Retail news. Semester 1 of 2014 table of contents

Retail: A changing landscape. By: Danette Breitenbach | 19 Nov 2013

A dissatisfied customer will tell 50 people; while a satisfied customer will tell just 5 people. Loyal customers spend more: A business with 1,000 customers will make R105,820 per annual increase with compliant resolution.

Bryan Gildenberg, Kantar Retail, chief knowledge officer, was the international speaker at the recent Consumer Goods Council of South Africa (CGCSA) conference held in Bryanston, north of Johannesburg. He made some key points about South Africa's place in a changing global world, with specific reference to retail.

*Is the industry changing incrementally or fundamentally?

The answer is both. Retail is a complicated business. Global retail industry is 20% of global GDP. It is your ability to understand what is happening in retail that will ensure your success in this changing world.

*Where to play

Growth in the future is not going to come from the First World but from us. There is a divide between the old world and the new young world; or what is popularly termed the First and Third worlds. Brands will want to penetrate the younger world to make sure its products reach as many consumers as possible.

*Urban retail is growing

Selling in densely populated areas will be key. 50% of Africans will live in cities in the future.

*All markets will be multicultural in the future

South Africa is an example of a multicultural society and therefore is ideally positioned for the future.

*Age
South Africa and India have young populations. Brands and products want to sell to this market.

*Online purchasing
By 2025 music video stores, video/DVD rental stores, electronic stores, and book and gaming stores will not exist.

*Importance of the mobile

Communication to the customer, e-commerce, and payments will work together through one device: the mobile.

*Digital

Everything sold or bought will be influenced by digital. Stores will look good because people can shop online

*The experience

The shopper wants a wow experience in-store. The new experience is the big AHA. The in-store experience is only a differentiator if it is useful.

*Convenience

Convenience is a mix of factors, but the most important element of convenience is to manage the shoppers' time. Time is a scarce resource and shoppers' have only so much time to shop in today's world.

*Chaos
The future is chaos and no matter what category you are this is what you will face, especially globally. How comfortable you are with this will largely determine your success.

*Franchising
It is becoming a bigger platform globally. The trend is for global brands to approach local partners. This will be very useful in South Africa.

Edcon to roll out stores in Ghana‚ Nigeria. By: Zeenat Moorad | 25 Nov 2013

Edcon‚ the unlisted owner of clothing chains Edgars and Jet‚ will roll out stores in Ghana and Nigeria next year.

The booming economies of Africa‚ the world's second fastest-growing region‚ have caught the eye of retailers in search of higher yield. The region is topped only by emerging Asia.

Accelerating economic growth on the continent has caught the eye of large retailers reaching for untapped consumer spending potential. Africa's consumer-facing industries are expected to grow by $400bn by 2020‚ representing its single largest business opportunity‚ according to a McKinsey report.

Edcon's current expansion outside South Africa is mainly through the Jet‚ Jet Mart and Edgars Active formats. Its total number of stores outside the country increased by 39‚ from 115 at the end of the second quarter 2013 to 154 at the end of the quarter ended September 28.

South Africa's largest clothing retailer operates in Zambia‚ Zimbabwe‚ Lesotho‚ Swaziland‚ Botswana and Namibia.

Exciting opportunity

"This remains an exciting opportunity going forward‚" Edcon CEO Jürgen Schreiber said.

Mr Price‚ Truworths and Foschini Group also have stores in Nigeria. Earlier this month‚ Woolworths said it would pull out of its three stores in Nigeria as high rental costs‚ duties and complex supply-chain processes made trading in the West African country "highly challenging".

"We normally go into a new country with Jet‚" Schreiber said. "In Zambia‚ though‚ we went in also with Edgars‚ which is working well‚ and then we will go into Ghana‚ next year in the second half‚ with both Edgars and Jet‚ because the market is quite strong.

"Nigeria would be a discount approach and not an Edgars one at this point. We have more learning experience and it's a little bit more of an easier format.

Success in Nigeria

"Other clothing retailers have been very successful in Nigeria‚ especially when they work in the discount space‚ so we are comfortable and confident on the Jet side."

In Edcon's African division‚ sales grew 25.5% in the quarter ended September 28‚ compared with the second quarter‚ due to the higher number of stores as well as improved merchandise selection and availability‚ the company said.

These sales contributed 11.4% - or 9.1%‚ excluding Zimbabwe - of retail sales for the quarter‚ up from 9.6% (7.1%) in the prior comparative period. Edcon owns 39% of Edgars Zimbabwe‚ a Zimbabwe-listed public company that is independently managed.

The retailer reported a 5.9% increase in retail sales to R6bn for the quarter ended September 28.

Edcon‚ which is reviving its Edgars chain‚ has underperformed its peers and lost market share since its highly leveraged private equity buyout in 2007 by Bain Capital. Its net loss narrowed to R724m in the period compared with a restated R2.7bn a year earlier.

72-store transformation project

The implementation of the 72-store transformation project in Edgars remained disruptive in the quarter but was almost complete‚ Edcon said.

The Edgars division grew retail sales by 3.4% from the second quarter. This was primarily due to the continued opening of Edgars Active stores as well as promotional campaigns. The total number of stores in the Edgars division is now 466.

However‚ same-store sales were 1.6% lower when compared with the second quarter as temporary disruptions from the transformation initiatives affected results.

"At the end of the second quarter 2014‚ 61 of the 72 stores were completed and we remain on track to complete all but one of the stores before the start of the Christmas trading period‚" Edcon said.

By September 28‚ the cumulative cost for the project was R443m.

Edcon's strategic initiatives include improved sourcing‚ beefed-up merchandising teams and the addition of international brands such as Dune London‚ Lucky Brand‚ Lipsy and TM Lewin. It also acquired the controlling stake in the companies that hold the local franchise rights for Accessorize‚ La Senza and Inglot‚ in line with its strategy to offer more global brands.

The gross margin was 38.6%‚ down slightly from 38.9% for the second quarter.

The discount division‚ which includes Jet and Legit‚ saw sales rise 10.3% and same-store sales grow 5.4% from the second quarter‚ primarily due to a strong performance in ladies- and menswear and benefits derived from turnaround measures over the past two years.

The company expects R1.2bn in capital expenditure in the 2014 fiscal year.