Companies
Companies

Retail store closures present opportunities for agile startups

by Dave Nemeth. The writing has been on the wall for many years with clear indications that the face of retail is changing at a rate of knots; and adapting to ever-changing consumer attitudes was going to be a tough road.

by Dave Nemeth. In 2017 an announcement was made that South African retail icon Stuttafords would be closing its doors after 159 years of trading. A variety of reasons were cited, including the downturn in the economy and the rise of digital online shopping. It was clear that retail was under pressure, and the focus shifted to the struggling Edcon brand, which was once the most powerful retailer in Africa. In 2019 the group announced that it would be closing 150 stores but would limit job cuts.

2020 kicked off with Edcon announcing it was to close its mega Rosebank store which was no longer a viable trading option. The same week another shocking announcement was made as Massmart announced it would be closing a total of 34 Dion Wired and Masscash stores, resulting in the loss of approximately 1,440 jobs. It is still unclear whether or not the entire Dion-Wired brand would disappear entirely, but most reports point in this direction stating that all 23 stores would be closing their doors.

In August 2019 Mitchell Slape, a Walmart veteran, was announced as the new CEO for Massmart, replacing Guy Hayward who had spent five years steering the brand. The directive to Slape was clearly to turn the brand around due to declining performance. The economy, load shedding and online sales were announced as some of the leading factors for the slump.

Mass retail store closures is not just a South African phenomenon, but rather a global trend. In 2016 Walmart, which owns a 51% stake in Massmart announced (via CNBC) that they would be closing 269 stores worldwide, which affected some 16,000 jobs. A further announcement in 2019 stated a further nine stores in the USA would be closed.

Coresight research released the following stats in July 2019:
• In the US, year-to-date announced closures have already exceeded the total Coresight recorded for the full year 2018. Coresight Research estimates announced US store closures could reach 12,000 by the end of 2019.
• So far this year, US retailers have announced 7,062 store closures and 3,022 store openings. Compared to 5,864 closures and 3,258 openings for the full year 2018, reported Coresight.
• In comparison, UK retailers have announced 392 store closures and 477 store openings.

The writing has been on the wall for many years with clear indications that the face of retail is changing at a rate of knots; and adapting to ever-changing consumer attitudes was going to be a tough road.

Retail dynamics have changed dramatically since 2007 when Dion Wired launched, but the brand failed to keep up with these changes. Retail has become exceptionally complicated in an over-traded world. Service, instore experience, product offering, stock levels, location and store size are just a few of these dynamics, which interestingly enough, are never discussed when store closures are announced. Many of the products or similar offerings found in Dion Wired were also available in Makro, as well as Game outlets. Both of these stores are also part of the Massmart group.

Hirsch’s, a direct competitor of Dion Wired, and the biggest privately-owned home appliance store in South Africa with mega stores throughout the country, has continued to grow and is consistently opening new stores. The number of these now stands at 12 as well as six Samsung concept stores. Somehow Hirsch’s don’t seem to be as affected as their competition. While no financial reports are available, the stores seem to be going from strength to strength, with a recent statement confirming that, 40 years from their inception, the brand is stronger than ever.

How is this possible when the stores are operating in the same country, with the same load shedding and the same economic woes? Some of the answers may lie in the way in which they run their operation:
• Owners and founders, Allan Hirsch and his wife Margaret, are actively involved in all store operations and are regularly found in these stores.
• Staff are highly trained and product experts; the store management have a meeting every single morning before the stores open.
• The brand speaks about purpose, which they regularly share on their social media platforms. They engage on a personal level with their consumers.
• They empower their staff and mentor them in the entrepreneurial qualities which have made the duo such a success.
• They have their fingers on the pulse at every single level and don’t manage the brand from a distance, by simply reacting to data which appears on a spreadsheet.
• They are an integral part of the entire retail ecosystem.

These traits are very difficult for large corporates to imitate and put into effect. Red tape, outdated ideas, the lack of agility and not understanding that real innovation is not just about digital, are some of the problems which companies need to take into consideration in order to survive and thrive.

We can expect the announcement of many more large retailers facing a crisis in the years to come, but it is certainly not all doom and gloom as the opportunities for new entrants into the marketplace will be immense.

Dave Nemeth is trend forecaster and business consultant at Trend Forward, and a design thinker, innovator, business re-designer, trend analyst, keynote speaker and writer.

 

– Receive the Retailing Africa newsletter every Monday and Thursday. Subscribe here.