HomeChoice bets on store in Johannesburg CBD
By Larry Claasen - Nov 5th, 08:04
Retailer and financial service group HomeChoice International has opened its first brick and mortar showroom in the Johannesburg CBD.
HomeChoice is best known for selling homeware, electronic goods, bedding and short-term loans through its mail-order catalogue and online presence. The move to have its own storefronts is part of its strategy of broadening its sales channels.
“For me, it’s really important she [the customer] can shop any which way she wants,” said HomeChoice retail CEO Leanne Buckham.
The launch of its showrooms comes at a difficult time for the retail sector. The pressure on consumers could also be seen in provisions for impairments in its retail operations rising from 18.6% to 20.6%. There is a similar story with financial services, which saw provisions for impairments increasing from 14.9% to 16%.
For now, Buckham said the showroom concept was performing well. HomeChoice traditionally grew its customer base by word-of-mouth and sales agents, but now having a storefront has seen it attracting new customers for both its retail and loan operations.
About 30% of its new storefronts’ customers had never previously shopped with HomeChoice and were now also driving 35% of its new loan activity. The showrooms cost about R6m to set-up and the group expects to make its money back in 24 months.
HomeChoice has so far opened five showrooms in SA and there are plans to roll out as many as 30 more over the next few years.
Buckham said the showrooms were also a way to give customers the chance to “touch and feel” products they could only see online and in its catalogues.
Though trading conditions were difficult, HomeChoice managed to generate compound annual growth rates of 21% in revenue and 23.1% in operating profit between 2009 and 2017.
HomeChoice’s latest results for the half year to end-June saw revenue rise to R1.52bn and operating profit jump 14.4% to R374m for the period.
Keith McLachlan, a small and mid-cap specialist fund manager at AlphaWealth said for him, HomeChoice is more of a financial services company than a retailer, as it not only offered short-term loans but also sold most of its goods on credit.
This meant its profitability was in large part based on the provisions it had set aside for impairments. The issue around its impairments and the illiquidity of its shares was why McLachlan said he did not follow it.Business Live
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