To Save Retail, Let It Die

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The store of the future will become the most powerful media channel available to a brand, offering customer experiences that are the most profitable product a retailer can sell. But to get there, retail as we know it must die.

By Doug Stevens for Business Of Fashion

In 2011, in what has now become retail folklore, Ron Johnson, one of the brains behind the Apple Store, was hired to resuscitate the American department store chain JCPenney. At the time, I was asked to write an article for Advertising Age on whether Johnson would succeed or fail at this herculean task. My feeling at the time was that he would fail – not because he didn’t understand what needed to be done and certainly not because he lacked the creativity or knowledge to do it. He would fail, I believed, because customers, shareholders and ultimately the board of JCPenney wouldn’t have the stomach for what Johnson would ultimately have to do in order to revive the ailing retailer.

What Johnson understood was that in order for the new JCPenney to be born, the old JCPenney had to die. In order to pump oxygen into an entirely new era of department store retailing, he would have to once and for all turn off the respirator that was keeping this old brand barely alive.

And while we can quibble about Johnson’s approach to change management, (even he now admits he could have been gentler and more sensitive in his approach) the end result would have been the same. He failed because JCPenney felt more comfortable clinging to the corpse of their brand than working through a messy, uncertain and turbulent resurrection.

It’s six years later and a similar malaise poisons the broader retail industry. Everyone is talking about the need for disruption, innovation and change, yet most stop well short of actually doing anything about it. Many retail brands talk about game-changing innovation but what we see are lukewarm iterations of existing concepts and old ideas. Retailers, it seems, lack the will or sense of urgency to effect significant and radical change.

Adding to the numbness is a continuous chorus of bloggers and retail pundits saying the “retail apocalypse” is overblown. They acknowledge that 8,642 retail stores will close in 2017 in North America alone, but somehow always work their way back to telling us the sky isn’t falling and we need not be overly concerned. Well, I’m here to tell you that the time for concern has passed. We’re well into “shit-yourself” territory.

They say change happens slowly and then suddenly. Here’s a glimpse of what suddenly is going to look like. My hope in sharing this is simple; that it may spark new conversations in your organization and initiate the action your business so desperately needs to take. Here we go.

E-commerce will soon drive the majority of sales.
You don’t need to multiply a small number by a big number too many times before the result is a huge number. Online retail is currently compounding globally at a rate somewhere between 12 and 35 percent, depending on where you do business. In the US, for example, even if nothing else changes, e-commerce will comprise 25 percent of total retail within 6 short years. In the UK that figure may exceed 30 percent. Perhaps most staggering of all is that within 3 years, three companies — Amazon, Alibaba and eBay — will control 40 percent of planet earth’s e-commerce. And this is just a warm-up. Within 15 years, e-commerce will overtake conventional retail sales in developed nations, as a new wave of pervasive technologies take hold.

Products will replenish themselves.
The next profound revolution in e-commerce will come as our connected homes, cars, appliances, product packaging and even the products themselves begin connecting, communicating and transacting on our behalf. The three quarters empty bag of dog food in your home will suddenly have the capability to re-order itself. Using the third-to-last diaper in the carton will trigger the order of 40 new diapers delivered to your door. The light bulb that’s going to burn out will order its own replacement, taking into account shipping times from your online provider. Sensors in your running shoes will measure tread depth and trigger a reorder when necessary. These and hundreds of other items will manage their own replenishment. All will be done with minimal intervention from consumers.

Stop thinking ‘product’ and start thinking productions.

Amazon is already offering free in-home consultations for connected home technology because they know all too well that the company that connects the home owns the consumers that live in it. Whether we opt to subscribe to Amazon, Google, Walmart or some other provider, we will choose a meta-service to manage most of our routine, regular purchases. E-commerce will no longer be something we do but rather something that just is. Within 20 years the idea of pushing a buggy through the centre aisles of a grocery store and lugging toilet tissue home will seem laughable.

Amazon will become the Sears catalogue of the future
The days of pointing and clicking at pictures on a screen will come to an end within a decade. Amazon already knows this, hence its push to develop its Alexa Voice Services platform and Echo devices. But while seemingly invincible today, Amazon, likes Sears before it, will eventually be overtaken by new platforms that completely redefine what shopping is. Technologies like Magic Leap’s mixed reality (in which Alibaba is a major investor) will open a new chapter in experiential e-commerce. We will meet with designers in the virtual world who will style and fit us with clothes that we can see and feel. Fitting will be achieved with almost perfect accuracy as zettabytes of manufacturer data feed sophisticated fitting algorithms. We will “travel” to virtual places where we can contextually and viscerally trial the products we’re looking for. We will not buy from online “stores,” as we do today, but rather from within online experiences that are exciting, entertaining and fun. If you’re a retailer struggling to keep pace with Amazon, you’re going to have a hell of a time with the company that puts them out of business.

Physical retail will no longer be a channel for buying
With the vast majority of our daily and weekly needs simply coming to us as necessary, the role and purpose of retail space will no longer be principally to sell products. Rather, these spaces will act as living, breathing physical portals into brand and product experiences. They will become places we go to learn, be inspired, see and try new things, experiment and co-create. Beyond mere consumption, we’ll go to these spaces for entertainment, education, connection and community. This is not to suggest that there will be no products for sale in these physical spaces, only that the emphasis will not be sales but rather on catalysing a relationship with the consumer that transcends the store. The way these spaces are planned, built, staffed, managed and measured will look and act nothing like the retail operations of today. My advice to retailers is to stop thinking “stores” and start thinking stories. Stop thinking “product” and start thinking productions.

There will be a retail refugee crisis.
Nearly 4.6 million Americans work in retail, making it the country’s number one employer. Indeed, in many developed countries retail represents one of the most, if not the most populous of industries. Amazon has already proven that it can build a store without cashiers. And cashiers are just the beginning. Robotic customer service staff, fully automated warehouses, bot-staffed call centres, driverless delivery trucks and even the displacement of store management by artificial intelligence are all clear and present realities. Any human being that doesn’t generate added value, either through creativity, expertise or intuition will be expendable. We can debate the morality and ethics of this endlessly but the certainty remains that retail workers will become the blacksmiths of their era.

As a retailer you need to decide now which side of this line you’re going to stand on. If it’s with the robots, start investing in the technology now. If you choose people, prepare to pay for the very best in the market. There will be no alternative between the two.

The economic model for retail will implode
If you’re fortunate enough to sell something no one else on earth sells you might dodge this bullet. If not, you better find a new way of making money. This is because the wholesale-to-retail model is coming to an inglorious end. Firstly, brands are fleeing the confines of wholesale distribution in unprecedented numbers, largely because they can and secondly because it just makes business sense to do so. Technology has advanced to the point where the ability for brands to reach consumers directly is not only possible, it’s preferable. Through vertical integration brands cannot only better manage their margins but also their brand image and customer experience.

This will put retailers in a position where the brands they call “vendors” are also competitors for the same shopper. In essence, even if they win, they lose. By selling more products they only feed the enemy’s war chest. This sets up an untenable situation that private labelling can only partially remedy. Simply, the economic model for retail will require a complete reimagining.

Some smart retail start-ups are already doing precisely this. California-based electronics retailer b8ta treats retail as data and sells consumer engagement analytics back to the brands they represent, offering insights they wouldn’t otherwise get, and giving b8ta a unique and recurring revenue stream. New York’s Story sells experiences, working with brands to curate and produce beautifully executed, in-store events and they’re paid handsomely to do so. These are the sorts of pioneers that I feel will lead an entirely new class of experiential retailers over the next decade; retailers that use their physical stores not to sell products but to sell experiences that involve products. These new experiential merchants will be intensely creative masters of retail stagecraft, and experts at executing and measuring consumer experiences.

The physical store will become the most powerful and measurable media channel available to a brand, and the customer experiences that take place there will be the most profitable product a retailer can sell.

So, it’s true that retail may not be dead. But therein lies exactly the problem. Until we let go of the old era we can never fully move forward into a bright new age. If we really want to save retail, we’ve got to let it die.

Apparel Retail: its inevitable demise in Botswana

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Author : Nomsa Makgabenyane  Source : Weekend Post

The death of retail is a hot topic on the minds of business and economic thought leaders. What does this mean for our local apparel Retail scene and business environment? 

Superstars of Retail, Mr Price Group, accounted a drop in headline earnings for the first time in 16 years. In the year to April 1 2017, Mr Price reported a fall of 10.4% in earnings per share. Before our eyes we saw the 159 year old Stuttafords dissolve despite its efforts.  It’s a tough time for the Retail sector.

Unless you have been living under a rock, it should be of no mystery to you, the way shopping is being done by the urban population in Botswana is changing.  For illustrations sake, several weeks ago, I witnessed a very interesting phenomena, I saw shopping happen, but outside the store. What I witnessed was a delivery being made to a client who had purchased a garment of clothing from a “facebook vendor”. More recently a friend of mine found her dream wedding dress on well-known Ali Express, there will be no need for consumers like her to search through a plethora of retailers.

Retail has been taking place outside the conventional store for some time, however with digital platforms like Facebook, simple Online shopping and Instagram, shopping for apparel has been transformed forever. It arouses great enthusiasm to see young individuals take advantage of this to better their lives, it is a welcomed disruption. On the other hand, does this signify a bleak future for apparel Retail stores as we know them? Yes and no.

Yes because, what we are seeing is a death of a traditional channel.  The “facebook store”, for lack of a better term,  in its nature is more convenient, from the browsing and comparing,  to paying and ultimately  receiving  your desires goods,  its fluid and less strenuous, time wise and on the pocket (although further analysis is necessary to prove the latter). These entities offer free delivery either in Gaborone or in the country, an upper hand in terms of value adding processes, even some of the most popular Botswana owned retailer slack in this aspect.  A consumer browsing through a facebook store during work hours needn’t plan for a trip to a physical brick and mortar store for something he or she likes. If say consumer lives in Serowe / Palapye, the vendor being in Gaborone is not a cause for concern.

Payments are done through varying mobile platforms. The seamlessness of the shopping experience goes a long way in building greater loyalty to these enterprises. With the rise of increased connectivity and consequently a rising number of facebook users in Botswana these shopping experiences  are going to be a noticeable challenge to  conventional apparel Retailers in our economy.

The death of retail will not occur that hastily in Botswana, qualifying the ‘no’ side of things.  Africa has a good 2082 shopping centers, and in Botswana there seems to be a one popping up often.  We can explain this by highlighting a few factors, one of which is the “eating out” experience, which is an irreplaceable and sustains “mall culture”.  Needless to say as long as there is a mall we will see an apparel retailer, but not in the volumes we have always known.

A study* in 2015 indexed Botswana as number two in retail potential, I  believe there is room to question this where apparel retail is concerned. If advanced economies are anything to go by, even peering into neighboring South Africa, apparel shopping at these locations, shopping for clothes at brick and mortar stores is not here to stay. Several stores are not only downsizing but some have totally exited the South African market.

THE RELATIONSHIP BETWEEN THE TWO CHANNELS

In the digital age, consumers use online stores as a reference point and more often than not know what they are looking for when they visit a store, curbing down unplanned purchases, in this case the channel remains the same.  Yet an interesting counter notion is that physical stores serve as points of reference and comparison, but actual trade occurs with various online vendors, local or international, at a later stage.

Either way, consumer behavior has been altered, and in Botswana it is the social media stores which we can use to an extent when explaining these dynamics. What then for Botswana owned apparel retailers, how do they avoid having a white sheet of paper spread out on what would have been their store front? The death of retail is slow one, but that is no reason for comfort. It’s slow but also inevitable.

To survive, retailers in Botswana should make adequate advances towards R&D for appropriate Channel Strategies, suitable to our changing market. R &D firm Seriti Insights is undertaking the generation of these strategies, the outcomes of which should be interesting. Once again these disruptions are welcome in my view, disruption to things as we know them allows for great opportunities for development and growth of new ideas. Young people behind social media stores do deserve consideration and support. It will not be instant but the apparel retail environment needs surveillance, as does the overall death of Retail.

 

By Nomsa Makgabenyane  for Weekend Post

A fair wage for global garment industry workers?

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Michelle Russell for Just in Style

Western European garment industry workers in BRIC countries (Brazil, Russia, India , China and South Africa ) earn only half a living wage, according to new research.

The study, carried out by Surrey’s Centre for Environment and Sustainability (CES) and published in The International Journal of Life Cycle Assessment , shows that while globalisation has made the Western European clothing supply chain fairer by increasing employment opportunities and income for workers in BRIC countries, their income is still insufficient to support a decent standard of living.

The research paper, ‘Investigating fairness in global supply chains: applying an extension of the living wage to the Western European clothing supply chain’ , was conducted using a Social Life Cycle Assessment (SLCA) approach, in which impacts across the whole lifecycle of the product are considered. This means that rather than focusing solely on factory workers, the researchers considered all of those involved in the garment industry supply chain – including cotton growers and miners providing metal to make machinery.

The researchers estimated how much workers would need to be paid in order to be able to afford a decent, but not luxurious life: a living wage. The study found that garment factory workers are only paid around half the living wage, and agricultural workers even less.

Also taking into account financial demands on workers – income tax and social security contributions – in addition to wages, researchers found that in real terms, workers would need to be paid, on average, an additional 35% to offset these factors.

“Despite some improvements to workers’ income and employment opportunities through globalisation over the last 20 years, this research has demonstrated that workers are still not paid a living wage, so the supply chain cannot be described as ‘fair’,” said Research Fellow Dr Simon Mair.

“The next step is to look at the potential impact on companies and consumers if BRIC workers were paid a living wage. For example, a company may choose to absorb the additional cost, or might pass the cost onto consumers. Faced with a higher priced product, consumers might choose to buy less, which could in turn have a positive impact on the environment (by reducing carbon emissions) but possibly a negative social impact (by reducing employment).”

Angela Druckman, Professor of Sustainable Consumption and Production, added: “This research has implications for all those who are concerned about social justice along clothing supply chains.”

Article Sourced from Just In Style

How Rex Trueform feels the pinch

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By Marc Hasenfuss for Business Live

Operating margins were ripped to shreds at Rex Trueform — the owner of niche fashion retailing chain Queenspark — in the year to end-June.

Results released on Friday showed Rex Trueform’s operating margin at a threadbare 0.13% compared with 2% in the previous financial year.

This is well below the margins achieved by larger listed fashion retailers like TFG, Truworths and Mr Price.

Operating profit came in at just R755,000, well down on 2016’s R11.5m figure.

The effect on the bottom line was cushioned by interest received of R4.4m — earned from Rex Trueform’s cash pile, which started the financial year at R81m but ended the trading period at R58m.

Rex Trueform CEO Catherine Radowsky said that additional operating costs were incurred with the opening of a Queenspark store in Namibia.

The Queenspark division recorded an operating loss of R1.9m, compared with a R9.4m operating profit in the previous year, Radowsky said.

There was better news from the company’s property division — for which its Rex Trueform Office Park complex located in Salt River, Cape Town, is the main income-generating operation.

Radowsky said the property segment managed to generate operating profits of this segment amounted to R8m, falling from R8.5m in 2016. The drop in profit stemmed mainly from one-off maintenance costs, she said.

Rex Trueform intended to develop two more Cape Town-based properties in the medium term, she said.

Radowsky noted one of the properties was classified as a heritage site.

“This limits the development opportunities and has caused a delay in the development process,” she said.

On Friday, Rex Trueform and its holding company, African & Overseas Enterprises, announced the appointment of empowerment pioneer Marcel Golding, formerly chairman of Hosken Consolidated Investments, as chairman.

Golding is part of an investment consortium that has effectively taken control of Rex Trueform and African & Overseas Enterprises.

Article sourced from Business Live

Woolworths fights many battles

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Author : Ray Mahlaka for Moneyweb

Staying resilient during uncertain times was once Woolworths’ hallmark, earning it the status of a darling in SA’s retail sector.

Woolworths is now facing many battles: an intensified war with its competitors via aggressive promotions for market share, SA’s ailing economy and the problem of burning cash as a result of the slow turnaround of its Australian business David Jones.

“We are in the midst of a storm of change. The customer is changing and markets are in tough places. But we are not going to wither and die,” Woolworths’ CEO Ian Moir told Moneyweb.

Although Woolworths’ group sales grew by a marginal 3% to R74.3 billion for the year to June 2017, its clothing business underscored the extent of heightened markdowns by its peers in response to low consumer confidence and spending.

Clothing sales advanced by 1.4% and fell by 0.9% on a like-for-like (same store) basis. Excluding price inflation of 6.6%, sales volumes fell by 5.2%. Gross profit margins – a key metric used in the retail sector to measure profitability – declined to 47.9% from 48.3% in 2016.

Moir sees little hope of the clothing segment turning its fortunes around for a while. “Margins will tread down for a long period of time. The next two to three years are going to be tough.”

Woolworths expects clothing margins to grow by 16% to 17% for its full-year 2020.

The recovery hinges on retail basics: a better customer shopping experience and fast response to fashion. On the latter, 80% of its clothing business is ladies wear, and the retailer’s lead time on introducing new fashion is six to eight weeks versus 11 months five years ago.

Woolworths joins its peers Truworths and The Foschini Group in offering a sober outlook for the apparel segment.

“I get the sense that these retailers have been hit more by structural changes such as competition and promotional activity changes than cyclical changes like economic growth and low consumer confidence. Woolworths in its results has come short more on structural changes,” said Alec Abraham, a senior analyst at Sasfin Securities.

The food segment, a mainstay for Woolworths, is the antithesis.

Retail space grew by 4.6%, helping to lift food sales by 8.6% and like-for-like sales by 4.6%. Factoring Woolworths’ price inflation of 8.4%, sales volumes grew by a meagre 0.2% compared with a resilient 2.1% posted by its closest rival Shoprite (SA supermarket sales of 8% and product inflation of 5.9%).

On Tuesday, Shoprite CEO Pieter Engelbrecht unveiled the retailer’s plans to ramp up its exposure to higher-income consumers – a market traditionally conquered by Woolworths.

Read: Shoprite eyes wallets of upmarket consumers

Moir is unfazed, saying Woolworths doesn’t have a monopoly in SA’s premium food space, as Engelbrecht implied. “They [Checkers] have more LSM nine to ten customers than we do, so does Pick n Pay. We just do premium really well,” Moir said. “People have tried to attack our business for a very long time. We are deeply entrenched in quality and value. We have great product developers and technology. It’s a difficult business to be in and we are far from being complacent.”

Arguably, the top priority for Woolworths is turning around its disappointing David Jones business. Since Woolworths completed its ambitious R22 billion acquisition of David Jones and sister retailer Country Road Group (CRG) in 2014 – tipped to turn it into a substantial retailer in the southern hemisphere – both businesses have been in turnaround mode.

Woolworths has sunk about A$284 million (R2.9 billion) between 2016 and 2017 to reposition David Jones and CRG by mainly replacing merchandise and financial systems that track stock availability better.

Woolworths’ push of its home-grown private label brands including Studio W and RE into David Jones stores flopped as the quality and fashionability of merchandise didn’t resonate with Australian shoppers. It will relaunch private label brands in March designed by its local CRG, making the price points affordable and fashion-led.

Its turnaround efforts are starting to bear fruit at CRG, which grew sales by 5.1% while comparable sales fell by 0.4%. David Jones is still the problem child, with total sales up by 1% and a decline of comparable sales by 0.7%. “The CRG performance is encouraging and indicates the new management team [led by ex-Marks and Spencer executive Scott Fyfe since this year] is fixing the business but it still has a long way to go,” said Damon Buss, an equity analyst at Electus Fund Managers.

Woolworths recently introduced a high-end food service into David Jones, opening a flagship Foodhall in Bondi Junction, located in an upmarket eastern suburb of Sydney. The store is similar to Woolworths’ model of offering food and apparel in its SA stores.

Abraham said Moir has successfully converted Woolworths’ brand equity into shareholder value. “I’m confident that he will do the same with David Jones.”

Article sourced from Moneyweb

R10m investment in digital printing to revive local textile industry

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This article originally appeared in Bizcommunity

The arrival of digital textile printing in Cape Town can revive the local clothing and textile manufacturing industry and salvage some of the job opportunities lost to China. Craig Whyte, CEO of digital printing specialists ArtLab, has invested close to R10-million in new printing equipment over the past few years to bring digital textile printing to South Africa.

R10m investment in digital printing to revive local textile industry“We call it reshoring – bringing back some of the manufacturing jobs, which were a staple of Cape Town’s business landscape, from Chinese factories. By offering higher quality, rapid customisation and a broad range of natural and synthetic materials; digital textile printing is also a cost-effective option for brands and retailers, many of whom have trialled the tech over the past year and are now putting in increasingly large orders.”

Digital textile printing has already helped revive Europe’s textile industry. “Large fashion brands, such as Zara, use digital textile printing to design, print and roll out new styles and fashion to their stores quickly, in an environmentally sustainable manner. This allows them to stay on-trend without incurring the significant costs and potential wastage of doing large-volume print runs in China.”

According to the latest research, the global textile market is expected to reach more than $1.2-trillion by 2025.

“Despite coming off a low base of 2% of the total textile market, digital textile printing is set to disrupt the traditional textile industry drastically. Analysts estimate that the global digital textile printing sector will grow by 25% per annum over the coming years, with half of that growth centred in Africa, Latin America and the Middle East.”

Empowering local small businesses

“According to the latest stats, the local industry went from employing 200,000 people in 2002 to a mere 90,000 today. The loss of jobs in this sector has had significant consequences, partly because three out of every four textile and clothing workers are women. For the industry to move from survival into a more consistent growth phase, it needs a shot in the arm. We believe digital textile printing is just that.”

“The effect of the offshoring of Cape Town’s textile and clothing manufacturing industry can clearly be seen in local neighbourhoods. We are based in Woodstock, where much of the industry was traditionally located. Over the past 15 years, we saw factories shut doors and witnessed the effect of these closures on the communities around us. For us, digital textile printing marks a revival of industries related to clothing, upholstery, soft furnishings, and more.

“The new technology gives old artisans and small businesses a cost-effective way to revive their craft and improve their livelihoods. We’re trying to create a platform for the industry – there’s a strong sense of entrepreneurship in what we’re trying to achieve.”

Greener option

Environmental impact has long been a concern in the traditional textile manufacturing industry, with some towns declared disaster areas due to run-off from textile factories.

“In India, water pollution from the run-off from fabric dying factories forced the closure of 30,000 family-owned farms in Tirupur, placing the livelihoods of tens of thousands of people at peril. Digital textile printing has none of the environmental issues associated with traditional pigment dyes, and uses a range of latest-generation technology to ensure minimal ecological impact.

“The secret to reviving the local textile industry lies in a combination of cutting edge technology and close collaboration between the various industry role players. We are inviting key stakeholders in the local textile industry to trial the new technology and witness for themselves the quality of digital printing on a range of natural and synthetic fabrics. Since print runs can start from as low as 1 metre, there’s no barrier to entry for new and existing clothing and textile manufacturers to see how it can speed up their production, unlock new business opportunities and spark a revival of a once-proud local industry,” concludes Whyte.

Economics: the lipstick effect

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Women tend to buy more beauty products during a recession, but that may not apply in these difficult times
By Stafford Thomas for BusinessLive

Consumers go into lockdown mode during periods of economic hardship, slashing their spending on big-ticket items, apparel and even food. But they draw the line when it comes to cutting spending on cosmetics and personal care.

“People may cut back on other things such as clothing, but not on cosmetics,” says Clicks Group CEO David Kneale. “Beauty products remain an affordable luxury.”

That fact is showing in retail sales figures for the three months to May.

Measured in constant 2012 prices, overall retail sales for the period came in 1.5% up compared with the same period in 2016. Bucking the trend, cosmetics, toiletries and pharmaceutical sales were up by a healthy 5%.

The general dealer sector, comprising mainly supermarkets, took heavy strain, limping in with sales up 1.4%. Clothing and footwear retailers’ sales contracted by 1.7%.

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The “lipstick effect” seems to be working in the beauty sector’s favour. Proponents of the theory assert that in tough times women buy more, not fewer, beauty products.

“I am a strong believer in the lipstick effect,” says Kneale.

The lipstick effect was first brought into the spotlight in 2001 by Leonard Lauder, chairman emeritus of US cosmetics giant Estée Lauder, who observed a consistent pattern of rising beauty product sales during recessionary periods dating back to the Great Depression.

Michael ten Hope, CEO of Cavi Brands, which imports brands such as Chanel, Burberry, Van Cleef & Arpels and Hermès, says the lipstick effect held true during the last recession, when GDP growth fell to a low of -6.1% in the first quarter of 2009 and averaged -1.5% for the year.

This time, however, he is not as certain the lipstick effect will save the day for the beauty sector.

“We are still enjoying single-digit sales growth, but it is still too early to say categorically that the lipstick effect is working,” says Ten Hope. “For the first time ever we are seeing demand stuttering.”

Highlighting his concern, Ten Hope says demand began the year on a strong note but slumped in April. “We even saw destocking by retailers,” he notes.

Could it be that, unlike the previous recession, this one comes with a huge overlay of political uncertainty?

“Even consumers in the upper-income LSM9 and LSM10 segments are cautious about spending,” says Ten Hope. “They are nervously watching the sociopolitical horizon.”

Author : Stafford Thomas

After 159 years, ‘Harrods of South Africa’ shuts up shop

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By Olivia Kumwenda-Mtambo and TJ Strydom

JOHANNESBURG (Reuters) – Department store Stuttafords, the 159-year-old “Harrods of South Africa”, is closing down, victim of a global shift to online retail and a domestic economic slump that has put brands such as Ted Baker and Gap beyond its customers’ reach.

Mirroring the fortunes of once-mighty department stores in Europe and the United States, the doyenne of the South African high street during apartheid and the two decades since applied for protection from creditors in October.

However, attempts to revive its fortunes proved futile and creditors voted in June to wind up the unlisted firm by Aug. 1, with closing-down sales at its nine stores in South Africa, two in Botswana and one in Namibia.

In its flagship store in Johannesburg’s Sandton financial district, piles of naked mannequins lay in heaps next to bare shelves as the last few bargain hunters picked through trays of heavily discounted perfumes, make-up and clothes.

“We don’t know what’s going to happen – if we will still have jobs,” said one employee, who did not want to be named for fear of hurting her chances of staying on. “We only heard that maybe this shop will be one that will not close.”

For South Africa, it is the end of a piece of retail history.

The first shop was opened in Cape Town in 1858 by Samson Rickard Stuttaford with the vision of creating a Harrods-like department store in what was then Britain’s Cape Colony.

Its main Cape Town store, opened in 1938, was designed by in-house Harrods architect Louis David Blanc and echoed the British store’s famous frontage in London’s exclusive Knightsbridge district.

Through various changes of ownership, it never lost its focus on the middle and upper-class South African market, despite the economy’s failure to recover fully from a deep recession in 2009 sparked by the global financial crisis.

Chief Executive Robert Amoils could not be reached for comment but has defended his approach to the tough conditions.

“I believe the path we set was correct,” he told business website Fin24. “We ran out of time. The market downturn was so swift, so severe.”

John Evans, a lawyer overseeing its closure, said he had received a last-minute approach that could salvage two Johannesburg outlets, in Sandton and Eastgate, which would save the jobs of 300 of the group’s 950 staff.

“There’s a chance we’ll save Sandton and Eastgate. If we do, we should be able to save 300 jobs,” he said.

“Fall from Grace”

Nearly all retailers in Africa’s most sophisticated economy have struggled as consumer sentiment has hit multi-year lows, a result of high unemployment and inflation gnawing at disposable income. The economy is now back in recession.

The slump is piling pressure on President Jacob Zuma, who faces increasing calls to resign due to a slew of corruption scandals and accusations of mishandling the economy.

Macy’s and Nordstrom in the United States have also hit tough times, suggesting Stuttafords’ woes are not unique to South Africa, Sasha Naryshkine of local asset manager Vestact said.

The main squeeze has come from cheaper retailers such as South Africa’s Woolworths, Sweden’s H&M and Spain’s Zara.

“The fall from grace in all these department stores is that people can get the same stuff online and there is a rise of other quality brands at a cheaper price,” Naryshkine said. “In an economic downturn, people are going to shop down.”

Nor is Stuttafords alone.

Footwear and accessories chain Nine West, owned by U.S. buyout firm Sycamore Partners, and Spanish fashion chain Mango, whose local licences are held by House of Busby, have closed stand-alone outlets due to poor sales.

“The brands did not meet the required return on invested capital hurdles,” House of Busby Chief Executive Mark Sardi said.

Edcon’s Edgars, another clothing retailer ubiquitous in South African shopping malls, was taken over by creditors last year and had to restructure debt.

In May, no-frills retailer Mr Price posted its first annual drop in profits in 16 years, while rivals Woolworths and Truworths flagged lower or stalling earnings last week.

THE STATE OF RETAIL IN SA: H&M UPDATE AND OTHERS

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By Songezo Ndlendele for IOL Business Report

Swedish retailer H&M has revealed plans to open six more stores in South Africa before the end of the year as it extends its reach in the country. This follows on the group’s interim results which showed a 32% rise in sales in rand terms in SA. According to a statement, the rise came at the expense of local retailers such as Mr.Price and Edcon.

 

Arnold Tshimanga, Senior Account Executive at FleishmanHillard said that the clothing sector particularly is under severe pressure, as clothing is classified as “discretionary spend” from a consumer’s budgetary perspective, meaning that when people are short for cash, they cut back in these areas. Furthermore, the entry of international players such as H&M, Zara, and Cotton-on, has put even more pressure on local players like Mr Price, Truworths, Foschini, as well as Edcon, and even a casualty.

 

H&M South Africa country manager Pär Darj, said they see a lot of potential in SA “Three stores will be opened in Cape Town from September to November. The remaining three will open in Witbank, Richards Bay and Durban during the course of the year.”

 

He said that the Canal Walk store in Cape Town – to be opened on November 18, will cover more than 4,600m² on two levels.

 

“We are extremely excited to be opening yet another flagship in the western part of the country,”said Darj.

 

H&M’s expansion comes at a time when local and international fashion brands are finding it harder to survive as consumers are experiencing increased pressure.

International fashion brands Mango and Nine West, which were brought to SA by House of Busby, closed their stand-alone stores in March. British retailer River Island, which has a presence in Rosebank Mall, Sandton City and Mall of Africa in Gauteng, Canal Walk in Cape Town and elsewhere has exited the country in the past month.

Analysts have warned it is going to become even tougher for clothing retailers. Since the beginning of 2017, retailers of textiles, clothing, footwear and leather goods have experienced sharp declines. The Statistics SA retail trade sales report for April showed this segment of goods recorded a 4.7% drop after a 5.1% decrease in March.

Opening up international markets for clothing and textile manufacturers

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This article was written by Christian Gerling and first appeared on BIZCOMMUNITY

I am often asked what it is that prevents clothing and textile manufacturers from breaking into the international market. There are several answers to that question, but perhaps one of the most important elements is that many do not meet social auditing requirements.
In short, the quality and pricing of their products may be on point, but they also need to be able to demonstrate that the working conditions they provide for their staff comply with local laws and international best practice. Almost all of the importers in Europe, the Middle East, Asia and Latin America, which are the areas in my portfolio, require that the businesses they deal with are independently audited for compliance with labour laws.

So, what exactly is a social audit? Simply put, it’s a means of measuring compliance with regulations and best practices when it comes to managing workforces, not only within a business but throughout its supply chain. Compliance in this area of operation is important to both investors and customers, and needs to be independently audited and certified. In fact, most importers have a zero tolerance approach to gaps in labour standards.

Compliance requirements

In order to be compliant, manufacturers in South Africa’s R12 billion-a-year clothing and textile industry need to be able to prove that they’re playing by the rules. These include the codes outlined in such laws as the Basic Conditions of Employment Act (No. 77 of 1997), the Labour Relations Act (No. 66 of 1995), the Occupational Health and Safety Act (No. 85 of 1993), the Employment Equity Act (No. 55 of 1998) and the Skills Development Act (No. 97 of 1998). Listed companies also have to comply with the King Codes on Corporate Governance (King III and King IV).

In terms of international best practice, companies can refer to such excellent sources as the document titled OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector, recently published by the Organisation for Economic Cooperation and Development. Guidance documents are also available on the websites of UL affiliates such as Sedex, SAI, ICTI-CARE, BSCI and EICC.

Reputable social audit vital

This is, of course, complex territory, which is why importers require an independent and valid social audit report before they consider purchasing from local manufacturers. An audit report provided by an independent global safety science company with an established reputation proves compliance in a way that minimises the time taken to conclude transactions, reduces costs and improves profitability. This is because there is a quantifiable link between responsible business practices and quality, safety and efficiency.

When it comes to analysing the reasons why manufacturers commission UL to conduct social audits for their companies, demand for verification of ethical practice amongst consumers comes at the top of the list. Research commissioned by UL shows that 87% of global customers consider a manufacturer’s environmental and social performance before purchasing its products.

A valid audit report is often considered a licence to operate and is as important as the business licence itself. In the EU alone, legislation is evolving to require independent verification of due diligence at both EU level, through compliance with the Directive 2014/95/EU requirement for non-financial reporting, and, at the national level, with recent laws such as the UK’s Modern Slavery Act of 2015 and the upcoming Wet Zorgplicht Kinderarbeid, which is due to be adopted in the Netherlands in 2020.

Within this context, it is clear that if local clothing and textile manufacturers wish to enter into and be successful in the international market, an independent social audit is as important as a quality and safety audit and a financial audit.

Author : Christian Gerling .