Stuttafords is that increasingly rare animal—a department store. In fact, it’s one of a kind; but no dinosaur, as its executive chairman Hilton Mer is determined to prove. He explains all to John O’Hanlon.
Founded in 1858, Stuttafords certainly has a venerable and established presence in southern Africa. It is a brand that is associated with quality on the continent as Selfridges might be in the UK or Bloomingdale’s in the US. It’s about the same age as these institutions, which still thrive today—but then, the department store was very much a 19th century invention. Countless other names that used to be as well known to the public no longer exist, and today, only a few survive.
In Africa, there remains no really traditional comparable competition, says executive chairman Hilton Mer. “And we seek to distinguish the level of our concept, product and service offerings from the new generation of multi-department stores. Over the years, Stuttafords gobbled up the historically similar concepts.” It was a family business until it went through a series of leveraged buyouts, which shifted the focus from customer service to shareholder value, with the consequence that some of its core values got neglected until the chain came into the ownership of its presentexperienced pool of shareholders representing private equity interests focused on retail investments.
What was needed was leadership to bring this well-known and respected but somewhat old-fashioned chain of stores into the 20th century, which is why early in 2009, the owners secured the services of Mer, who has many years’ experience at the helm of major retail and distribution businesses in South Africa, including Metcash and Super Group. A commercial lawyer by training, Mer understands the African consumer market in general and in particular the customers right across the LSM (living standards measure) and is thus clearly able to distinguish those that Stuttafords caters for and intends to satisfy going forward.
He warns against trying to be all things to all people, but felt that this was a company that had massive opportunities to expand its market. “I think that there used to be a market perception that Stuttafords is a store that serves only the highest end of the market and is inaccessible to middle income earners. That was never true in my opinion; that people thought that way simply reflected a lack of communication on the part of the business and, perhaps, some inadequate in-store merchandising concepts.”
So while guarding the stores’ reputation for quality and service, he wants to broaden the appeal of Stuttafords to include a broader range of income groups and especially the younger shoppers that represent South Africa’s modern aspirational generation. “While we are certainly not planning to go into the mass market, we do believe that people in the LSM 6 upward range of the market are all potential customers for our stores.”
For a department store, Stuttafords is actually highly focused: it has clothing, cosmetics and housewares, and in all of these it excels in managing and selling international brands and brands exclusively labelled for its stores. In the cosmetics departments you can see counters dedicated to names like Christian Dior or Estée Lauder; and in 2007 it introduced Gap, Banana Republic and French Connection clothing ranges and also Calvin Klein underwear to southern Africa. “We rely on high quality, reputable international brands. There is a significant amount of brand loyalty in regard to labels like these. But when consumers are under pressure they may move to more economical offerings and we aim to fulfil some of these expectations within the framework of suitable products.” A result of the recession has been that consumers are more prepared to shop around, he says.
But far from representing an exodus to the cheap clothing chains, Mer is convinced these customers can be retained. “We regard this as an opportunity wide open to us right now. I don’t think we have tapped that market at all—or the market doesn’t understand that we have those offerings! We are currently supplementing our ranges with that in mind, but without detracting from the brands we have always had and will continue to offer. We are clear that, in addition to our traditional customer base, we want also to attract the younger shopper and the LMS 6-7 shopper; but our entry-level offerings won’t be the same as the mass market.”
So his aim is now to reach out to these categories of shopper to tell them what’s on offer. “Now we are making the offerings, supplementing the offerings and we are going to be communicating those offerings. For me that represents the opening of a whole new market opportunity that should always have been there but was never taken advantage of,” he says. “I think this is an expansion opportunity, not just a retention opportunity. We are not changing the nature of the business, just communicating our offerings, and to some extent broadening them for those target markets.”
Stuttafords has 13 stores in South Africa, plus one in Windhoek and another in Gaborone. “Each store is a unique strategic business unit and each one has to wash its own face,” says Mer. There are flagship stores, signature stores and smaller stores in this portfolio, and though they all reflect the design and layout of the group, they are stocked according to the local market. “We add value in a lot of areas in each store and make sure our footprint remains relevant and appropriate. But I do not think that there is, at present, room to open a whole lot more large department stores than we have already without cannibalising sales.” In the short term at least, he has no intention of expanding further outside of South Africa. “We are looking to maximise the existing businesses in South Africa.”
Some things don’t change though. Don’t expect to see Stuttafords moving into e-commerce like Bloomingdale’s. A department store relies on people actually coming in, so although the website is currently undergoing a complete makeover over the coming months, this is principally aimed at information to woo the defined market. Information was the main missing ingredient, Mer found—and not only information directed at the customer. “When I came in, I said that I remembered telling my management teams in the 1990s that if you have them, management information systems attached to the right IT platforms represent a huge competitive advantage. I now tell them that if they don’t have them they will suffer a huge competitive disadvantage! The business has travelled exceptionally well despite the fact that the systems were a little dated. We are rapidly changing those things.”
Mer is therefore driving investment in new software and new extraction systems: “What I call slice and dice systems,” he clarifies. “We have tens of thousands of SKUs in this business—I don’t believe you can efficiently manage and oversee the rotation of all that stock without having the ability to tap into focused information in real time and not spend days navigating through data. So we are putting all those things in place.”
All of these initiatives will undoubtedly improve the efficiency of the business dramatically, bringing with them greater customer satisfaction and of course, profitability. www.stuttafords.com
