Radical steps needed to save Edcon

29 May 2016 - 02:01 By PALESA VUYOLWETHU TSHANDU

On her way through an Edgars store, Shelly Gould eyes a dress on the express merchandise of international brands. "Buy one, get one free" reads the signage , but even that doesn' t tempt her .

"I don't browse. I only come here if I really need something," said Gould.

The mother of two, who started shopping at Edgars 10 years ago, said the only reason she still bought at the store was its new diversified offering - "they've got more products, like Forever New. But I don't shop here for my daughter at all. There's nothing for her."

Gould said some of the clothes on offer for young girls were in fact inappropriate, and better suited to women.

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But Gould's son could be the ideal customer for the Edcon group's flagship stores. "I've got a 15-year-old son who only wears name brands." Edgars stocks a variety of international, local and private-label brands in its 203 stores.

In 2012, when then-CEO Jürgen Schreiber introduced international brands such as Mango, Topshop and Forever New, he anticipated that the youth-oriented labels would increase sales by 50% to make up for the previous year's R2.8-billion loss.

In the years since then, they have become perhaps the only reason the retailer is surviving.

The Edcon group employs more than 40,000 people, most of them full-time employees, according to CEO Bernie Brookes.

Brookes said last week that "over the past few months we have accelerated and advanced our operational change process ... this included an enhanced focus on the store look and feel, better service levels, improving the product offering, as well as better overall cost management, and these are all starting to resonate well with customers".

But on the shop floor the conversation is very different.

One Edgars sales representative, who did not want to be named, said the only reason Edgars was surviving was because of niche brands such as Mango and Jo Borkett.

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"Imagine if Mango and Jo Borkett pulled out: people would just be coming in to buy Kelso Career and jeans. But because they've got an account and they don't have cash, people come here to use the Edgars card to buy Mango-branded clothing."

The salesperson said poor customer service was one of the main reasons the retailer was losing market share. "The company is losing and the managers are blaming it all on us, and saying we are not doing our jobs ... but if we are not happy, what should happen?

"If you take a person ... and put them in an Edgars shop with no training and they don't know what they are doing - what do you expect them to do? I think that they have to start at the top before they go to the ground."

It is also the look and feel of the store that needs attention.

Brenton Watt, owner of Brand Inventors , said part of selling a brand was visual merchandising, a concept retailers did not always understand.

"If you don't do your highly detailed designs and focus on your merchandising, then your business will not make it at all, " said Watt.

For example, some retailers opt for the minimalist look, with a few items on each shelf. But what draws customers in are well-stocked stores with lots of different items to look at.

Daniel Isaacs, an analyst at 36ONE, said Edcon had followed the wrong strategy for a long time in terms of management and merchandising, "but I think the down spiral was sealed when it sold its debtors book to Absa".

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The sale of the debtors book in 2012, for R10-billion, was initially considered a smart way to raise much-needed cash to pay down debt. But Absa adopted a more conservative approach to offering credit, meaning less spending by Edgars customers.

"What they need to do is refire their credit offering. They have been growing another book but this is still very small, relatively. They also need to revitalise their house brands," said Isaacs.

Edgars has recently opened a large store at Mall of Africa in Midrand, where it is one of the key anchor tenants.

Abri du Plessis, a portfolio manager at Gryphon Asset Management, said the retailer's spin-off stores, such as Red Square, were an undue expense.

 

He said the group was "building more cash sales and probably moving away from credit sales. By scaling that down and pushing cash sales they are taking on Mr Price, and I think that they are making inroads."

But it seems that even a mid-season sale offering 50% off on many items will not draw the customers. Gould, for instance, walked pastthe bold red discount signage clamouring for her attention and headed straight for the Topshop rail. - Additional Reporting by Colleen Goko

tshandup@sundaytimes.co.za

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