data’s release on January 17. The market will now be looking for assurance that the stronger sales growth trend is sustainable.

Investec Bank economist Kamilla Kaplan has reservations. “There is a risk of the stronger than expected outcome in November giving way to weaker than usual December sales growth,” she says in a research note.

Kaplan points to the Bureau for Economic Research’s fourth-quarter 2017 retail sector confidence survey. “Confidence among retailers remained depressed and survey respondents noted that conditions in the retail sector remain tough,” she says.

A sharp slowdown in December retail sales growth would be in keeping with the experience in 2016. Sales growth in November 2016, the first in which SA consumers had a taste of a Black Friday sales drive, came in at 3.1% and was followed by a slump to 0.9% growth in Decembeshopr.

This year there are some positive factors that were absent a year ago. The breaking of the drought in the northern provinces and a stronger rand has resulted in far lower product-price inflation and in many instances product-price deflation. On the political front, deputy president Cyril Ramaphosa’s election as ANC president in December has brought hope of a revival in consumer confidence.

A spate of trading updates provides only a limited indication of how retail sales will pan out in 2018. The updates range from excellent to mediocre and downright bad.

Among fashion retailers, Mr Price impressed. It has clearly put the big setback in its past year to April 1 well behind it. It was a year in which poor product selection, big stock writedowns and market-share loss left the retailer nursing a 13.8% headline EPS (HEPS) slump.

Mr Price’s response to its past financial year’s woes has impressed Daniel Isaacs of 36One Asset Management. “I recently attended a product presentation by Mr Price,” he says. “Their fashion line-up was spot on and their pricing points excellent.”

It showed in results for the 13 weeks to December 30, with sales in its core apparel division — which accounts for 70% of total sales — up a hefty 10.1%.

The rise was led by the flagship MRP Apparel brand, which upped sales 11.3% and same store sales 8.2%, despite minimal internal inflation of only 1%.

Mr Price’s performance was not the result of a Black Friday wonder. The group reports that sales growth was consistent across all three months with retail sales and other income exceeding R3bn for the first time in a single month in December.

The market has rewarded Mr Price by boosting its price into new-high territory and its p:e to 26.7. Investors are looking to a repeat of the 23.6% HEPS rise and seem unlikely to be disappointed.

December also proved to be a good month for The Foschini Group (TFG), with the retailer reporting trading in its core TFG Africa clothing division as being “above expectation”. In December the division achieved an 11.4% sales increase, while in the first nine months of the year the rise was a solid 8.5% against the background of 0.7% price deflation.

“TFG and Mr Price both performed brilliantly,” says Alec Abraham of Sasfin Securities. “They are grabbing market share from Woolworths, Truworths and probably Edgars.”

But while consumers were still buying clothes from TFG with enthusiasm in December, they were cutting back on their spending on other items. Sales declines across TFG Africa’s nonclothing brands ranged from 0.8% on jewellery to 10.8% on cellphones.

Trading on a 17 p:e, TFG appears fairly priced at a time when investors are awaiting clarity on the impact on results of two recent acquisitions — Retail Apparel Group in Australia and Hobbs in the UK.

Falling full-square into the downright bad trading update category was Woolworths, which warns that in the 26 weeks to December 24 HEPS will fall by 12.5%-17.5%. It will follow a 7.6% fall in the year to June.

The only saving grace for Woolworths in its latest 26 weeks was a 9.4% rise in food sales. But it battled in the SA clothing space, with sales falling 0.2% and volume down almost 1%.

But it is in Australia where the really big damage is being done by its David Jones (DJs) department store division, acquired in 2014 for R21.4bn. DJs limped in with sales down 3.3% but profit damage is likely to have been far worse.

Ominously, DJs’ profit before tax slumped 73% in the second half of the past financial year. A reassessment of the carrying value of the David Jones assets is being carried out by Woolworths.

Also falling in the bad update category was Truworths, which reported sales growth of a mere 1% in its SA and UK operations in the 26 weeks to December 31. For the period, HEPS are expected to fall 1%-3% and will follow a 0.8% fall in the 53 weeks to July 2.

The only other trading update that can be termed excellent was from Shoprite, at least as far as its SA operations are concerned. In the six months to December the retailer’s SA supermarket division excelled, turning in sales growth of 7.8% despite price deflation of 0.4%.

Similarly solid performances were produced by Shoprite’s furniture and OK food franchise operations.

It was only in non-SA supermarkets that performance flagged, with sales in rand falling 0.4%. There was a particularly weak showing from its key Angola market, where sales fell 13% in rand and 9.5% in constant currency terms.

However, the sales fall is understandable given the exceptional showing in Shoprite’s year to June 2017 — when African sales, led by Angola, lifted 13.5% to R24.8bn and by 33.8% in constant currency terms.

Undoubtedly, another challenging year lies ahead for retailers. Investors wanting retail exposure should go with those who have already shown that their business models are a match for the challenge.

This article was sourced from Business Live

South Africa meets Japan while design meets culture

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“Ultimately, we believe that our uniqueness does not come from specific elements of African or Asian cultures, it just stems from us.”

Article by Jehan Latief for Design Indaba
When they were introduced to each other in Boston, both South African Mpho Muendane and Japanese Maki Nakata were frustrated by the untapped potential of the lesser-known varieties of African design.

With a background in graphic and textile design, Mpho was in between lecturing a university course and freelance textile design, while Maki was pursuing her Masters in international affairs and business.

It must have been alchemy that these two happened upon each other the way they had, because the duo has gone on to build a globally relevant brand.

Maki & Mpho is a textile design company that combines modern African art with traditional Japanese craft. Co-founder and creative director Mpho designs each of the textiles and products herself, but the brand seeks to share a message deeper than aesthetic appeal.

Maki says that they’re on a mission to promote African design, and that design is the vehicle with which they aim to communicate different cultural values.

“Ultimately, we believe that our uniqueness does not come from specific elements of African or Asian cultures, it just stems from us, Maki and Mpho whose individualities, identities, ideas, and backgrounds mix together in the global context and generate something new.”

It’s an interesting proposition given the complexities around what exactly African design is, who it belongs to, and where it is headed.

Maki and Mpho make it very clear that they’re not here to represent any African traditions or culture through their work. Rather, each textile design has a unique story weaved into it that celebrates African culture from the designer, Mpho’s perspective.

Mpho’s creative process is pretty robust. And quite an immersive experience as the designer.

Her tools are pen, paper, paint and pattern. That list wouldn’t be complete without the powerful African narrative that informs the design. While her mood boards address style, colour and narrative, the gist of her process involves simultaneously drawing, reading and writing “with my imagination and secret ingredients.”

The design process will only move forward, or backward, she says, once a strong design story has been established. From there on, patterns and colourways are digitally created for final design.

I wondered where the Japanese element in all this was. Though the textiles draw from Mpho’s interpretation of African design, most of the production is done in Hyogo, Japan. This region specialises in Banshu Ori, a cotton-based fabric.

For their recent collection, they worked with a textile manufacturer there, who has been operating for about 150 years over five generations.

The more you hear about their story, the more you get a sense of the stories woven through them, and the beauty of interconnectedness and collaboration.

While they’re currently based in Tokyo, there’s plans to launch a store in Amsterdam, and in one of the South African cities (the Cape Town vs Johannesburg battle continues).

They’re a young company, but the duo has already started giving back to young designers and creative sectors. In collaboration with South Africa’s Department of Arts and Culture, they’ve worked with selected local designers to assist them in developing and showcasing new collections, specifically in textile design.

Article Sourced from Design Indaba Website

The Retail Apocalypse Is Fueled by No-Name Clothes

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By Bloomberg December, 2017

A few months ago, Amazon.com Inc. representatives met with fashion designer Jackie Wilson as part of the expansion of Amazon’s surging apparel business. They wanted her to make a knit top for women that would be sold under an Amazon-owned private label. And they wanted the fabric to feel heavy and high-quality—the sort of attributes long associated in the shopping mind with name-brand attire.

“They are not concerned at all about how many units they sell, and they’re not focused on margins,” says Wilson, whose company in Syracuse, N.Y., makes clothing for Kohl’s, American Eagle Outfitters, and J.C. Penney Co. “They’re concerned about customer satisfaction. They want five-star reviews.”

Wilson’s knit top is in the vanguard of a private-label push that’s upended the $275 billion U.S. apparel sector. Amazon, Wal-Mart Stores Inc., Target Corp., and other big retailers are beefing up their clothing lines to grab shoppers whose loyalty to established brands such as Gap and Nike has waned. Even supermarket chain Kroger Co. is getting in on the act, attracted by profit margins that far exceed what they earn on bananas and paper towels.

This year Amazon will leapfrog T.J. Maxx owner TJX Cos. and Macy’s Inc. to become the second-biggest seller of apparel and footwear in the U.S., Wells Fargo estimates. In some categories—like the active wear that Americans increasingly wear all day, whether or not they hit the gym—private labels combined account for 20 percent of the market, according to researcher NPD. That makes store brands in aggregate larger than any single brand, which should strike fear in the executive suites of Lululemon Athletica, Nike, and Under Armour.

“Active wear is going like wildfire,” Wilson says, for the simple reason that “you don’t have to try on spandex pants. If I was in those categories, I would be worried.”

Store-brand apparel is nothing new. The Sears, Roebuck & Co. catalog first offered clothing in 1894, and Wal-Mart’s Faded Glory house brand began life in 1972 as a department-store label. But for years, private-label apparel was dull and dowdy, no match for branded threads.

That started to change in 1990 when British supermarket chain Asda Stores asked fashion designer George Davies to create an exclusive clothing line. The result, George, was a hit in the U.K. and caught the attention of Canadian retailer Loblaws Cos. Ltd., which in 2004 hired Joe Mimran, co-founder of the Club Monaco chain, to do the same. His Joe Fresh expanded into standalone stores and a partnership with J.C. Penney in the U.S. But the brand didn’t click with Penney’s shoppers, prompting Mimram’s departure in 2015 and an overhaul of the business.

Despite its recent struggles, Joe Fresh “was a nice surprise to other retailers who said, ‘Hey, if they can do this, we can, too,’” says Adheer Bahulkar, a partner at consultants A.T. Kearney.

As retailers stepped up investments, connected with Asian suppliers, and poached fashionistas to head up in-house design teams, the established brands stumbled under the weight of declining mall traffic and heaps of unsold inventory. Brand loyalty began to crater.

Under Armour has been battered by slowing growth in athletic footwear, J.Crew Group has struggled to reinvent itself after the departure of longtime Chief Executive Officer Mickey Drexler, and Gap’s only bright spot lately is its off-price Old Navy chain. Even mighty Nike this year announced its first major layoffs since the financial crisis.

“Every new generation is becoming less and less brand-loyal,” Bahulkar says. “Millennials don’t care as much about logos. They will buy anything from anywhere at any price point, and that is a big change.”

The erosion of brand loyalty has been a boon for Target, the cheap-chic retailer that made its name in apparel via partnerships with top designers Isaac Mizrahi and Jason Wu more than a decade ago. It’s leveraged that success to create its own private labels in recent years, most notably Cat & Jack, a kids’ apparel line whose sales surpassed $2 billion after a little more than a year on the shelves. Target’s winning formula has emboldened Wal-Mart, which recently hired a veteran of Saks Fifth Avenue and Ralph Lauren Corp. to boost its fashion game.

Apparel shopping these days often begins with an online search, and research from consultants Bain & Co. finds that a surprising number of those queries don’t mention a brand at all—consumers just enter “yoga pants” and see what comes up.

Searching for generic product categories on Amazon turns up plenty of private-label options. More than one-quarter of first-page Amazon search results in categories such as men’s button-down shirts were private labels, Bain says. That helps explain why almost 40 cents of every dollar spent online on clothing and footwear in the U.S. will go to Amazon this year, according to data tracker Euromonitor, up from 23 cents in 2014.

Amazon is capitalizing on this in two ways. First, despite its private-label push, it’s simultaneously trying to create legitimacy as a destination for fashion by luring established brands that want to improve their digital sales, even if it means submitting to Amazon’s pricing algorithms. Heads turned when Nike began selling its shoes directly on the site over the summer. And Calvin Klein recently opened two pop-up shops in New York and Los Angeles whose fitting rooms are outfitted with an Echo, an Amazon device that lets users submit photos of outfits and recommends the best one. There’s also a dedicated Calvin Klein storefront on Amazon.com with exclusive items.

Not every fashion brand is as willing to hop into bed with Amazon, fearing a loss of cachet. But with mall-based department stores falling out of favor, analysts at Goldman Sachs say they expect the “vast majority” of labels to follow that path and deepen their relationship with Jeff Bezos.

Simultaneously, Amazon has introduced a bevy of private labels with names such as Peak Velocity in categories that include shirts and sportswear, where fit and function—plus the convenience of free shipping—are often more important than the latest fashions. One example is plus-size for women, where Amazon increased its market share about 50 percent over the past three years, Bain says.

Plus-size is “radically underserved,” Bain partner Tamar Dor-Ner says. “The thing that made it even more attractive for Amazon is it’s a shopper who traditionally doesn’t want to go into the store.”

Luckily for the big brands, three-fourths of apparel shoppers still prefer to feel or try on the product before buying, A.T. Kearney says. The likes of Lululemon can counterattack with so-called curated merchandising, industry jargon for showing shoppers that this top goes well with those pants. Despite experiments such as the Amazon Echo, the online giant is not there yet.

“I don’t know anyone who is jumping up and down about buying clothes on Amazon,” says Candace Corlett, president of WSL Strategic Retail. “They’ve put together a lot of midpriced, uninteresting stuff.”

But private labels don’t need to inspire. Like Jackie Wilson’s knit top, they just need to satisfy a need.

“We don’t expect private labels to become fashion houses, but they can create enough newness that they can capture sales,” A.T. Kearney’s Bahulkar says. “Competing with Amazon is a losing proposition.”

Article sourced from Bloomberg

Redwave Global collaborates with Under Armour

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This article was supplied by Redwave to Fibre to Fashion
Redwave Global, a Pittsburgh-based science technology company, has entered into partnership with fitness conglomerate Under Armour to provide restorative apparel nationwide. The collaboration brings state-of-the art athlete recovery sleepwear to the market, available on the Under Armour website. Redwave has provided the technology for the sportswear design.

From lounge pants to comfortable Henley shirts, each piece restores players to their full potential in preparation for the next performance. Chairman of the board Dr. Shannon Vissman understands the importance of athletic drive, stating, “It’s not about the sport, but the ability to push the human body to the edge that turns a person into an athlete.” Redwave emphasises the essential healing process, helping players to practice self-care.

Chair of the Technology Committee of the board, Dr. Alan Letton, explains the forward-thinking and innovation behind this wearable technology. “By harnessing the physiological benefits of Far Infrared, we created therapeutic apparel able to improve health as it’s worn – making recovering from an all-out effort faster, easier, and more efficient,” states Letton. The first wave of wearable recovery products officially launched in January 2017 at the Consumer Electronics Show held in Las Vegas, Nevada.

Dr. Vaugh McCall, who specialises in psychiatry and health behaviour at the Medical College of Georgia, attests to the technology’s further ability to improve sleep. “How one sleeps at night affects focus, performance, and overall functioning during the following day. Using Redwave’s technology, this new line works to restore the body, assuring you’ll rest easy and wake up refreshed.” (SV)

Source : Fibre to Fashion

Trade expo brings textiles, apparel and footwear to Cape Town

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Are you in the business of clothing, footwear, textiles and fashion accessories? Get ready to network and explore at the China Premium Tex – Apparel, Textile & Footwear (ATF) Trade Exhibition, taking place at the Cape Town International Convention Centre from November 21 to 23.

At the exhibition, buyers from chain stores, independent retailers, boutiques, importers, distributors, factory managers and other decision makers can meet 140 international manufacturers and suppliers from China, South Africa, Indonesia, India, Hong Kong, Bangladesh, Belarus and Estonia.

More than 100 manufacturers from China will display a range of products exclusively to Southern African buyers. These will include fashion garments and footwear, sportswear and sports footwear, safety boots, denim, home textiles, fashion fabrics, yarn, interlinings, trims and fasteners, fashion accessories such as bags and scarves, and much more.

Don’t miss this opportunity to snap up new lines, agencies, products and services!

The China Premium Tex opening ceremony will take place at 10am in Hall 4A on Tuesday, November 21, and anyone in the industry is welcome to attend.

Presentations and trend talk
To book your seat at any of the insightful business presentations or the trend talk, email atfexpo@worldonline.co.za. There is no cost to attend, but space is limited and seats are allocated on a first come, first served basis. Open to trade only.

Tuesday, November 21 – 12pm–12.45pm
Trend talk by Nicola Cooper of Nicola Cooper & Associates

Topic: Sociopolitical, technological and environmental trends shaping the mindset of the current and future African consumer

Cooper, a senior fashion, lifestyle and pop culture trend analyst, will focus on explaining trends from global-to-local, local-to-local and local-to-global perspectives. In this explorative, illuminating and insightful talk, learn about pioneering African trends and the effect these will have on lifestyle, fashion, advertising, retail and emerging consumer markets in 2017­–18.

Wednesday, November 22 – 9.30am–10.15am
Presentation by Dave Nemeth, owner of Trend Forward

Topic: The future of business and retail

The only certainty in business today is the death of business as we know it. This presentation, based on a year’s research, will look at the disruptions that businesses and specifically retailers are facing. It will cover areas such as macro trends affecting business and retail; current consumer attitudes, technology and the retail space; the future of retail; the changing face of corporate culture; and evolving company structures.

Thursday, November 23 – 9.30am–10.15am
Presentation by Brett Kaplan, independent retail consultant, Choppies Superstores

Topic: The changing apparel retail landscape in SA

Kaplan was the MD of clothing and general merchandise at Woolworths for 37 years. He was instrumental in building that business into the success that it is today. He will talk about the globalisation of retail, where both hemispheres are taking advantage of the “untapped African opportunity” with South Africa at the centre of this development. Retailers learn that a “cut and paste” approach does not always deliver results in South Africa, as consumers’ fashion appreciation is unlike that of other regions, including Australia, albeit a southern-hemisphere lifestyle. Kaplan will look at the challenges of and opportunities in apparel retail in South Africa.

Pre-register for FREE entry online today to visit the event and/or presentations, and receive a complimentary copy of the 2018 African Clothing & Textile Trade Sourcing Directory valued at R100 and a show catalogue on arrival at the show.

For more information, visit www.atfexpo.co.za, call Tel: +27 21 790 5849 or email atfexpo@worldonline.co.za.

Please note, this is a business exhibition and not open to the general public. Persons under the age of 18 will not be admitted.

Woolworths sales feel the squeeze

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By Michelle Gumede for Business Live

Woolworths is battling a tough economic environment in both Australia and SA, putting pressure on sales.

After posting its trading update, which showed a 2.6% growth in overall sales, the group’s share price declined as much as 5% before recovering to close 2.41% lower at R53.75.

Woolworths has three operating subsidiaries — Country Road Group, Woolworths and David Jones, which was acquired in 2014 for R23.3bn.

Its David Jones sales declined by 5.3% in the 20 weeks ended November 12, the group said.

The company was struggling because of its “questionable business model”, Vele Asset Managers equity analyst Matthew Zunckel said.

Consumers globally were trending towards online and specialty retail, yet David Jones remained a department store, Zunckel said.

The management of Woolworths could tweak this over time with the introduction of food, but that would take a lot of time and investment, he said.

In Australia, the group opened eight new Politix locations within David Jones stores and said it was “seeing positive results from this initiative”.

However, Zunckel said it was a matter of concern that Woolworths continued to grow space quite aggressively despite significant volume pressure.

The company fared slightly better in the local market. On Wednesday, Statistics SA reported that retail sales were up 1.4% in the third quarter from the second, while retail trade sales had increased 5.4% in September from a year earlier, to R74.12bn.

The food division grew sales “ahead of the market” by 9.3%, double its internal inflation of 4.5%, the retailer said, with sales in fashion, beauty and home division slightly up by 0.7%. Zunckel warned that it could be losing market share in SA as the clothing performance was quite disappointing and the retailer did not seem to be benefiting from the recent uptick in apparel retail sales.
Author: Michelle Gumede

TFG looks to further grow sales on internet

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By Nick Hedley for BusinessLive

CEO Doug Murray says the 6% contribution from online sales will ‘definitely’ grow

TFG expects to see a rising contribution from online sales — which now account for 6% of group-wide turnover — as it invests in its e-commerce operations, says CEO Doug Murray.

“The UK is just over 28% [online sales], Australia is a bit less because it’s only been included for two months, but their online sales are about 2.5% of what they do, and in SA, we’re edging up to 1%,” Murray said.

“Considering that America is around 8.5%, we’re going in the right direction and we’ve got a lot of focus on that in terms of investments in all territories.”

The 6% contribution from online sales would “definitely” grow, Murray said.

The clothing retail company reported that turnover in the six months to end-September rose 9.2%, or 12.6% on constant currency terms, to R12.5bn. Headline earnings grew 5.6% to R1.1bn, excluding costs related to the acquisition of Australian company Retail Apparel Group.

Credit turnover growth rose to 6.2%, which was “in line with expectations, as the negative impact of the affordability regulations is now in the base”.

TFG, Truworths and Mr Price took the Department of Trade and Industry and the national credit regulator to court in August over the affordability regulations. The retailers have argued that the rules, which require credit providers to validate customers’ income, are forcing them to deny credit for many shoppers.

TFG said the rules “have had and will continue to have a negative impact on the group’s credit turnover”.

“A lot of things that went on in that court case we see positives from, but we await the ruling,” Murray said.

The national credit regulator is also probing TFG for allegedly charging a club fee on its credit agreements. TFG believed that the regulator had an incorrect view on club fees, Murray said. “We’ve got several senior counsel opinions that make us very confident on that. We feel that we are totally compliant there.”

Giving the lie to fast fashion

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By Zainab for IOL

Over the past few years, the retail climate has changed drastically from top-down fashion where luxury brands set the standard of what was trendy to a more democratised industry where these same brands’ designer threads are being ripped off by large high street chains and sold for a fraction of the cost.

And while I’m all for spending less on items that will be relegated to last-season status, I tend to err on the side of longevity. Quality over quantity, as they say. I rarely buy new clothes and, when I do, my purchases are either extremely pricey items I’ve saved up for over months or bargain finds made from quality fabrics I know are not just in season this month.

Then there are those times when I enter a mall and find myself panic-stricken by all the gloriously gorgeous attire on offer. Jeans for R150, screams one sign and I’m instantly drawn into a parallel universe where I desperately need five new pairs of jeans.

But I don’t need them, of course. I could easily walk into Levi’s and drop R800 on a decent pair I know will last several years, if not more. But the price tag draws me in and I end up with two new pairs of jeans that lose their shape and need to be thrown out after a few months.

Which is why lately I’ve become a strong advocate for initiatives such as H&M Conscious and Fashion Revolution. I love the fact that I can walk into any H&M store and recycle garments that would otherwise end up in a landfill somewhere. And while many would say that H&M’s entire business model relies on its rapid-fire production line, I still applaud its efforts at recycling and reusing old garments in its Conscious Collection. Indeed, it seems a fitting first step towards all its products eventually being produced this way.

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That being said, H&M isn’t the only brand doing its part for sustainable and ethical fashion.

One such local brand I was lucky enough to work with a few months ago is Bodhisattva. Deriving its name from the Sanskrit term for anyone who is motivated by compassion and wishes to increase enlightenment and consciousness for the benefit of others, the brand works with small local businesses, specifically those owned by women, in impoverished communities to produce quality garments made from fabrics such as silk, leather and cotton that stand the test of time and are interchangeable with other items in your wardrobe.

So, while you may be paying top dollar for a skirt or top, you’re also paying for an item that will see you through several seasons.

And isn’t that what we’re after, really? Items that will last, that can be repurposed, deconstructed and recycled season after season?

Even runways have started to blur the lines of seasonal fashion. Much of what we see now will still be trending on the streets of Jozi next year, albeit in a different colour or guise.

So how will you be making a sustainable change through your fashion choices?

retail demand planning and forecasting

How SA’s retailers can overcome stunted growth forecasts

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Author: Rod Salmon : Source: Bizcommunity

 

Retail is a fast-paced, cut-throat industry; businesses that are not meeting their customers’ needs as and when they require, can quickly find themselves sidelined, while more responsive and innovative competitors fill the gap. In South Africa, which is currently a low growth market, the above challenges are being felt acutely by retailers.

 

With additional obstacles posed by negative consumer credit growth largely as a result of a decline in credit extended on store cards, there is a risk of South African retail stocks depreciating even further. Coupled with an increasingly competitive environment, caused by new international entrants and consumers with less disposable income (and therefore less spending power), there can be little doubt that the retail trading environment will continue to be tough for the foreseeable future.

What poses a particularly interesting conundrum for me right now is the number of retail managers that believe the cycle will turn, and that growth similar to the 2003-2013 period will be achieved. Based on our research though, what we are seeing is structural – as opposed to cyclical. Change is being driven by a demographic shift that has seen the expansion of a middle class not matched by savings or productivity increases. This mismatch means there has been a rise in the level of debt to disposable income from 52% to almost 90% in the space of only a few years.

This makes it unlikely that retailers will achieve the same levels of growth as the heydays of high credit growth. However, this is not to say that there are no opportunities for savvy and innovative retailers to find a niche in the market and benefit from it. Broadly, we have identified three key ways that industry players could potentially drive the growth they are seeking.

Increase market share

This is no doubt a difficult task in a climate where established retail giants such as Stuttafords have had to close their doors, and consumer companies that rely on growth and inflation to generate earnings growth will in our view find it increasingly difficult to survive in this market. But it is attainable. It will require creativity in looking beyond the traditional retail business model, and will even require looking into products and services already within their portfolio and how they can be re-imagined to add value and increase market share.

Become more operationally efficient and streamlined

Finding ways to improve operational efficiencies is by no means a new concept, and most businesses have already examined ways to streamline business processes from the supply chain right through to customer care. The rise and adoption of digital technologies in the last few years has, without doubt, assisted in improving cost efficiencies, but implementing the right technology has wider capabilities.

It can, for instance, contribute to more seamless demand planning and forecasting to help meet customers’ ever-evolving expectations, as well as improve productivity, reduce time-to-market of new products and drive revenue gains. This makes it critical for retailers to consistently evaluate how their current strategies and technology solutions are contributing to greater efficiency.

Expand – geographically or in product offering

Linked to the ability to increase market share is expansion – and the two main ways for retailers to expand are into new product markets and into new geographical markets. Of course, each comes with its own set of pros and cons; moving into new markets comes with regulatory and policy considerations, it typically provides an effective way of driving earnings growth by capturing new customer markets and opening up more opportunities.

Only those retailers that have clear and robust expansion and efficiency strategies will be able to achieve higher than average earnings growth. The important point to take away is that retailers who proactively look for gaps in the market and aim to create solutions to fill those spaces will most likely be the ones to achieve growth.