Covid-19 led eCommerce revolution



The Covid-19 crisis has redefined the retail playing field.&nbsp; This has seen retailers scrambling to accommodate changed consumer behaviour as shopping surges online.&nbsp;&nbsp;



The pandemic has exposed the precariousness of a solely bricks and mortar model.&nbsp;&nbsp;According to a recent report by&nbsp;<a href="https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/survey-south-african-consumer-sentiment-during-the-coronavirus-crisis" target="_blank" rel="noreferrer noopener">McKinsey</a>,&nbsp;consumers expect a relative shift to online shopping in most categories in the short term,&nbsp; driven primarily by a sharp decrease in in-store shopping. In the longer term, 40 percent of consumers plan to increase online shopping once the crisis is over.



Fear of infection drives move to online



“Previous epidemics have foreshadowed this online trend,”&nbsp;&nbsp;says Derek Cikes, Commercial Director at buy now pay later fintech, Payflex.&nbsp;&nbsp;



“The<a href="http://weforum.org/agenda/2020/05/digital-payments-cash-and-covid-19-pandemics/" target="_blank" rel="noreferrer noopener">&nbsp;SARS epidemic in 2003</a>&nbsp;expedited China’s path in launching digital payments and eCommerce in the country, creating a permanent shift in consumer behaviour.&nbsp; Similarly, the Coronavirus has caused a marked change in South Africa’s consumer behaviour and habits, with social distancing, hygiene measures and self-quarantine now integral parts of our everyday realities,” says Cikes.



With the crisis expected to remain for the foreseeable future, these behaviours are anticipated to become further entrenched and remain even as the crisis eventually ebbs.



Shopping:&nbsp; an altered reality



Shopping is no longer a leisurely, sensory-filled experience.&nbsp; Instead, retailers have replaced sampling of beauty items or delightful food temptations with an antibacterial touch averse world of hand sanitizers and plexiglass barriers.&nbsp;&nbsp;



This interaction or rather fear of interaction is driving new shopping behaviour, with consumers opting for the safety and convenience of eCommerce. And retailers are hastening to adapt to what they view as lasting changes in the way that people choose to shop as millions of consumers choose online as their preferred medium of shopping.



Epidemics’&nbsp;impact on retail



According to a&nbsp;<a href="https://public.tableau.com/profile/salesforcecommercecloud#!/vizhome/SalesforceShoppingIndex/SalesforceShoppingIndex" target="_blank" rel="noreferrer noopener">Global Shopping Index</a>&nbsp;published by Salesforce, the number of unique digital shoppers rose 40% year-over-year for Q1 2020.&nbsp;



In a South African context, 29% of online consumers say they are doing far more shopping online than before the coronavirus outbreak while 65% say they are visiting physical stores less, according to a&nbsp;<a href="https://www.nielsen.com/za/en/insights/article/2020/overcoming-online-shopping-obstacles-amid-lockdowns-in-africa-and-the-middle-east-is-not-only-retailer-driven/" target="_blank" rel="noreferrer noopener">Nielsen study</a>&nbsp;of 10 markets in Africa and the Middle East, including South Africa.&nbsp;



“The pandemic has fast-tracked trends that were already budding in the eCommerce space including digital and alternative payments.&nbsp;The 40% increase in shoppers and 25% increase in eCommerce merchant sign-ups to our platforms highlights this monumental shift towards digital as an increasingly preferred avenue of shopping and transacting,”&nbsp; says Cikes.



Cikes says the increased availability of click-and-collect models, digital payment models like buy now pay later platforms and other alternative payment options,&nbsp; as well as faster delivery models, are anticipated to further fuel this online revolution.&nbsp;



Global players wake up to eCommerce opportunity



Major tech and retailer stores are waking up to the huge potential of eCommerce as millions of consumers choose online space for their shopping. Facebook is making a major push into e-commerce with the launch of&nbsp;<a href="https://www.facebook.com/business/shops" target="_blank" rel="noreferrer noopener">Shops</a>,&nbsp;a way for businesses to set up free storefronts on Facebook and Instagram.&nbsp;



While<a href="https://edition.cnn.com/2020/06/10/business/zara-inditex-online-investment/index.html" target="_blank" rel="noreferrer noopener">&nbsp;Zara-owner Inditex&nbsp;</a>recently announced plans to close up to 1,200 smaller-sized stores, and to invest 3 billion dollars in digital commerce.&nbsp;



“Retailers and tech companies are recognising the significance, need and value to move online in order to accommodate consumer behaviour and sentiment for safer, seamless shopping alternatives.&nbsp; It will be interesting to see the kind of personalised, targeted spin they can put on it based on their collected user data around interests and geolocation,” says Cikes.



How SA retailers can harness this opportunity



The consumer mindset has changed in terms of their relationship to eCommerce.&nbsp; Online has become an accepted, go-to shopping alternative with the digital environment providing consumers with convenience, safety and access to a wide range of shopping options.



And while hygiene and safety concerns have provided the initial impetus in driving consumers online, shoppers have now experienced this environment as a feasible option with its accompanying convenience and benefits. This is entrenching the shift to online shopping, extending its impact to long after the pandemic has passed.



“We’re reaching a tipping point for eCommerce.&nbsp; Standalone bricks and mortar are no longer sufficient as consumers demand more rapid digitisation solutions.&nbsp; The fact that more people than ever are relying on the internet to shop for their everyday needs makes it imperative to have an online shopping model in order to remain competitive and viable.



The eCommerce revolution is here.&nbsp; Those that will survive will be retailers who have a multichannel approach to sales that provides customers with an option for a seamless shopping experience from the comfort of their own homes.&nbsp; This is no longer a luxury. It’s critical,” concludes Cikes.&nbsp;



&#8211; Paul Behrmann, Founder &amp; CEO of Payflex

Excited Woman Shopping Online At Home

Op-Ed: The eCommerce Lifeboat For South Africa’s Retail Industry

With a possible call for a lockdown looming in South Africa, people are stockpiling for the worst case scenario. Although some may think it’s too early to be taking such panic-driven action, it seems this behaviour is perfectly aligned with global consumer behaviour trends caused by the different stages of the Coronavirus outbreak.



A recent<a href="https://www.nielsen.com/us/en/insights/article/2020/key-consumer-behavior-thresholds-identified-as-the-coronavirus-outbreak-evolves/?utm_source=sfmc&amp;utm_medium=email&amp;utm_campaign=newswire&amp;utm_content=3-18-2020">
Nielson’s report</a> highlights that there are key consumer behavioural changes that
occur parallel to each stage of the virus’s evolution. Nielson identifies that
these consumer changes are being mirrored by every country that is currently
trying to flatten the curve. Nielson identified the following stages together
with changes in consumer behaviour at each stage:



<figure class="wp-block-table"><table class=""><tbody><tr><td>
 Stage
 </td><td>
 Coronavirus Event Markers
 </td><td>
 Consumer Behaviour Change
 </td></tr><tr><td>
 Stage 1
 Health-minded Buying
 </td><td>
 Minimal localised cases of
 Covid-19 generally linked to arrival from another country.
 </td><td>
 Consumer’s interest rises in
 products that support overall maintenance of health and wellness.&nbsp;
 </td></tr><tr><td>
 Stage 2
 Reactive Health Management
 </td><td>
 First local transmission with
 no link to other location and first Covid-19 related death/s.&nbsp;
 </td><td>
 Prioritise products essential
 to virus containment, health and public safety. E.g., face masks
 </td></tr><tr><td>
 Stage 3
 Pantry Preparation
 </td><td>
 Multiple cases of local
 transmission and multiple deaths linked to Covid-19
 </td><td>
 Pantry stockpiling and
 shelf-stable foods and a broader assortment of health-safety products; spike
 in-store visits; growing basket sizes.&nbsp;
 </td></tr><tr><td>
 Stage 4&nbsp;
 Quarantined Living Preparation
 </td><td>
 Localised Covid-19 emergency
 actions, percentage of people diagnosed positive continues to increase.
 </td><td>
 Increased online shopping, a
 decline in-store visits, rising out-of-stocks, strains on the supply chain.
 </td></tr><tr><td>
 Stage 5
 Restricted Living
 </td><td>
 Mass cases of Covid-19.
 Communities ordered a lockdown.
 </td><td>
 Severely restricted shopping
 trips, online fulfilment is limited, price concerns rise as limited stock
 availability impacts pricing in some cases.&nbsp;
 </td></tr><tr><td>
 Stage 6
 Living a New Normal
 </td><td>
 Covid-19 quarantines lift
 beyond region/country’s most-affected hotspots and life starts to return to
 normal.&nbsp;
 </td><td>
 People return to daily routines
 (work, school, etc.) but operate with a renewed cautiousness about health.
 Permanent shifts in the supply chain, the use of e-commerce and hygiene
 practices.&nbsp;
 </td></tr></tbody></table></figure>



(table <a href="https://www.nielsen.com/us/en/insights/article/2020/key-consumer-behavior-thresholds-identified-as-the-coronavirus-outbreak-evolves/?utm_source=sfmc&amp;utm_medium=email&amp;utm_campaign=newswire&amp;utm_content=3-18-2020">source</a>)



Although South Africa has yet to
have any deaths, our own consumer behaviour is following this trend almost
exactly. Derek Cikes, COO of online payment solution Payflex has been following
the effects of Coronavirus on retail closely since the outbreak and says that
South Africa is somewhere between stages 4 (Quarantined Living Preparation) and
5 (Restricted Living).



“We’ve seen a significant
increase in online shopping both in our own data and at our merchants. South
Africans are looking to online stores to keep goods flowing while we all
prepare for a possible lockdown. But we’re also seeing the limitations and strain
put on online retail because of this surge in users,” says Cikes.&nbsp;



In line with Nielson’s stage 5
attributes, South Africa is clearly seeing the strain put on online grocers and
their supply chain due to the demand of social distancing and self-quarantine.
Checkers launched their app sixty60 to major SA cities promising to deliver
your groceries within 60 minutes only to have to adjust that promise due to
increased demand for the home deliveries. Pick ‘n Pay’s online store is also
showing signs of a supply chain disruption as a large percentage of goods are
unavailable or sold out.&nbsp;



In order to ease the strain on
the supply chain caused by panic buying, both Checkers and Pick ‘n Pay have
implemented rationing, meaning that consumers are only allowed a certain number
of each product per purchase. This action hopes to ensure that all South
Africans are able to get what they need for the weeks ahead. Other online
grocery apps such as OneCart are seeing an unprecedented increase in users. For
example, OneCart is usually able to deliver groceries within an hour, but
because of increased demand, now have a 2 to 3 day delivery time.



In its <a href="https://www.bain.com/insights/defending-retail-against-the-coronavirus/">Situational
Threat Report Index</a>, Bain &amp; Company states that the concept of the shopping
journey in physical stores is taking on a new meaning and importance, given the
potential for transmitting the virus at each interaction.&nbsp;



According to Bain &amp; Company’s
index, the world is currently sitting at a level 6 global threat which is
called Markets and Public in Multiple Major Nations Reacting Strongly. The
index combines official data with Bain’s own modelling. It evaluates
Coronovirus’s effect on global business, grading it from 0 (a negligible
threat) to 10 (severe global recessionary conditions).&nbsp;



South Africa is no different,
with stores and businesses scrambling to find innovative solutions to keep
customers safe and secure. For example, a Spar franchise in the north eastern
suburbs of Johannesburg recently put up perspex glass panes at each till to
create a physical divide between shopper and cashier while delivery services
such as Woolworths allow the drivers to drop the goods in a safe area outside
the house without coming into contact with customers. Uber Eats and Mr D have
implemented similar regulations.



Bain &amp; Company also note that
in most segments, the outbreak will probably reduce traffic and revenue. They
say that retailers of all types must be prepared to act quickly to mitigate the
impact of such turbulence, while also learning from the experience of their
counterparts in China and other hard-hit countries. And even as they strain
every sinew to address short-term disruption, retail executives also need to
begin medium-term planning for an eventual recovery.



Falling in line with Nielson’s
stage 6 “A New Normal”, Cikes believes that there will be a permanent change in
the way South Africans use e-commerce.&nbsp;



“If there was anyone who was reluctant to use online shopping as a viable way to get both necessities and luxury goods, Coronavirus is sure to change this. It’s forcing people to get online and this may change the way South Africans shop forever. This will also push retail to think about bringing their own stores online if they haven’t already,” says Cikes.



Content provided by Nielson

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Op-Ed: These Are The Six Stages Of Changes In Consumer Behaviour Led By The Coronavirus Pandemic

The coronavirus could mean the end for a number for vulnerable retailers.



With millions of Americans forced to stay home to help prevent the spread of COVID-19, foot traffic to malls and downtown shopping areas is quickly evaporating, a potential deadly blow for those chains teetering on the edge of bankruptcy.



A new monthly report from S&amp;P Global Market Intelligence, which tracks the publicly-traded retailers that are the most likely to default in the next year, offers a glimpse at those most at risk during the coronavirus outbreak. Several large mall-based brands sit atop the list, including: Victoria’s Secret’s parent company L Brands, Francesca’s, Ann Taylor’s parent company Ascena Retail Group, J.Jill, JCPenney and The Children’s Place.



While many of these retailers have been on bankruptcy watch for months—typically due to some combination of falling sales, low cash reserves and too much debt—the coronavirus could fast-track their demise.



In recent days, Victoria’s Secret and Ann Taylor have&nbsp;<a href="https://www.forbes.com/sites/laurendebter/2020/03/16/coronavirus-store-closing-tracker-patagonia-warby-parker-and-other-chains-temporarily-close-up-shop/">joined a parade of retailers</a>&nbsp;to announce voluntary two-week store closures to help slow the spread of the virus, wiping out any shot at in-store sales. Their best hope is to recoup sales on the web. While more shoppers may flock online while they’re stuck at home, there is no mistaking their reliance on stores. According to the National Retail Federation, 89% of total retail sales still take place at brick-and-mortar stores.



At the same time, retailers are stuck with rent and other fixed costs of running a sprawling fleet of stores. Most retailers have said they will continue to pay employees while stores are closed. However, those who have a meager amount of cash on their balance sheet to fund operations could quickly find they are unable to pay their bills. Large amounts of debt put further strain on balance sheets.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="960" height="723" src="https://www.forbesafrica.com/wp-content/uploads/2020/03/SPGlobal.jpg" alt="" class="wp-image-43263" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/03/SPGlobal.jpg 960w, https://cms.forbesafrica.com/wp-content/uploads/2020/03/SPGlobal-300x226.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/03/SPGlobal-600x452.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/03/SPGlobal-768x578.jpg 768w" sizes="(max-width: 960px) 100vw, 960px" /><figcaption> S&amp;P GLOBAL MARKET INTELLIGENCE </figcaption></figure>



There have already been eight retail bankruptcies this year. Pier 1 has&nbsp;<a href="https://www.forbes.com/sites/warrenshoulberg/2020/02/17/wholl-buy-pier-1-as-it-files-bankruptcy-and-puts-itself-up-for-sale/#5adea2d21aee">put itself up for sale</a>&nbsp;and will permanently close 450 of its stores. Art Van Furniture, which was purchased by a private equity firm in 2017,&nbsp;<a href="https://www.forbes.com/sites/neilstern/2020/03/09/art-vans-furniture-from-powerhouse-to-liquidation-in-just-three-years/#322921e16384">will close all of its stores</a>.



“We haven’t seen any bankruptcies tied to coronavirus yet because it’s fairly new,” says S&amp;P data analyst Chris Hudgins. “However, we might see more as time goes on. The ones that have more cash on their books and less leverage are going to be the ones that do better in times like this.”



&#8211; <a href="https://www.forbes.com/sites/laurendebter/">Lauren Debter</a>, Forbes Staff, Retail

gettyimages-1189215466-594×594

These Struggling Retailers May Suffer Their Final Blow From The Coronavirus Lockdown

Topline: Nike will shut down all U.S. stores until March 27, the company&nbsp;<a href="https://news.nike.com/news/nike-coronavirus-statement" target="_blank" rel="noreferrer noopener">announced</a>&nbsp;Sunday, adding to a growing list of retailers deciding to close in an effort to slow the spread of the coronavirus.



<ul><li>In addition to all U.S. stores, Nike will also shut down locations in Canada, Western Europe, Australia and New Zealand.</li><li>Nike has 384 retail stores in the U.S., according to SEC filings.</li><li>The closures will go into effect from Monday, March 16 through Friday, March 27.</li><li>Customers can still order from Nike’s online store while company-run facilities will implement social-distancing measures such as staggering work schedules and additional cleaning.</li><li>Apple, Patagonia, Glossier, Warby Parker and Urban Outfitters have also closed retail locations in the wake of the pandemic.</li><li>The announcement comes as public health experts say Americans should limit their time in crowded public spaces in order to stem the disease’s spread and prevent a spike in cases that would overwhelm the U.S. health system.</li></ul>



Crucial quote: “The well-being of our teammates and consumers is our top priority so we have decided to close our stores in multiple countries around the world including in the United States, Canada, Western Europe, Australia and New Zealand to limit the spread of the Coronavirus (COVID-19),” Nike said in a statement.



Key background: American life has almost come to a halt as local governments and public health experts work to slow the spread of Covid-19. Employees have been told to work from home, schools and universities have moved their classes online and hundreds of major events and conferences have been canceled.



News peg: According to Johns Hopkins, 2,952 cases have been confirmed in the U.S., but public health experts say that number will grow as the virus continues to spread and testing becomes more widely available.



&#8211;<a href="https://www.forbes.com/sites/rachelsandler/">Rachel Sandler</a>, Forbes Staff, Breaking News.

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Nike Among Growing List Of Retailers Closing In Response To The Coronavirus

The Death Of Shopping In Africa?

When he talks, people listen; when he moves money, markets react and when he invests, many follow.  He is Christo Wiese, Africa’s third richest man after Aliko Dangote and Nicky Oppenheimer &amp; family, according to FORBES’ list of Africa’s 50 richest, and the creator of Africa’s largest retail store. He is ever busy as he adds to his $6.5 billion fortune, but his last investment raised a few eyebrows.
As we meet, Wiese is dressed in black pants and a black sweater; you may mistake him for an ordinary bloke on the street in Cape Town, South Africa. But, there is nothing ordinary about this man when it comes to business. His creation, Shoprite, earns revenue of $9.9 billion a year, at a time when retail is struggling. Steinhoff, the parent company of Wiese’s retail company PEP, brings in $11.8 billion. Combined, they net almost $2 billion in annual profits, operate more than 9,000 stores in 30 countries and employ over 200,000 people. He made his fortune from smart investments that earned him billions. So, why is he looking to venture into Africa’s glittering, but struggling, diamond industry?
<img decoding="async" loading="lazy" class="alignleft size-medium wp-image-5514" src="/wp-content/uploads/2017/05/Christo-Wiese_JC-6-300x200.jpg" alt="" width="300" height="200" />
The family businesses, Cream Magenta 140 Proprietary Ltd. and Metcap 14 Proprietary Ltd., bought close to 50 million shares (23.54% each) in diamond company Trans Hex. This adds up to a dominant stake of just over 47%.
This isn’t entirely new territory for the risk taker. Wiese was in diamond mining in the late 1990s through an investment in Ocean Diamond Mining Holdings (ODM). He sold ODM to Namibian-based diamond miner Namco.
“I used to be in the diamond industry 40 years ago and the opportunity arose to acquire a controlling stake in Trans Hex which is one of the junior diamond mining companies and one I think has potential,” says Wiese.
The cold fact is South Africa’s once thriving diamond industry is suffering atrophy. It has no more than 200 diamond beneficiators remaining from a historical peak of about 4,500 and a decline in investment, according to Mining Weekly.
“Rough-diamond prices are too high for manufacturers, who cannot profitably polish goods at such levels. Polished-diamond prices have declined, in turn, reducing demand for diamonds from South African mines, as well as throughout the world,” it says, quoting World Federation of Diamond Bourses president Ernie Blom.
Trans Hex has not been immune. Their 2016 results suffered heavily from a sharp decline in rough diamond prices.
“The diamond market was severely impacted by excess stocks in the polishing industry and a resultant decline in demand for rough diamond. Average prices received for rough thus decline by 23.5% year-on-year. As a result, the Lower Orange River operations, which are earning the end of their reserves, moved into loss overall,” says Bernard van Rooyen, Trans Hex Chairman in the company financials.
Piet Viljoen, Alternate Director at Trans Hex, says its share price has come under pressure but the business has tried to ride the storm.
“The problem creates value in a very lumpy way. It earns a lot of money one year and then makes big losses the next year… so its share price doesn’t seem to go anywhere ever, that’s why it creates the impression that the business is under pressure,” he says.
Viljoen says it helps to have shareholders like Wiese who have vision.
“The shareholder reference can act as a provider of capital when the business needs it, do acquisitions or to fund projects.”
Trans Hex Group incurred a disappointing loss of R100.8 million ($7.3 million) and Viljoen has called it “a difficult year” but Wiese is optimistic.
“It is going well, except the exchange rate is not in favor of diamond exports because the rand is stagnant. With the diamond industry, you are not running a shop where you always know what your sales are going to be,” says Wiese.
Wiese is known for taking risks and smart investments. More than 60% of his wealth is in Shoprite and Steinhoff, while another 30% or so comes from his shares of investment company, Brait. His stock in Tradehold, a real estate firm, accounts for much of the remaining 10%. He has made investments in the United Kingdom (UK) such as clothing retailer New Look and gym chain Virgin Active. He says there is no secret behind the success.
“In this company, we have always had a philosophy, in terms of which we run our group of companies. These are the five pillars as we call it; faith, positive thinking, enthusiasm, compassion and hard work. Hard work is probably important but you’ve got to be a positive person and able to put teams together and motivate them. I am not a person running the business, I play a different role. The good business leaders like Whitey Basson and Markus Jooste are people who can put teams together, motivate them and steer them in the right direction,” he says.
There have been several enormous setbacks like the currency upset in 1985 when the rand lost about 50% of its value in less than a year, Brexit, which badly affected the share price, and great disappointments in people. It is wealth that hasn’t come easy.
“Oh yes, plenty [of bad investments]. I can’t even remember the worst one but there are many adventurous investments that just didn’t work out. I am heavily invested in wine farming and that’s not a very big lucrative business but it gives other pleasures such as the beauty of it…”
“A man’s true wealth is the good he does in the world,” goes the proverb. According to Wiese, success is more than how much money you have, it is about whether you can look at yourself in the mirror and say maybe it’s very small but my contribution made life or the world a slightly better place. Following this mantra, he is helping the poor gain title deeds to their homes. He is a sponsor of the Free Market Foundation, which is working with First National Bank to give people land tenure, and gave more than 100 title deeds to residents of Ngwathe, a municipality in South Africa’s Free State province.
“The Free Market Foundation looked at South Africa and found that there are between seven and 11 million households where the occupants own the structure on the land by they do not own the land, so they launched an initiative cooperating with the local, provincial governments to give people title to their homes. My family decided to get involved in that to make financial contributions in order to help people to acquire the title deeds to their homes,” he says.
“It is an enormously important thing for people to have a sense of ownership. People that are used to owning things do not realize how much it adds to a person’s dignity if he can say ‘this is my home. It may be a modest little home, but it’s my home and I can leave it to my children and be assured they have a roof over their heads.’”
Wiese says positivity rules his life.
<img decoding="async" loading="lazy" class="alignleft size-medium wp-image-5516" src="/wp-content/uploads/2017/05/Christo-Wiese_JC-1-300x200.jpg" alt="" width="300" height="200" />
“If you are positive about life, you ignore the unfair criticism. A lot of the criticism is totally justified but you don’t focus on either the nice things people say to you or about you too much or equally you don’t concern yourself too much about the bad things people say…”
“I don’t remember anything bad people say. I always say to entrepreneurs, ‘if you start rising above the average, you become a target’. People say, ‘but that guy is not cleverer than I am, why does he make a success and I’m so clever and I don’t make the same financial successes?’ You have to know you will have people tear you down; it’s part of the game,” says Wiese.
We leave him preparing to jet off to the UK for meetings. Some may not understand his decision to dive back into diamonds, but Wiese seems to see money where others don’t.  Maybe the smart investor should take a look at the diamond business.

The Billionaire Diving Into The Depths Of The Diamond Business

Retail and consumer markets are buoyant in developing countries throughout the globe. Personal incomes in many of these regions have increased steadily over the years, prompting the emergence of a growing middle class. Africa is no different. According to World Bank estimates, our continent is home to more than a billion people, a figure expected to increase to more than 2.5 billion by 2050. Perhaps, more crucially Africa has one of the fastest growing youth populations in the world.
PwC recently released a report, So Much in Store, which is an in-depth study into sub-Saharan Africa retail and consumer goods industries. The findings are compelling. The report provides a five-year outlook by focusing on 10 African economies that PwC believes offer substantial opportunities for retail and consumer businesses looking to expand into African markets. These countries include: Cameroon, Ethiopia, Kenya, Nigeria, Tanzania, Zambia and Côte d’Ivoire. Despite a slowing Chinese economy, and subsequent lower commodity prices, having a knock-on effect on real GDP growth in a number of African economies, there appears to be a silver lining. African economies predominantly reliant on commodities are beginning to diversify.
The growing consumption of the middle class in Africa has been driven by several key factors, such as: an increase in internet usage and accessibility; ubiquitous use of social media; private healthcare; and budding retail property developments (malls). Consumers in sub-Saharan Africa in particular are becoming more brand conscious and aspirational; they are willing to satisfy their needs and wants at a whim provided they can afford it.
“Africans are becoming more connected to global trends than ever before as a result of growth in internet penetration and travel,” says Anton Hugo, PwC Africa Retail and Consumer Industry Leader.
There’s been a spike in the level of consumer discernment when it comes to their purchasing decisions, thereby stimulating retailers to create new products to meet this demand.
One issue highlighted by PwC is that there are several misconceptions about doing business in Africa. Like going into any new business venture, there’s no such thing as a one-size-fits-all approach. Firstly, Africa is home to more than 50 countries, with even more languages, including indigenous dialects. It’s integral that companies seeking to enter African markets get their hands dirty, on the ground, to gain an understanding of the region. A business can ill-afford going into any part of Africa with preconceived notions. Instead, firms should take the approach of immersing themselves into the culture of the local people to understand the dynamics of business in that country.
In addition, having the right strategy cannot be over-emphasized. Strategy can strengthen or decimate a business in an instant. Some firms fail to recognize a strategy that has been successful in South Africa, for example, does not necessarily translate to success in other African countries. Firms must formulate a unique and well-thought strategy for the different markets it aims to enter to avoid becoming another casualty, similar to Woolworths in Nigeria.
Despite the varying challenges that are slowing growth in the retail and consumer businesses in Africa, the PwC report assures companies that the opportunities far outweigh the impediments. There are enormous opportunities yet to be realized: retail trade in Africa is still largely concentrated in informal markets; the online retail industry is still in its infancy and intra-African trade is incredibly low.
“Each country in Africa has its own value proposition. Smart investing in Africa means investors need to understand key regions and local markets. Furthermore, investors need to note that there are specific risk factors underlying the development of Africa. Despite these risks, investors and retailers will continue to see the African market as a huge opportunity,” says Hugo.
When opportunities aren’t realized, they remain idle. Development in Africa and expanding African retail and consumer businesses in Africa will require collective action from business and governments. Governments need to invest in infrastructure, such as transport networks, in order to open more markets.
It will be interesting to witness the progress of the African retail and consumer business sector in the next five years. The odds are in its favor; now let’s see whether it can thrive.

Opportunities must be seized

Table mountain, the striking mesa above Cape Town, lords over another impressive African monument: the multistory Golden Acre shopping center. Lunchtime crowds pour into the glassy, brightly lit structure, and from within it is impossible not to notice the dominance of South Africa’s second-richest man, Christo Wiese. His bargain-bin clothier, PEP, pulls foot traffic to the basement. Above it, you’ll find his more upscale Ackermans chain. Around the corner is his OK Furniture and his grocery chain, Shoprite, which takes up two floors.
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&nbsp;
&nbsp;
By and large, they all carry the same message. PEP’s window ads, accented in canary yellow, proclaim it the home of the “Lowest Price in South Africa.” Brightly colored bunting in OK Furniture heralds a similar promise. Shoprite (among its many slogans: “Lower prices, that’s our promise”) will even play moneylender, fronting customers up to R7,500 (roughly $470).
“The business has basically been built on one slogan: Low prices you can trust. Just very, very low everyday prices,” says Wiese (whose name, fittingly, is pronounced VEE-sa, like the credit card). “I suppose we could be described as the Wal-Mart of Africa.” Underscoring the cost-conscious philosophy, the 74-year-old is telling me this at his company headquarters, in an industrial area that abuts a composter and Adult World, which sells what you think it does.
His offices, like his stores, are decidedly spare: drab beige enlivened only by some hotel- quality art (a portrait of an elephant herd hangs outside the door of the conference room he uses as an office). “People have very limited budgets,” continues Wiese, clad in a capitalist’s power uniform – blue suit, blue shirt – the very picture of the lily-white executive that still controls most of South African business. “They have to get extremely good value for their money.” His hunch – that value trumps everything – led him to create the largest retail business in Africa. Publicly traded Shoprite does revenue of $9.9 billion a year, while PEP’s parent company, Steinhoff, brings in $11.8 billion (some of it from selling cellphones and home furnishings). Combined, they net almost $2 billion in annual profits, operate more than 9,000 stores in 30 countries and employ over 200,000 people. No other African retailer comes close to rivaling their breadth and depth, and Wiese controls both.
Those stakes are largely what makes Wiese one of the planet’s richest people, with a $5.8 billion fortune. More than 60% of his wealth is in Shoprite and Steinhoff, while another 30% or so comes from his shares of Brait, an investment vehicle Wiese uses to buy other companies, many of them outside South Africa. His stock in Tradehold, a real estate firm, accounts for much of the remaining 10%.
But if Wiese is to continue his expansion he must move outside of his African comfort zone. The continent isn’t booming the way it once was. Economic growth across Africa has slid from close to 7% in 2007 to about 4% in 2014, the last year for which data are available. In coming years it isn’t likely to much surpass that figure. South Africa, still Wiese’s most important market, is emblematic of the larger trend – stuck at sub-2% growth for the foreseeable future. The slowdown gravely threatens Wiese’s ambitions. He can shut his eyes and picture his empire twice as big as it is today, but for it to grow that large, he must look beyond Africa.
And he’s already started. PEP is expanding rapidly in Europe, while Wiese is snapping up all sorts of companies through Brait, including majority stakes in British discount retailer (sound familiar?) New Look for $1.2 billion last June and Richard Branson’s fitness center chain, Virgin Active, for $1 billion a month later. Put broadly, Wiese is a little Sam Walton, in terms of his focus, and a little Warren Buffett, in terms of amalgamating a portfolio. As a matter of fact, he’s beaten Buffett handily lately. His holding company, Brait, has trounced Berkshire Hathaway in total returns over three years (160% versus 31%), five years (230% to 51%) and ten years (314% to 121%).
<div id="attachment_4832" style="width: 210px" class="wp-caption alignleft"><img aria-describedby="caption-attachment-4832" decoding="async" loading="lazy" class="size-medium wp-image-4832" src="/wp-content/uploads/2017/05/0000171388-200x300.jpg" alt="" width="200" height="300" />JOHANNESBURG, SOUTH AFRICA – APRIL 22: Billionaire businessman Dr. Christo Wiese on April 22, 2009 in Johannesburg, South Africa. (Photo by Gallo Images / Foto24 / Sharief Jaffer)</div>
“Christo has been a massive risk taker his whole life,” says Syd Vianello, a retail analyst in Johannesburg, who has observed Wiese over many decades. “Africa is not a place for sissies. You’ve got to have nerves of steel. In Africa they see him as a genius.”
The breathtaking views of Cape Town, where land and sea dramatically converge to produce vistas of green mountains towering above deep blue water, can be quickly forgotten on a nine-hour drive north to the dry, hot savanna city of Upington, an unsightly provincial town alongside the Orange River, close to the Kalahari Desert. Upington does possess one unique site: a statue of a donkey, a rare tribute to the quintessential beast of burden. It is not undeserved. Starting in the 1880s, farmers, employing donkeys to pump water, tamed this rough part of the country with an almost puritanical determination.
Wiese’s father was one of those men. He owned a sheep and cattle farm, as well as a car dealership in town. “People in Upington were hardworking, very neat, very orderly – disciplined,” says Wiese. “People who were not neat always stood out like a sore thumb.” For college, Wiese attended Stellenbosch University, one of South Africa’s better schools, situated in a sleepy area awash in wine and vineyards. He studied law and became head student of his residence hall and an active member of a progressive student organization.
After graduating in 1967, he decided he’d rather return home and join the small retail business owned by his cousin’s husband than become an attorney. The company had around ten discount stores near Upington, which were called PEP. With Wiese on board and helping guide expansion, sales went from 4 million rand in 1970 to 29 million rand (around $100 million today) four years later. Fast growth, but Wiese lost interest after a moment of self-discovery.
“I had worked out for myself that I’m not really” – he trails off, as if about to utter a dirty word – “a number-two man.” There was another concern, too. “I started thinking about getting married,” he says. “And the way I lived in those days, I was away from home 20 days a month. That’s no way to build a marriage. So I thought if I go and practice law, at least I’ll be home much more.”
While working as a barrister in criminal and commercial law in Cape Town, Wiese, restless still, made a futile run for parliament in 1977 on the opposition party ticket, partly inspired by his new father-in-law, a controversial member of parliament expelled from the ruling, pro-apartheid party for dissension. Wiese also grew interested in something that has always attracted the ambitious in South Africa – diamonds. He found a mine nearer his hometown, in Richtersveld. (“The area has a stark beauty, like a moon landscape. Very sparse vegetation, very little rainfall.”) He bought it for about $20 million in today’s currency and began mining and trading diamonds.
<div id="attachment_4830" style="width: 310px" class="wp-caption alignleft"><img aria-describedby="caption-attachment-4830" decoding="async" loading="lazy" class="size-medium wp-image-4830" src="/wp-content/uploads/2017/05/AV_00022953-300x199.jpg" alt="" width="300" height="199" />JOHANNESBURG, SOUTH AFRICA – JUNE 12: Billionare businessman Christo Wiese on June 12, 2012 in Johannesburg, South Africa. (Photo by Gallo Images / Financial Mail / Hetty Zantman)</div>
Five years after purchasing it, in 1981, he sold it, and looking for his next chapter, he turned to his cousin and PEP, which by then had 450 locations, including a grocery business, Shoprite, it had added a few years earlier. In taking a check (worth roughly $100 million in current terms) for his successful, middling business, the cousin was set for life. Wiese, no longer number two, pictured something much grander. “Maybe I was more ambitious,” he says, quietly, eyebrows arched.
What Wiese envisioned was retail at its rawest, and he understood how attractive it could be. In modest, unadorned storefronts, PEP sold only the simplest kinds of clothes (“underwear, schoolwear, very basic stuff”). The choice between a white shirt and a blue one was often the most complicated one in the store. Shoprite did the same with groceries. All that mattered to Wiese’s target market – poor whites and a black population kept systematically impoverished – was price.
In a perverse twist, apartheid ensured him a gigantic customer base of some 20 million nonwhites, who made up more than 70% of the population. They were incapable of climbing the ladder or earning more money – or shopping elsewhere. And the heavy economic sanctions against South Africa meant little in the way of foreign competition. It was a perfect market: massive and artificially protected.
“Wiese saw the opportunity faster than anybody else,” says retail analyst Vianello. “He targeted the bottom end of the market, and nobody could argue his business had any element of waste. He cut out all the extravagance and gave people what they wanted at the lowest possible price.” The concept proved popular enough for Wiese to begin expanding aggressively, sometimes opening as many as 100 new stores a year. While other retailers concentrated on stores in large markets, he eagerly plunged into rural and poorer areas. He’d rather his customers spend their money in his stores than spend it traveling to them.
Wiese was maniacal about costs, a business necessity in lowmargin retailing and perfectly fitting with his personality – a billionaire who keeps spare change neatly stashed in a tiny bottle inside his Lexus SUV. “Christo is stingy,” says James “Whitey” Basson, Wiese’s right-hand man at Shoprite since day one and an old buddy from Stellenbosch University. “He’ll give me the nicest bottle of champagne as a present, and I’ll open it up, and I’ll see he forgot to take out the message: It’s a bottle from Lord So-and-So. He’s a regifter.”
To guard against corporate expenses, PEP manufactured many of its clothes in 11 factories; one was situated next to the company’s modest offices in Parow Industria. Most important, from almost the start PEP relied on a central distribution system with warehouses to store goods, a total departure from how most South African retailers operated (with many deliveries from many suppliers to each shop). “That was a no-brainer,” Basson says. “Getting one truckload to a store is substantially cheaper than getting 30 trucks to wait outside the store and offload 30 different times.”
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In 1986 Wiese spun off Shoprite and PEP into separate public companies while maintaining control of both. Good timing. Four years later Nelson Mandela was freed after spending almost three decades in prison. Apartheid was ending. South African companies were no longer pariahs, and Wiese began to expand elsewhere in Africa. A year after Mandela ascended to the presidency in 1994, Shoprite opened its first store in central Africa, in Zambia, followed by Mozambique, Swaziland, Botswana, Zimbabwe and Uganda. PEP had a similar trajectory. Their stores’ simple model made them easily exportable.
“Wiese and Basson sat down and took a view that they could conquer Africa, and they went out and conquered Africa,” says Vianello. Shoprite’s size ($2 billion in 1996 sales with about $120 million in cash flow and little debt) allowed it to move more quickly than local rivals. “How long does it take to clear a container in Angola or Nigeria? What bribes do you have to pay to get supplies in? Who on earth would finance them to put up stores? They had to build their own stores themselves. No one else would.” (Wiese insists he has spent not one rand on bribery.)
Other growth came through acquisitions. By the 1990s he had already made six purchases to expand both Shoprite and PEP, pushing PEP’s operations as far as Britain and its sales to more than $2 billion. In 1997 he bought OK Bazaars (and its nearly 300 grocery and furniture stores) from South African Breweries for just one rand. The catch? OK Bazaars was losing around $40 million annually, which was just about how much Shoprite was booking in annual profits. It could be kept on life support for just so long.
“We bet the farm,” says Wiese. He reached for a familiar page from the playbook: “cutting frills, lowering overhead,” including renegotiating several onerous leases. As it turns out, OK Bazaars had good bones and had simply been mismanaged. “Christo is a fantastic corporate deal thinker,” says Basson. “He always makes me think: What would the alternative be if I didn’t make a deal? What happens if the opposition buys the company?”
Wiese didn’t really develop a profile outside of Africa until recently, and to his annoyance, his arrival was trumpeted not by a cunning deal but by something more ignoble. It came after U.K. customs officials detained him at London City Airport in 2009 with two suitcases filled with nearly $1 million in cash. They seized it, suspecting illicit origins. The British and South African press merrily picked up on the incident – apparently suspecting Wiese had been nabbed for money laundering – and were further emboldened by Wiese’s stubbornness in fighting for the funds’ return and his insistence that the amount was “insignificant.” (The Daily Mail’s gleeful headline: “It’s Just Peanuts To Me.”) The government ended up returning the money – interest attached – but the damage was done. He still won’t talk publicly about the incident, and until recently, it was pretty much the extent of his reputation in the West.
That’s now beginning to change, and much of his activity is still in Britain. When his holding company, Brait, first showed an interest in stretching beyond South Africa in 2012, it invested in British supermarket business Iceland Foods and added to its position in November 2015, when it paid about $275 million to increase its position from 19% to 57%. Two more deals came last year: the stakes purchased in discount retailer New Look and gym chain Virgin Active. A second Wiese company, Invicta, has put its capital into industrial companies: unsexy firms with predictable, recurring revenue streams, like Singapore-based Kian Ann Engineering, a distributor of heavy machinery parts. And a third Wiese vehicle, Tradehold, watched the value of its U.K. property portfolio increase by about 50% to roughly $120 million in February 2015 (the latest full-year results available), driven substantially by new investments in the British real estate market, where it owns residential, industrial and office space.
PEP has charged into eastern Europe, too. After its initial move into this part of the continent in 2005 (Poland mostly but also the Czech Republic and Slovakia), PEP has proven its model successful there. Its eastern European stores do about $1,800 per square meter, a 60% increase from 2012 and roughly double what a comparable competitor might do. The region is now 11% of PEP’s $2.9 billion in annual revenue (up from 5% in 2012).
As PEP broadens its store expansion into Britain it will likely run up against the most entrenched competition, including venerable discount retailer Primark. Considering this, Wiese blithely expresses a malapropism: “There’s the old American saying that only three things are certain: death, taxes and competition. You can’t shy away from competition. You’ve just got to go meet them.” And besides, Primark tries to be fashionable, while PEP proudly does not. “We don’t have fashion. You can’t come into our stores and expect a wide selection of colors and pattern,” says Steinhoff CEO Markus Jooste. “Our stuff is for people who have to have it, not want to have it. It offers value to the bottom-end customer and gives them some dignity in what they wear.”
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Last December expansion-minded Steinhoff began trading on the Frankfurt Stock Exchange in addition to its long-standing listing in Johannesburg. But not before Wiese got slapped with a reminder that his international ambitions wouldn’t proceed without a false step. A few days before its Frankfurt debut German tax authorities raided local Steinhoff offices as part of an investigation into its accounting. Steinhoff dismisses the investigation as baseless, but it certainly spooked the company’s investors. The stock dropped about 15% in a month – wiping away almost $600 million from Wiese’s personal fortune.
Having long parried advances from those interested in buying his companies – including a visit by Wal-Mart heir and then chairman Rob Walton several years ago – Wiese sees himself firmly in command of his empire for the foreseeable future. Ahead, there’s one obvious final frontier for Africa’s retail pioneer: America. “We’ve been hesitant to plunge into the retail industry there. What can we teach them?” he says. “But we’re looking at getting involved there – one or two opportunities.
“In a decade I’m hoping you’ll find the business has grown, hopefully at the same pace as the previous decade. That will require a lot of thinking, a lot of commitment and a lot of energy – and I’m hoping that you’ll find me right here still.”

Africa’s Sam Walton

It was a sunny southern hemisphere spring day in October 1931 when businessman Max Sonnenberg and his son, Richard, opened the doors of a small shop in Cape Town&#8217;s city center. Allegedly housed in the dining room of the old Royal Hotel on Plein Street, within spitting distance from parliament&#8217;s back entrance, the store promised to bring value and affordability to South Africa&#8217;s white middle class.
Timing was far from ideal. The Wall Street Crash two years before had submerged the world in a frothing whirlpool of economic turmoil. South Africa too, was affected. Despite hardship dominated by poor economic growth, tumbling exports, and mass retrenchments, the store was a success. It did so well that it captured the entrepreneurial imagination of serial businessman Elie Susman who had made his fortune from cattle, banking, and retail.
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Having a genuine eye for business opportunities, Susman was taken aback by the success he saw, prompting him to financially back the opening of a second store in Durban. More branches followed suit and soon Woolworths was deeply embedded in South Africans’ day-to-day shopping lexicon.
Since the 1930s, Woolworths has morphed into a multi-billion-dollar holding company, comprising the familiar Woolworths food and clothing brand, as well as Australian brands Country Road and David Jones. The latter, a denim retailer, was bought last year for $2 billion. The acquisition proved to be a massive boost for Woolworths Holdings Limited (WHL), which saw its profit over the first six months to December 28, 2014, jump by 29%. Sales increased by 55%, to $2.56 billion. Without the David Jones business, sales would have grown by only 12.5%.
The David Jones acquisition also led to an expansion of WHL’s footprint, to 1,200 stores in 15 countries worldwide, including Australia. The 633 Woolies branches in 12 African nations, including Botswana, Namibia, and Kenya, however remain the company’s backbone. This number is likely to increase.
“We want to grow our footprint by some 10% per annum for the next three or four years,” says Group CEO, Ian Moir, adding that a lot of attention will go to the food side of the business. “Our food footprint has more than doubled since 2010.”
While WHL has been doing well, things have not always looked bright. The retailer was badly affected by the economic crisis of 2008/2009, which sank South Africa into its first recession in 17 years. Moir says the attitude of the company, which only comprised food and clothing at the time, towards its customers, was one of the culprits.
“We had become complacent, arrogant, and too expensive, and we were not listening to our customers. As a result, our sales plummeted during the recession,” he says.
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The downturn forced Woolworths to rethink its strategy.
“Someone once said that one should never let the benefits of a good recession pass by,” says Moir. “The Woolworths of today sees the customer as king, not the product. That is the big difference. If the customer thinks we are wrong, then we are wrong. If the customer thinks our prices are too high, then the prices are too high. That has been the biggest transformation since the recession.”
Complaints are taken seriously, says Moir.
“We used to be known as arrogant and not wanting to listen. Today, we reply to all complaints, queries, and criticism through our customer communications and social media teams. I even get some of them.”
The Woolworths approach has been well received in South Africa, as well as in other African countries such as Botswana and Namibia. Here the brand is still growing substantially. In some countries however, Woolworths didn’t manage to get off the ground. Nigeria is one of them. Last year the company decided to pull out of Africa’s largest economy for the second time.
“We were losing money hand over fist. Nigeria is a very difficult market for any apparel retailer to make money in. Firstly, the Nigerian retail market is largely informal, with very few shopping malls. The rental of the shopping malls that do exist, is very high,” says Moir.
“Doing business is very difficult, generally speaking, from traveling around to getting goods in the country,” he says, adding that Woolworths uses the same suppliers regardless of the location.
“We made a mistake by going into Nigeria, despite having the right partner,” Moir confesses. “It was the second time we tried it, and we won’t be trying it for a third time. Nigeria just doesn&#8217;t work for us.”
Moir doesn’t see Woolworths’ Nigeria adventure as wasted time. Making mistakes, he says, makes you grow.
“You, as a business, can always get better, and you will always make mistakes and there are always things to learn. My biggest fear is complacency in a business. If you think you won’t make mistakes, then you will fail.”
In other countries, business is going well. Moir says this is a result of the way Woolworths treats its employees.
“Our salaries are competitive and our benefits are better than elsewhere.”
Based on feedback from employees, the jobs portal, Indeed.co.za, gives Woolworths four out of five stars as an employer with staff discounts and incentives lauded. It, however, says salaries are too low and work hours too long.
The brand’s strength, according to Moir, is associated with value, principles, integrity, and sustainability.
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The company donates $79,000 to educational causes every week. Moir also says the company is committed to environmental sustainability, such as minimizing water consumption and reducing the use of genetically modified organisms (GMOs).
Despite its good intentions, Woolworths has faced the wrath of environmental activists more than once, and for a multitude of issues, including the treatment of pigs, the use of GMOs and claims the company’s free-range milk was not free-range at all.
“That type of activism is good for us as it forces us to do the right thing,” says Moir.
“That is why we, apart from selling free-range eggs, want to ensure that free-range eggs are used in all Woolworths branded products, down to the cake mix. This was a tough process. You are, after all, dealing with large suppliers of which you are not the only customer. As a result, you can’t do things as fast as activists would want you to. It takes years sometimes.”
Environmental activist, Caroline Hurry, however, claims the company won’t speak to her.
“They refused to answer any of my questions in writing. In the beginning, when I started investigating their practices in relation to animal cruelty, they suggested I call them for ‘a little chat’. But being a journalist, I insist on answers in writing. I have also found that the soy in their bread had the second-highest GMO content in the country&#8230; Woolworths doesn’t label all their GM food. At best, the label says ‘may contain GMO’. I have now been blocked on Twitter, by the very account that told us to ask questions,” says Hurry.
While he has sympathy for environmental activists, Moir is no fan of the Boycott, Divestment and Sanctions (BDS) campaign, which calls for the active isolation of Israel and for the country to end its occupation of Palestine. In South Africa, BDS has its teeth firmly sunk into Woolworths. Their objective is to force the retailer to stop selling Israeli products – 0.4% of its total offer.
“These protests were very unpleasant for our staff and customers, with pig heads being left on our shelves and people charging through stores, knocking over our goods, destroying them even. We have had protestors lying on the floor, pouring blood over themselves. A court order has stopped this.”
Despite the court order, the protesters claim their actions were costly for the retailer.
“The campaign is successful and growing. An independent report, released by Wits University, states that WHL has lost close to $3 million, since the start of the #BoycottWoolworths campaign in August last year. A survey among 300 people has shown that 84% of respondents said they stopped shopping at Woolworths shortly after we called for boycott,” says BDS coordinator, Muhammed Desai.
Despite a few setbacks, Woolworths has grown from a small store in Cape Town to an international retailer – a story of shopping bags
to riches.

How David Became A Goliath

The Adams Pavilion, a dusty shopping center selling aromatic oils, kitschy cushions and costumes in the noisy Sar Bet area of Addis Ababa, is hardly the setting for a flagship shop selling high-value branded shoes to 16 stores around the world, from Singapore to Switzerland to Silicon Valley.
Yet, that is where it all started – from a single outlet in Ethiopia.
Above the din of traffic outside, the diminutive Bethlehem Tilahun Alemu, in jeans, a white T-shirt and blue blazer, her hair coiffed into a careless bun, is retelling the genesis of her hugely successful business, soleRebels, 10 years ago.
To her customers across the world – ranging from techies in San Jose to gym nuts in Taiwan – she has broken every popular perception of Ethiopia. Instead of handouts going into the country, here was handcrafted footwear – with soles made of recycled tires – going out of it to stores across the globe.
<img decoding="async" loading="lazy" class="size-medium wp-image-30632 alignleft" src="http://www.forbesafrica.com/app/uploads/2017/05/XB4R0064-1-200x300.jpg" alt="" width="200" height="300" srcset="https://cms.forbesafrica.com/wp-content/uploads/2017/05/XB4R0064-1-200x300.jpg 200w, https://cms.forbesafrica.com/wp-content/uploads/2017/05/XB4R0064-1-300x450.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2017/05/XB4R0064-1-600x900.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2017/05/XB4R0064-1-768x1152.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2017/05/XB4R0064-1-683x1024.jpg 683w, https://cms.forbesafrica.com/wp-content/uploads/2017/05/XB4R0064-1.jpg 682w" sizes="(max-width: 200px) 100vw, 200px" />
We are sipping espressos – from the local Starbucks-inspired café below her shop – and Alemu mentions that her humble middle class background taught her to be industrious. Her mother helped as a cook in the kitchen of a local hospital, while her father worked hard as an electrician in the same hospital to raise his daughter and two sons.
“Growing up, I saw people trying to make it every day at the hospital. Leprosy patients getting treatment would also work. What I learnt from them is their dedication, how they worked hard and loved life and their culture,” says Alemu.
At home, she had the same rights as her brothers; her parents saw her as no different.
“In college, I wanted to create something authentic at the same time global, supporting the local community. But 10 years ago in Addis Ababa, it was almost impossible to do something like that because of the infrastructure.”
Alemu got married, and at the age of 25, quit her “boring” accountant job in a private company wanting to turn entrepreneur. She had nothing going for her except hope. She wanted to create a brand out of Africa, tapping into the local culture and talent.
“I had to put together a plan and be really brave.” But why shoes?
“I was looking at what people did widely in Ethiopia, and that was scarves, dresses and robes. I wanted to be innovative, and start from scratch.”
Recycled tire didn’t cost anything, and it was not an alien concept. Ethiopia’s rebels had famously fought off the invading forces in ‘barabasso’ sandals made of old tires.
Alemu took this idea and self-financed ($5,000) her dream, starting with five workers in a workshop on her grandmother’s land in the village of Zenabwork.
It took her two years to get it right. Initially, the prototypes weighed six kilos a pair.
“The shoes were really heavy, as I didn’t know how to cut the tire. They looked really funny. I kept trying and trying to develop the perfect product.”
She knew she had to come up with an artisanal product using local fibers she could sell globally moving up the Africa value chain.
“In my factory, in Yeshideble, we don’t have any machinery. You will find a lot of people sewing. It’s like music. We have a unique way of working with communities, where we have a culture of spinning and making our own clothes at home. These women, when they are old, are not so productive, so we give them jobs. We have 120 women who spin for us, they don’t need to go out, we collect [the goods] from them every week…These are mothers, grandmothers…they have their coffee and spin for soleRebels.” They are also paid more than the industry standard.
She is now building a $20-million state-of-the-art factory, to be completed by the end of the year.
“We currently do 200 pairs of shoes a day, when the big factory opens, we will do 2,500 a day.”
Alemu has standalone stores in Barcelona, Vienna, Zurich, Athens, and is set to open her first shop in Canada. She has 12 stores across Taiwan. Her label is certified by the World Fair Trade Organization.
<img decoding="async" loading="lazy" class="size-medium wp-image-30631 alignleft" src="http://www.forbesafrica.com/app/uploads/2017/05/MC_OPEN1-200x300.jpg" alt="" width="200" height="300" srcset="https://cms.forbesafrica.com/wp-content/uploads/2017/05/MC_OPEN1-200x300.jpg 200w, https://cms.forbesafrica.com/wp-content/uploads/2017/05/MC_OPEN1-300x450.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2017/05/MC_OPEN1-600x900.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2017/05/MC_OPEN1.jpg 666w" sizes="(max-width: 200px) 100vw, 200px" />
Her colorful shoes retail from $65 onwards. Earlier this year, Alemu diversified her business to include bespoke leather jackets (available online at about $60), dresses and bags.
Alemu is also launching in September a new coffee brand, Garden Of Coffee, “hand-roasted by traditional Ethiopian coffee artisans”.
Is the mother of three a billionaire yet? There is slight hesitation, and then a smile.
“Let’s see…The company’s growing but we are always looking at investing our monies somewhere.”
And then she says in one breathless sentence: “It doesn’t matter how much I have. What I want is to create a platform for everybody and they can come and work. And it’s something I love to do. I see it, I invented it, it grew up with me, it’s inside me, it’s my baby.”
Ten years ago, nobody talked about entrepreneurs, says Alemu.
“I was not looked at as an entrepreneur, only as a businesswoman.”
Times have changed. Alemu was recently awarded a PhD (Hons) in commerce from Ethiopia’s Jimma University.
“The government believes in entrepreneurs, and I am really happy we get noticed at the end of the day,” she says.
&nbsp;
Her guiding philosophy
“One of the things helping me is not to see myself as a woman. When I see myself as a woman, I always fail. We don’t have the confidence, we always say yes, we don’t say no – that’s going to take you down. Whenever I deal with people in offices, I am a business person. I have a goal and no one can stop me. All I think about is my business and my customers.”
If the last decade was this eventful, where does she see herself in the next 10 years?
“I will probably have 500 stores around the world,” says Alemu, ever the optimist set to ensure that with every step, her country moves forward too.

bethlehem-tilahun-alemu-founder-ceo-soleRebels-footwear-cropped

Heart And Sole

Stars are still out as Dirk Schlebusch starts work at 4AM. It is the busiest time of day for him as truckloads of potatoes arrive at the Joburg Market. In the next few hours, they will be traded as commodities worth millions.
The market’s 10 halls, that span 64 hectares, are piled high with pallets of every kind of fruit and vegetable. This is the primary fresh produce exchange of South Africa as well as destinations across Africa. It is also the largest of its kind in the world.
Before noon, the dynamics of supply and demand, of middlemen’s mark-up and the whims of what nature offers up on the day, merge to determine the first price tag on fresh produce as it exits the market. Food price inflation and food security issues are becoming more and more important as population numbers explode and demand soars. It puts the links in the chain, like the passage of food through the market, under increasing scrutiny.
Schlebusch is a buyer with Wenpro, one of the most established agents at the market. They serve as middlemen between producers and buyers. He specializes in potatoes, like his father has done for 40 years.
Potatoes and onions are big sellers at the Joburg Market and together fill out their own hall. An average day sees around 1.4 million kilograms of potatoes traded.
Schlebusch has standard daily orders from big retail chains, wholesalers and the companies that process vegetables for frozen food products. He also sells to restaurants, hawkers and walk-in buyers.
“We have potatoes for everything and potatoes with every kind of price tag to suit whatever buyers are looking for.”
When determining a daily price, Schlebusch checks the quality of physical stock that arrived on the day, examining stats from previous days and pulling up stock sheets that detail the availability of potatoes throughout the market.
With fresh produce you don’t have the luxury of stockpiling for extended periods to influence the market in the hope of fetching a higher price. It’s too much of a gamble &#8211; fresh food perishes or loses quality and there’s no saying what hand nature will play.
Schlebusch says it’s ultimately down to supply and demand, the best produce still fetches the best prices and the highest bidder still wins. It’s how the market has functioned for 120 years, from the days of its origins in Newtown. The market is just a few years younger than when the city of Johannesburg itself was founded.
Schlebusch’s ear is glued to a phone, communicating with buyers and farmers throughout the day.
“It is about relationships. If you don’t give your farmers the service they expect they’ll go to another agent and if your buyers don’t get the produce at the prices they want they will also go somewhere else,” he says.
As he chats, a call comes through from an anxious farmer. A lorry has been delayed; it never made it to market on time to join the sample displays. It means an instant drop in price for the farmer as his potatoes become day-old stock.
It’s the middle of July, and at the market the bulk purchase price of Grade 1 bananas is worked out at around R4.45 a kilogram (R1=$0.10). They will end up in the mid-range supermarket upwards of R8.99 a kilo. The top-grade potatoes are selling at R46 for 10 kilograms. The price almost doubles at retailers.
The price gap from market to retail comes with everyone along the value chain taking their cut. Tracy Davids, an analyst at the Bureau for Food and Agricultural Policy (BFAP), says day to day market prices are more volatile than what end consumers see at retail level. The price hikes come from transport and labor costs, repackaging, labeling and operational and distribution overheads that retailers incur. Added to this is the rising fuel and electricity costs in South Africa.
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Davids says managing food inflation ultimately comes down to having a more robust economy.
“Food security will always be a critical issue and at the end of the day it’s the consumer who pays more and more as costs in the value chain increase, which is why we need effective value chains,” she says.
Piet van Zyl, who runs Wenpro’s fruit section, outlines some of the unique challenges of handling fresh produce. Although the value chain comes with mark-ups, disruptions can cause even more hikes. Wenpro has seven cold rooms, each runs at around $470 to $560 a month. It makes load shedding and power cuts his biggest nightmares. Agents are responsible for the upkeep of their own pallets and fleets of forklift trucks that criss-cross the halls in urgent beeps. Agents are also responsible for the health, safety and general cleanliness of their halls. It adds up to operating costs that run into the millions.
“Agents must perform and grow or the market will start taking away your floor space,” he says, waving his gloved hand, protected against the early morning chill, across the expanse of the hall that is Wenpro’s terrain.
Agents must be able to offload produce fast enough, retain the integrity of the product on the warehouse floor and sell as quickly as possible at the best price possible.
“Sometimes the agent’s buyers resort to salvage sale, it means they will make up the loss from their profits to make sure that the farmer still gets his base asking price. It keeps the farmer loyal to the agent and opens up floor space. Good buyers know where they can afford to take a loss and where they can make a profit,” says Van Zyl.
Agents take up to 7% on any deal, 4% goes directly to the agent’s buyers. The market takes a 5% cut.
It’s something that’s top of mind for Gugu Hadebe. She is the director of Egoly, the newest of the market’s three Black Economic Empowerment agents.
Hadebe says breaking into the market as a black woman was not easy. Her advantage is that she was previously employed by the Joburg Market. She understands the role of agents as well as the cultural, political and historical nuances attached to farming in South Africa. Another significant insight she had was to team up with old hands in the business, which plainly put, meant white males.
“I knew I had to have the right partners, people who have been in the game longer than I have been, people who have built relationships with farmers and buyers,” she says.
Egoly currently has eight sales staff. They concentrate on selling to hawkers rather than competing at this stage, with the likes of Wenpro, with its 350 staffers, who target bigger fish like retail giants.
“There is a big hawkers market out there that’s still growing in South Africa. People still buy from the [old lady] on the street where they pay less, where they may know the seller and they pick and choose as they like,” says Hadebe.
Each of the market’s 14 agents has to find its niche to deliver a value-add. Some do specialty items like sourcing exotic dragon fruit from South East Asia, or making sure there’s enough ginger for the explosion of sushi bars across the country. Others offer pre-packaged produce or some, like Egoly, target specific sectors within the pool of buyers.
“We don’t sell anything as a market. It is a free market system, we are just a platform where anyone can come here to sell through an agent or to buy from whomever they choose,” says Simangele Sekgobela, CEO of the Joburg Market.
Sekgobela adds that the market has had to respond to changing demands, like the key issues of traceability of produce and minimizing human handling of food.
“We’ve also had to adapt to meet international standards, which includes things like maintaining an unbroken cold chain and following standards for pesticide limits,” she says.
The adapt or die principle applies to the market, like it does to almost everything else.
“We have seen a decline in the stock that comes through the market in the past few years. Retailers are doing more direct sales from farmers and developing their own storage facilities. In the future, there will also be more virtual sales that will mean produce will not physically come through the market. It’s the reality of a free market, but you’ll never replace the market completely. You will still need the market for its facilities, its quality control and convenience of having everything under one roof,” says Sekgobela.

Why We Pay Through The Nose For Food

It is a Tuesday morning in Rustenburg, the heart of the platinum belt, in the north west of South Africa. On days like this, at the end of the month, this town is usually buzzing with business. The hardship of months of striking at the platinum mines has turned Rustenburg into a ghost town – a poor one at that.
“There’s no business at all here, sales have dropped drastically since the strike resumed in January. We don’t even come close to the business target. Food is going to waste as there are no customers buying. The business has reached its all-time low figures,” laments a restaurant manager who has put her staff on short time.
The manager at this restaurant, who asked not to be named, says because of the long Association of Mineworkers and Construction Union (Amcu) strike she was instructed to reduce her staff’s working hours and pay.
“The bosses are aware of the situation. Generally, a sound business practice is that if you fail to make profit, you either close shop or downsize the staff. I have a fear this will happen if the strike does not end soon. People are suffering; I have a fear that crime will rise because people are desperate to make ends meet. In this shop we also fear for our lives. What if someone walks in armed and demands we hand him chicken,” she says.
At around lunchtime, Marikana Fruit and Veg co-owner, Michael Bendu, was removing rotten bananas from the shelves. He says he hasn’t had a customer all day.
“For me the business is 80% down and I am about to close shop if it continues like this in this month. Electricity, salaries, the rent of this shop and my house are taking their toll. I can’t deal with it.”
Bendu supplies mine hawkers and was making $955 a day before the strike.
“You can stay with me for the day; I promise you will hardly see customers entering the shop. Those who come are not buying in bulk. We can’t carry on like this. I have plenty of credit accounts with my customers but they can’t pay and I understand their plight,” he says.
Bendu often ends up giving away his fruit rather than see it rot.
“Here we survive by mineworkers. The mines are the backbone of our economy. I don’t know what will happen when the backbone collapses,” Bendu.
A few hundred meters from Bendu’s shop stands Marikana Wholesalers, operating since 2006, a stone’s throw away from where miners camp.
Owner, David Neto, says he lost around $955 though rotting food in March alone. In the past, he used to lend money to his hard-up workers but he can’t afford that anymore.
“I am at my bones. I can’t afford to further cut down the prices. It doesn’t make business sense,” says Neto.
“My staff is currently on flexi-hours. I have to force them to take leave, taking advantage of the poor business. The current situation is hurting everyone, I can’t afford a fulltime domestic worker anymore and I need a plumber but I can’t call him. The situation is creating all kinds of nonsense. Everyone is desperate these days. Taxis are forcing passengers off buses. It’s chaos here. My turnover is half of what it used to be. It is painful that I am paying my workers to look at passing people and watch the sun turning,” says Neto.
The taxis that ferry thousands of miners are also feeling the pain.
“Business is bad; the strike is the worst in the history of platinum mines. These are the days we would be seen busy but people are not using our services. This strike must come to an end because the banks will repossess our taxis as we are failing to pay our debts,” says Mojalefa Rantoa, a taxi driver.
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On the side of the road, two Mozambican hawkers, Gina Javana and Julia Makwakwa, watch their pile of spinach and tomatoes rot, along with their dreams.
“Worst time ever. We are so despondent. We came to Marikana to make ends meet but now we don’t know why we should stay when things have turned this bad. We couldn’t return home in December and Good Friday is here. We have no means to see our families, we are stuck here,” says Makwakwa.
Godfrey Jakaya, a 30-year-old Tanzanian herbalist, says in his five years in Marikana it’s never been so bad. He has had to move to a smaller shop to save rent.
“The business is not doing well, my family is living off my savings but it’s drying up. I am just glad my two children are too young to understand what we are going through with my unemployed wife. No more KFC (Kentucky Fried Chicken) meat for them.”
The strike has led to increased violence in the area. Business owners are the targets of robbers who are desperate to get their hands on their stock. Some striking miners have also been involved in clashes with police and workers on their way to the mines.
It has been tough on the strikers, who used to earn around $400 a month, as well. A group of striking Amcu members is seen walking aimlessly in the market area.
“Our landlords are on strike as we are. They understand we can’t pay as we are not earning a penny. But we have an understanding that we hustle for electricity and that’s all we can manage,” says one striker, who refused to give his name.
If the strike is still on when you read this, the hustle of Rustenburg can only get worse.

Rotten Food,  Rotten Strike

Edward Moshole was destined for a life as a cleaner in a factory; until inspiration came on a breath of fresh cherry-scented air in a storage room surrounded by detergents. Now the former cleaner sells 70,000 bottles of detergent a month to the largest retail shopping chains in South Africa, worth R12 million ($1 million) a year.
“A broomstick is what started my business. It was the only thing that I owned… Getting a job as a cleaner at Enterprise changed my life; them giving me the boots and overalls and saying ‘here, clean’. I could feel in my heart I wanted to be something more,” he says.
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With humble beginnings in the small township of Gapane, a place few have heard of in the Limpopo province of South Africa, Moshole’s story is uncommon. He grew up without parents from the age of 16 and failed the eighth grade five years in a row. Moshole says when he was young he never dreamed he could become a millionaire.
His life changed when he moved to Cape Town to live with his brother. He says the move woke him up. Moshole finished his schooling and became a cleaner in a factory run by food chain Enterprise. In this factory, in a two-square-meter storage room that smelled of cherries; among piles of detergent, bleach, cleaners and soaps, Moshole had an idea.
“Getting into that store room, I could see that the quality doesn’t measure the performance of the cleaners. I could improve things. I could see myself becoming a detergent manufacturing champion,” he says.
It began with $6 and a broom stick says Moshole. The then cleaner went directly to a manufacturer and bought a 5-liter bleach bottle. His first sales pitch was short and simple.
“I went to an ordinary person and said ‘look I’ve got detergent, I’ve got cleaner and they go for R15 ($1.30) a liter’,” he says.
Moshole’s part-time business took off. He targeted his co-workers who finished work too late to make it to the shops. A few months later, Moshole began selling door-to-door. He moved to spaza shops and sold to neighbors.
Moshole soon grew tired of the life of a middleman salesman and decided to create his own brand. With the money he earned, he bought a pile of 25-liter spice drums from Enterprise for around $1 each. He spent the following weekends churning detergent with a homemade metal mixer in his backyard.
“At the end of the day my hands were blistered,” he recalls.
For three years, Moshole toiled over his blue spice drums. His brand, Chem-Fresh, garnered the interests of supermarket giant Pick n Pay, owned by Raymond Ackerman, who is ranked 38th on FORBES’ list of richest Africans. It was the big break that Moshole needed.
The deal took seven years to sign. Along the way, Moshole learnt some hard lessons about mass-market production. One of them was to change from an informal backyard business to a formal one. He named his company ‘ebinter’ and started selling his Chem-Fresh products through it. Moshole also learnt he needed to become an accountant as well as a salesman. But it was the competition in the detergent business that was hardest to handle.
“Retail must retain a formal market. It’s tough. You negotiate with a buyer who takes 300 calls a day from others who supply the same product as you. Then there you are competing with the multinationals and then you are competing with the companies who own no-name brands. Your product needs to be cheap and needs to be of a consistent high quality,” says Moshole.
These days, Moshole’s factory in Wynberg, an industrial sector a few kilometers outside of Sandton, is a far cry from his backyard. Thousands of plastic bottles are piled to the ceiling. A $90,000 mixer churns bath soaps and hand wash. Another mixer prepares bleach for the day. Moshole says it takes half an hour to produce 500 liters of Chem-Fresh bleach.
His clientele has now spread across supermarket chains Spar, Pick n Pay, Massmart and Dischem. The last two were recently acquired in December.
Despite landing these promising contracts the detergent maker remains humble. He keeps the broom that he started with as a reminder of where his dreams began, minus the brush which fell off a few years ago.
With $6 and a broomstick, Moshole began selling detergent to his colleagues, bottle by bottle. Now, he sells them in the thousands. What’s more, Moshole proudly claims he has never missed a delivery.

The Unlikely Millionaire Cleans Up

Kopano, dress me up but I don’t want to look like $1 million.’
This is an instruction that 27-year-old Kopano Motsoeneng is very familiar with. ‘While the wheels of fashion are moving at the speed of light, many women still value the safety of classic, timeless style. These are the women Motsoeneng caters for. He is a stylist whose passion for making women look good has motivated him to embark on a career where he has the pleasure of telling high-earning women what to wear.
Motsoeneng’s introduction to the fashion world came at the tender age of 11. He recalls advising girls in his school on their Matric farewell dresses.
He also devoured the contents of any fashion magazine he could get his hands on, until he finished high school, and registered at a fashion school in Johannesburg, South Africa. Here Motsoeneng learned that being a fashion student did not necessarily mean that all you could become was a designer. He was hopeless at making patterns, but he was a skilled salesperson.
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He joined small boutiques, which allowed him to interact with cust-omers and introduce them to different designers’ brands. Motsoeneng identified a unique opportunity to pair designers with potential clients.
In 2012, he launched Strictly KP. His main order of business was hosting intimate fashion events where a number of local designers and potential clients gathered in a small venue set up like a boutique store. Designers showcased their garments and clients nibbled on snacks and sipped champagne as they shopped.
With each gathering, Motsoeneng cemented his relationship with the circle of designers. They began to trust him to sell their clothes, while maintaining respect for their labels. His network to diversify, as clients began seeking out Motsoeneng’s fashion advice talent on a more personal level.
One day he received an unusual request: ‘I’m going on a trip, do you mind packing for me?’
“All I thought was, ‘you only see this on reality television!,” Motsoeneng laughs.
It was his first personal styling job. The client was going to Europe and needed him to pack her luggage “strategically”. He was paid $37 just to pack lightly enough to allow the woman space for shopping spree purchases. She must have been happy with his decisions; she still calls on him regularly.
With each consultation, Motsoe-neng aims to help a woman identify her signature style and feel confident about the choice. His typical clients are self-assured corporate leaders, who need him to diffuse the black, grey and navy items in their wardrobes with some vibrant colors that can they can wear to social events.
Over time, however, Motsoeneng has learnt that not all corporate women wear black, grey and navy suits. Twenty-nine-year-old head of operations at Liberty Intelligence Insurance, Lerato Olahleng, expresses her quirky personality within the confines of her ‘boring’ office dress code.
When she first met Motsoeneng, he helped her pick out an outfit at the store where he worked. He studied her style and would keep her informed about any new stock that she might be interested in before it hit the shelves.
Olahleng says Motsoeneng has helped see her wardrobe’s potential.
“He’s helped to get rid of that feeling you get when you look into your wardrobe and think you have nothing to wear,” she says.
For Olahleng, money is no object when it comes to Motsoeneng’s services. She says she loves being able to sleep in on a Saturday morning and spend much-needed quality time with family and friends, instead of being at the mercy of busy, overwhelming malls, trying to find something to wear.
Motsoeneng introduced Olahleng to the brain child of 29-year-old designer Isabelle Lötter, Sies Isabelle! The label is aimed at larger women, who enjoy looking both feminine and fashionable.
And when Olahleng saw an ele-gantly draped tweed coat-dress by Sies Isabelle!, she couldn’t resist. Lötter says the coat-dress is a top seller because it is a flattering cut.
“My target market is a curvy figure like myself. I basically design for me… there’s a big gap in the market for curvaceous women who have style but can only shop at stores like Donna Claire,” explains Lötter.
Her range is so wide that both her 75-year-old grandmother and a 14-year-old cousin can wear her designs. Lötter particularly appeals to professionals like Olahleng, because her clothes are expressive and not rigidly corporate; they can easily be dressed up or down.
The fashion business is a tough one. Countries like China are mass producing their goods much faster than the local industry.
“South Africa’s textile industry is almost non-existent at this point… a lot of my fabrics are imported,” Lötter admits.
She says South African designers are no competition for China, mainly because local consumers are not discerning enough.
“They don’t understand why they should pay $67 for a dress when they can buy it for $9.60 at China Town.”
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Despite what you may think, Motsoeneng does not only style women. He consults with one couple on a weekly basis, planning both their wardrobes for the week ahead. At first he was advising only the woman, but one day she asked him to style her husband, a prominent businessman who travels frequently. When he received a message saying, ‘Thank you so much for picking this outfit for him, he went on his trip with a spring in his step’, Motsoeneng realized how much a good outfit can do for men as well.
That aside, most of his clients are women. One of the biggest lessons he has learnt is that even high-powered businesswomen have insecurities.
“As much as women say they don’t care what people say, they really do, because they are often judged by what they look like,” he explains.
One of Motsoeneng’s more unusual clients is neither a businesswoman nor a corporate player. Karusha Pillay is a nursery school teacher who, in her own words, “doesn’t get dolled up for work” in case she ruins her clothes. Outside work, however, she embraces her femininity and wants to look glamorous.
Pillay does not earn a lot of money, but says she finds Motsoeneng’s services invaluable, because he sources pieces that are tailored for her body shape and which last season after season. Pillay says she was won over by Motsoeneng’s personal approach.
“Styling is very personal because I come into your personal space, but I always try to establish trust with my clients on first consultation,” says Motsoeneng.
Another of his secret weapons is using young, talented South African designers who have the potential to compete with international labels like Zara, but cannot afford the rent. Sourcing from less recognized brands gives his clients a sense of exclusivity, which is often lost when trawling the retail chains in a shopping mall.
And despite all the challenges that the South African textile industry presents, Motsoeneng believes that “you are not taking a step back; you’re simply doing the cha-cha”.

Pairing to get the right fit

He’s nearly 60; a university dropout who moves like a cat through business. Ian Fuhr is probably the unlikeliest owner of a beauty chain you will ever find. He finds his constant change of career exciting, others may think him confused.
It all began on July 1, 1976, two weeks before the Soweto student uprising. Fuhr, then 22, and his brother, Rodney, opened the doors to the predominantly black-staffed retail store Kmart. After five years in retail, Fuhr was lured away by the sweet sounds of the music industry. His record company, Munjale Productions, signed artists like Letta Mbulu and Hugh Masekela.
Fuhr and fellow South African Clive Calder from Jive Records, an American label, bought a mobile recording studio, which they drove to Gaborone, Botswana. This was in 1983, when the two would camp out at the Woodpecker Inn to record exiled artists. Five years later, Fuhr left the music industry and rejoined his brother at Kmart.
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The store name was changed in 1988 to Super Mart, after a lawsuit by the American chain that owned the trademark for Kmart.
“They came into one of our stores, all in suits and stuff and started taking photographs. So the manager of the store took one look at this and said: ‘No ways, you can’t take photographs’. The guy started panicking and tried to run out the door and they locked him in the store,” says Fuhr.
The Americans added a lawsuit for wrongful arrest.
Fuhr left again in 1991 to start a new career as a race relations consultant for seven years.
It was in 2004 that Super Mart was sold to the Edcon Group—a leading clothing, footwear and textile retail group in southern Africa—for R112 million ($16,034,400). After the sale, Fuhr worked directly under the Edcon CEO, Steve Ross, for 18 months.
When you ask Fuhr if he’d ever imagined, when he first started out, that his company would be worth millions, he laughs and says: “No ways”. He says the key to his success has been to sort out the employees first. He says treating and paying them well, coupled with getting the culture right, lead to unimagined levels of productivity.
With another career in his rear view mirror, Fuhr was far from finished.
“I looked for my final shot into the entrepreneurial world,” Fuhr says beaming.
And what a shot that was. An innocent suggestion by his massage therapist, Liz Goldberg, turned Fuhr into a gap in the salon market. With only one existing visible brand at the time, Fuhr asked himself questions like: “Why hadn’t people done this before?”
“I thought there was an opportunity. There was a gap in that business and the only problem was to make sure there was enough business in the gap,” says Fuhr.
In 2004, with some money from the Edcon sale, Fuhr and his two partners, Goldberg and Johnny Marks, bought the first of five pre-owned salons and ran them under their original names while they got a feel for the business.
Branding consultants gave Fuhr and his partners a list with possible names for the business. Halfway down the list was “Sorbet”. Funnily enough when Fuhr called Goldberg to find out what she thought of the list, they realized they had both fallen in love with the same name. It was a done deal. The logo was a different story and it took four months to finalize. The business was launched in August 2005.
If the beauty industry was so lucrative, why not create a spa? Fuhr felt the salon market was small and fragmented, while the competition with spas was too great. The difference between Sorbet and other salons is that it focuses on the retail to create the bulk of its revenue, with treatments being a secondary source of income. This is proven by the retail styling of the salons, which Fuhr refers to as stores. According to him, the industry norm is to earn 65% from treatments.
With retail being such a large component of the company, the trick was to find products that were big enough to piggy back. The answers were the imported up-market skin care brand Dermalogica, South African produced Environ and the nail care brand Essie.
The first few years were hard for Sorbet as it tried to create a three-phase concept that not everyone found easy to buy into. Fuhr’s “You come to work to serve and not to make money” philosophy meant a mindset change among the staff. With around 56 stores, 15 of which are company-owned and 450 employees, Fuhr still does all the induction training for the entire group’s staff.
The company-owned stores were to develop the model and build the brand before franchising it in 2009. Due to the nature of the business, franchising was always the plan. A salon franchise costs between R850,000 and R950,000 ($95,455-106,694), while a nail bar is between R550,000 and R650,000 ($61,773-73,000).
In September 2011, Sorbet gained access to the 3.66 million club card members of Clicks—South Africa’s large pharmacy, health, home and beauty retailer. It began when three, female Clicks senior executives, who were Sorbet clients, telephoned Fuhr. It has now blossomed into product development: Clicks has developed a range of 17 Sorbet bath and beauty products, with further plans to diversify.
“We had been thinking about doing our own range, but we had been dabbling a little bit with it and it wasn’t anything exciting,” says Fuhr.
With the hope of someday getting into hair, Sorbet was, again, not looking to compete with the big hair salons in the country. The American concept of dry bars was a new moneymaker in South Africa.
Great, but what’s a dry bar? Judging from the pilot store, it’s a hair salon that only washes and blow dries your hair into one of 8 styles. No cuts or color. It still keeps with the look and feel of all the other Sorbet establishments, complete with nail treatments and the front-of-store retail side.
Continuing to do things its way, Sorbet became a franchisee of the Beauty Therapy Institute last year. The school offers training to aspiring beauty therapists and nail technicians and is a finishing school for the company’s staff. Students are guaranteed a job interview for any opportunities at Sorbet outlets.
The nationwide Sorbet stores perform around 40,000 treatments a month, with waxing accounting for 40%.
“There is a hell of a lot of hair that comes out of Sorbet, I can tell you that,” Fuhr laughs.
How well is the business doing? With the average store turnover at R3 million ($336,809) a year, the projections for the year ended February 2013 are R150 million ($16.8 million). Store-for-store growth is at 19% and overall growth for the company is at 40%, in the last year.
With 15-20 new stores planned for South Africa, Fuhr says the country still has a lot of potential and there has been some interest from other countries on the continent as well. As much as expanding beyond South Africa is on the agenda for the next three to five years, Fuhr feels this is too big a venture for his company to go at alone and that a strong financial partner is needed.
So for Fuhr, 60 could be the new 30. It’s never too late to start over.

Tag: Retail

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