By Kirsty Laschinger This email address is being protected from spambots. You need JavaScript enabled to view it. 

“I’VE made it my own personal mission to ensure that constant change is a vital part of the Wal-Mart culture itself.” So said Sam Walton, founder of Wal-Mart, now not only the world’s biggest retailer but also the largest company globally in terms of sales.
SA’s clothing retailers appear to have taken Walton’s advice to heart, and the sector has changed beyond all recognition over the past 10 years. Edgars, Foschini, Truworths and Woolworths have reinvented themselves to become more relevant to the changing dynamics of SA’s consumer market. They’ve lived the notion of “adapt or die”.

And upstart newcomers – most notably Mr Price – have turned traditional retail on its head by presenting consumers with an amazing array of goods at previously unthought of prices.

But it’s not just core businesses that have changed. In the desperate scramble for market share at the end of the Nineties, a plethora of new retail formats emerged. Retailers battled not just with a volatile interest rate environment but also with the pull exerted on consumers’ wallets by an entirely new basket of industries – such as cellphones and gambling.

It seemed that every group was constantly in the process of either testing or launching new formats. Apart from the lingering suspicion that at times new formats were hiding serious problems in the core chains, some burnt their fingers as they entered new product markets in which they had no previous experience. But others were successful; certainly Mr Price’s launch of Mr Price Home seemed to catalyse the growth of SA’s homewares market. In contrast to the “retail crisis” of five years ago, retailers have never had it so good as now. Despite headlines screaming of imminent retrenchments, retail sales have continued to power ahead.

One analyst (who asked not to be named) says it will remain this way for at least the next six months. “At the moment, market share gains are not crucial. There’s more than enough money to go around, so retail is not as cut-throat as it’s been in the past.”

He says that the industry is much healthier than before because retailers are now more confident “in their broad niches”. “The major listed retailers are getting better at what they do best. There have been some new formats introduced but there are far fewer now.” And he argues that new formats don’t present much of an opportunity to grow market share. But though there’s been a slowdown, it doesn’t mean the death of new formats. Edcon recently launched a lower-income fashion format, called Legit, using the old Smileys Warehouse store base. And Woolworths plans to roll out convenience grocery store iSentials this year.

However, there’s a definite change in the underlying philosophy. First, there’s been an industry-wide shift to focus on the customer. Second, retailers seem more concerned with operating in their existing businesses. Rather than chasing new product categories, they’re expanding their target customer base – especially into the mass market.

Edcon investor relations executive Tessa Christelis doesn’t believe that SA’s at the beginning of another wave of new formats industry-wide. Edcon has no plans to launch new formats in the next year.

Says Christelis: “Legit has been Edcon’s first new stand-alone format in a number of years. Legit is essentially a relaunch of the Smileys platform to low-income, fashion-conscious young consumers. We believe that this market is underserviced.” Both Legit and Jet will now focus on accessing the lower end of the market that Edcon has traditionally ignored. So far, Legit has been well accepted. “The relaunched stores are showing growth over the Smileys base numbers. It’s doing well and we’re very happy.” Christelis says that there doesn’t seem to be any “cannibalisation” of sales from Edcon’s other chains.

Steward Matlala, CEO of Woolworths’ iSentials, agrees that the low and middle-income markets will become more important. “We’ve been working on the iSentials concept for a few months. The catalyst was that the SA market has changed since 1994. There’s been a great deal of progress made, especially by the emerging and middle class consumer. In contrast, convenience retail formats haven’t changed much, except for small retail and franchising.” iSentials will target the middle-income market – that of Living Standards Measures (LSM) 5 to 7.

SA’s retailers are also responding to a change in the property market’s dynamic. Christelis says that new shopping developments are smaller and regional malls less upmarket than in the Nineties. “But people have the capacity to shop.”
However, executives at other clothing retailers believe that new formats play an important role in growing both sales and market share. Truworths deputy MD Tony Taylor says: “New format development is definitely part of the business. You have to constantly reinvent yourself.” He says that many of the group’s formats – such as Elements, Daniel Hechter, Identity and Truworths Man – were concepts developed in-house.

“New formats definitely boost group sales. For example, Identity’s turnover was R30m two years ago. Now it’s heading for R180m-plus in sales for the year to June from 50 stores.” And that hasn’t been at the expense of revenue in other group formats.

Truworths is currently testing “a few” new formats. Taylor hopes to roll out at least one in the next year. However, he says that Truworths will stick to its fashion retail knitting as formats in other retail categories are likely to distract management.

“Truworths’ philosophy is to develop formats in-house using existing head office resources and to make sure that we can use existing infrastructure, such as distribution. We don’t make exceptions and believe that’s why we have innovated new formats successfully.” But the process of retail evolution is not just about chasing “the next big thing”. It’s mostly about keeping the core chains fresh and relevant to consumers. Says Matlala: “Formats have life cycles – especially in SA, which is a growing, emerging market. We need to keep up to speed with markets and innovate to meet customer needs.”

Foschini’s group financial director Ronnie Stein says: “Brands do have life cycles and they can get stale – so they have to be reinvented. If you do this, a brand can go on forever.” He says that the Foschini group has been good at reinventing and reinvigorating its brands. Arguably, its major success has been repositioning the core Foschini brand away from “frumpy middle-market” to slightly upmarket, fashionable and aspirational.

Stein says: “The formats are evolving all the time. You can see it in the new stores which now all have cosmetics emporiums. The stores are now top-class and will continue to evolve.” He says that the Foschini format now compares favourably with its peers worldwide. American Swiss and Totalsports have been revamped. The group is in the process of rolling out the new Sterns’ look, and Markhams is also due for a facelift this year, with the men’s wear retailer losing its last letter as its name changes to “Markham” as part of its new look. Says Stein: “The revamp is all about reinvigorating both the format and the management team. The concept is still good – but it’s about time Markhams had a change.”

Fashion Express will also shortly be rebranded and relaunched as a “cash only” chain in shopping centres. Currently, it operates in outlying areas.

Stein says that revamps and relaunches have positive financial effects. “As the group revamps stores, we can see changes in sales growth, even where we don’t add floor space.” Ultimately, the test of whether or not relaunches – of new or existing formats – is good for business is in the numbers. Christelis’s analysis of Statistics SA and the Retail Liaison Committee’s monthly figures show that SA’s larger, listed retail chains are gaining overall market share. Her analysis shows that the major chains’ share of total retail sales increased from 60% to 65% between 2000 and 2003.

This means that the growth in listed retailers has been at the expense of smaller players. Christelis says that’s a result of the evolution in clothing retail over the past 10 years. “As big retailers have become more customer focused and given consumers what they wanted to buy – instead of what retailers wanted to sell – consumers have voted with their feet.”

The bottom line is that innovation is as much a part of clothing retailing as buying. And those groups that stay ahead of their peers will ultimately reap the reward in terms of higher sales, earnings and, ultimately, share prices.