South Africa’s clothing retail sector has faced a challenge as customers find themselves with lower disposable incomes. Lily Moreira, managing director at John Craig, tells Andrew Pelis how tough times have sparked new ideas.
Tough times call for tough measures, or so the saying goes. But for one South African business, the current economic retail slump has led to rather more creative measures as it has cut its cloth accordingly.
The John Craig brand is synonymous with quality and is regarded by its loyal customers as a brand they can trust. However, the financial crisis and the resulting fall in disposable incomes has undoubtedly made consumers more cost-conscious. This presented the company with a dilemma.
“For the past few seasonswe have started to roll out our range of in-house brands, which has been a big move on our part, to become more cost-competitive,” states Lily Moreira, John Craig’s managing director. “Our focus is always to deliver great, affordable products that suit our customers.
“We don’t manufacture any product ourselves and a considerable portion of the product is imported by our suppliers,” she continues. “Our challenge is a combination of trying to understand customer needs in terms of product, brand, quality and price. At John Craig we have built a reputation for delivering brands and products that our customers can be proud of. It is important for us to preserve that niche in the context of the recession and the lack of disposable incomes. We have been concentrating on this initiative for a while now but it has really only been in the last six months that we have been comfortable with the products and suppliers.”
The shrewd move into own-brand products follows several years of successful growth for John Craig. Originally founded almost 70 years ago in Johannesburg, the company was sold through a management buyout in 2002 and since then has gone from strength to strength. “I was with an affiliate business for many years and was part of the buyout which involved almost all the existing management team,” Moreira explains. “At the time, the company was not doing well and we felt that there was a good opportunity to buy the business and turn it into a profitable business.
“We felt that there was huge potential for John Craig but we had to cut costs first, which meant we got out of the non-profitable stores and utilised our existing assets more effectively. We then looked at stock turns and which brands were or were not working. The introduction of house brands, especially in formalwear, was a new venture that certainly seemed to be well received, as it was expected by the consumer that our quality was guaranteed,” she adds.
Having cut out the non-profit elements, the business quickly grew and within four short years had become an attractive proposition for a bigger investor. “We were fortunate with our timing—in 2006 Pepkor bought the company,” Moreira continues. “We were still a small retailer at that point and along with that came problems of economy of scale. Being with Pepkor gave us the internal resources to grow—with property and human resources both important aspects. Up until that point we were always two years behind the market when we were looking at new properties, so if a mall opened with spaces, they were generally snapped up quickly. With the support of Pepkor, we have grown from 36 stores to 56 stores today, although a considerable percentage of our profit still comes from the older stores.”
While Moreira says that the company’s culture naturally changed a little following the takeover, much of what was sacred remains intact. “Certainly the buyout did change our outlook—I think that before then we had an entrepreneurial approach and we made quicker decisions, sometimes to our cost. Today we have better processes in place and are more analytical in our decisions.
“We also have more emphasis now on training our 350 employees and we are starting to see the benefits. We are piggybacking some of Pepkor’s existing practices—they have some awesome training available and we have ramped this up over the last 12 months, with employees around the country coming to our central office. We are now training our store controllers and managers to improve self-management and over the next six months we will be training up our second level of management to get them onto the same level as our senior management.”
This last comment is significant, Moreira feels, as it is essential to maintain legacy over time. “It is important that we maintain our culture inside the company to keep it a friendly, family-feel business. My biggest dread is to lose what made us a good company to work for. I believe that by promoting within, we have a better chance of retaining those values.”
Another value that John Craig strives to maintain is retention of its black customer base that has stayed loyal from generation to generation. “Our business developed its customer base by default really but has given us a tremendously loyal following in the black community. John Craig offered black customers credit when they could not otherwise acquire it and many of our activities have been deliberately in tune with our customers. We are not catering for high-end fashion design; rather, we concentrate on products that appeal to our clientele.”
The next stage in John Craig’s strategy is already well underway, with the opening of two new stores in the Eastern Cape region. Further expansion is planned in the Central and Western Cape areas but according to Moreira, this is an exacting science. “We are basically looking for the right sites and that is the only delay at this moment. We are much more risk-averse with our approach and want to ensure we find locations that will prove profitable. In the next couple of years we will also review opportunities to expand into the rest of Africa—the rest of the Pepkor Group is already either there or looking and much of the infrastructure will be in place before we are ready. In the meantime, our focus for the next 12 months will be to ensure we get our products and infrastructure right,” she concludes.
