exact!
Suzanne Annenberg
Contemporary fashion for South African families.
POSITIONING
The exact! division provides contemporary fashion for South African families in the LSM 5 – 7 categories. Clothing, footwear and accessories are sold at affordable prices. The division sets out to provide carefully selected ranges with particular appeal to women and men aged 30 and upwards, as well as clothing and footwear for children aged between three and 12 years.
Cellphones and accessories complete the product range.
The concept of value for money remains a cornerstone of the division’s positioning, especially during tough economic times when consumers are financially stressed and have limited disposable income.
exact! stores are located in shopping malls, high streets and rural areas, and customers are offered a consistent shopping experience wherever they choose to shop.
REVIEW OF THE YEAR
Difficult trading conditions continued to plague the retail sector during the 2010 year. Sales were negatively affected, highlighting the need to offer maximum value to budget-conscious consumers. Overall, performance was subdued but turnover for the year nevertheless grew by 2,2%.
Product prices crept upwards, particularly during the summer season. This was the result of several factors, chiefly the addition of authenticity and detail in the garments, a devaluing Rand and changes in the product mix.
Both womenswear and menswear performed below expectations and strategies have been implemented to reverse this trend.
The footwear department, which includes shoes for women, men and children, continued to perform well and sales in this department increased by 14,6% compared to the past year. Price inflation was also lower in this department than in the other parts of the division’s business, confirming that customers were very price-sensitive.
Once again evidence emerged that as a category, childrenswear is more recession-resistant than some of the other types of apparel, as adult shoppers continued to cut back on their own shopping in deference to the needs of their children. Boyswear enjoyed another year of outstanding performance, with sales growing by more than 18% off an extremely strong base. Girlswear has not yet reached its potential.
| 2010 | % change | 2009 | |
| Turnover (R million) | 759,8 | 2,2 | 743,5 |
| Number of stores | 205 | 3,5 | 198 |
| Floor area (gross m²) | 62 988 | 7,1 | 58 789 |
| Number of employees (including those on flexitime) | 1 169 | (3,9) | 1 217* |
| Most significant countries from which merchandise is imported | China, India, | China, India, | |
| Bangladesh | Bangladesh |
| Store location | ||
| % of | ||
| turnover | % of m2 | |
| Shopping malls | 47,8 | 48,3 |
| High streets | 28,5 | 25,0 |
| Rural areas | 23,7 | 26,7 |
A breakdown of sales by product category in the exact! stores in the 2010 year is set out in the following table.
| Womenswear | 22% |
| Menswear | 20% |
| Footwear (for men, women and children) | 22% |
| Childrenswear | 13% |
| Accessories | 3% |
| Smalls | 3% |
| Cellular | 17% |
Slow sales, particularly during the summer season, made it necessary to apply high mark-downs in order to liquidate stock which was perceived by customers to be expensive. This resulted in an uncomfortable level of mark-downs as a percentage of sales.
exact! continued to support local clothing manufacturing through a strong collaborative effort between its buying teams and the group’s manufacturing arm, TFGA. Because of product requirements and the lack of local supply in some categories of merchandise, local procurement decreased for the year.
Cellphone sales decreased by 5,6%, largely because of insufficient stock fulfilment by the primary supplier.
| Mark-down statistics | |||||
| 2006 | 2007 | 2008 | 2009 | 2010 | |
| Mark-down value (Rm) | 84,6 | 91,0 | 104,3 | 105,3 | 146,3 |
| % of sales | 14,6 | 14,3 | 15,8 | 15,2 | 20,3 |
Cellphone products saw a slight decrease in their contribution to sales when compared to the previous year, making up 17,0% of divisional turnover. During the course of the year an additional supplier was brought on board.
The division retains its goal of improving the supply chain of products into its stores, in line with the group’s overall initiative in this regard. Top priority was given to projects initiated last year to optimise lead times. Some progress was made and more is expected during the next year.
Further details on the group’s supply chain management and auditing activities are provided in the Supply Chain and Group Merchandise Procurement reviews. An important development this year has been the introduction of a revised supplier auditing process aimed at ensuring that all contractual obligations are being met, including all legal, ethical, environmental, labour, and health and safety compliance.
During the course of the year the division opened ten new stores, relocated four, enlarged four and closed three. The refurbishments and enlargements of stores in Umtata, Rustenburg and East London have proved particularly successful.
The division’s personnel development activities continued to focus on training programmes for store, area and developing store managers, who play a key role in the relationship between exact! and its customers.
Performance measurement, succession planning and talent retention are now firmly embedded in the culture of the exact! division. Further details on the group’s human resource activities – including employment equity, skills development, and occupational health and safety – are provided in the Human Resources review.
A corporate social responsibility project, Ikusasa Lami, launched in conjunction with the Gauteng Department of Education for learners in grades 11 and 12, once again proved successful.
STRATEGY
exact!’s vision to supply “surprisingly affordable fashion to the modern family” is supported by its strategy for 2011.
In order to re-establish its value proposition, particular focus has been placed on offering the right product at the right price. To this end strategies have been designed to ensure a consistent and smooth implementation of the goal of keeping the stores stocked at all times with optimally selected and stylish “fashion solutions” (combinations of clothing, footwear and accessories) selling at moderate prices. The objective is to enable customers to appreciate these qualities when seeking easy-to-combine and comfortable apparel, and so make exact! the preferred destination for the target market.
Supply chain initiatives to increase speed to market and improve supply chain flexibility will allow exact! to provide more of the right merchandise where and when it is most needed, with the ultimate goal of maximising customer service. With this objective in mind, a number of initiatives are being designed to provide a quick response to exceptional sales of popular lines of stock.
Action plans are also being developed to guarantee efficient and reliable sources of supply which are sufficiently flexible to meet exact's requirements.
exact! will continue to maintain high standards in terms of merchandise presentation and in-store aesthetics. This will create an environment that is both aspirational and visually attractive for customers.
| Store statistics | |||||||
| Projection | |||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| No. of stores | 170 | 180 | 182 | 198 | 205 | 212 | 220 |
| Closures | – | 1 | 1 | – | 3 | 3 | 1 |
| Floor area (m2) | 47 855 | 51 386 | 52 831 | 58 789 | 62 988 | 65 000 | 67 500 |
On the employment front, it remains an objective to provide rewarding careers to people from previously disadvantaged communities while ensuring that the supply of talent and skills matches business requirements.
The division intends to open more than ten new stores, to enlarge four and to relocate five, focusing on sites where mass shopping takes place. To increase brand awareness, shop window and in-store branding with an emphasis on promoting value will continue to be developed.
In the next financial year, the division will follow the example of other divisions in rolling out lighting efficiency initiatives in its stores, to reduce levels of electricity consumption. The group’s efforts to reduce its environmental footprint are described in the environmental performance review in the services section.
The division plans to continue its support of community-based organisations.
PROSPECTS
While the public’s spending on discretionary items remains limited, signs of a recovery from the recession are starting to be felt. Interest rates are low and consumer confidence is nudging upwards. While consumers will be hit by hikes in the cost of electricity and transport, it is already evident that the exact! division, with its value formula, is exceptionally well positioned to appeal to its target consumers.
With its renewed focus on the product and price offering, and plans to expand its geographical reach, exact! is ready to take advantage of the expected upturn in the market.
The concept of contemporary fashion designed to appeal to customers aged 30 and upwards, plus their children, remains an excellent exploitable opportunity for the exact! division.
