 |
RETAIL TURNOVER |  |
| R1 634,7m | ||
| NO. OF STORES | ||
| 247 | ||
|
MARKHAM DIVISION
INTERNATIONALLY INSPIRED MENSWEAR OF GOOD QUALITY AND VALUE.
POSITIONING
Markham is the largest men's fashion retail chain in southern Africa. Markham stores are located in most major shopping centres and towns in this territory. In its endeavour to make its customers "feel great, look good, and share our passion for style", Markham provides up-to-date, internationally inspired menswear of good quality and value, suitable for all occasions and daily experiences. This is done from conveniently accessible stores, most of which offer a full range of menswear, while in others the emphasis is on fashion casualwear.
While the division targets the LSM 6 to 10 range, the LSM 3 to 5 categories are also buyers of its stylish apparel and cellphone products. Increasingly, shoppers tend to be younger men, often in the age group 19 − 25.
REVIEW OF THE YEAR
While the general economy is still at a delicate stage in its recovery from the trough of the recent past, the Markham division had a successful trading year, particularly in the latter half, and annual turnover was 20,2% higher than in the previous year. In apparel the rise was 18,8% and in cellphones 28,8%. In comparable stores growth was 16,9%. Turnover growth in the first half of the year was 16,4% and in the second half 23,7%.
Cellphones and related accessories and services are a smaller but significant part of the division’s business. Cellphones accounted for 15,5% of the division’s turnover.
Performance exceeded expectations in all product categories. Casualwear, denim (Relay) and smartwear (Cignal) all performed well, and a strategic decision to focus on men’s fashion accessories was vindicated.
Branded denim had a good year and there was good growth from the Guess and Levi’s ranges of branded denim products. Guess is widely seen as an aspirational brand with considerable appeal to the division’s target market.
| 2011 | % change | 2010 | |
| Turnover (R million) | 1 634,7 | 20,2 | 1 359,6 |
| Number of stores | 247 | 5,6 | 234 |
| Floor area (gross m2) | 76 250 | 6,9 | 71 303 |
| Number of employees | 1 683 | 11,4 | 1 511 |
| Most significant countries from which merchandise is imported | China, Mauritius, Bangladesh |
China, Mauritius, Bangladesh |
From the in-house brands, Relay (jeanswear) and Cignal (smartwear), there was excellent performance.
Although the price of merchandise remained effectively constant, changes in the product mix resulted in a modest degree of product inflation.
Several factors contributed to the success of the year’s operations. Among them was the process started some two years ago of introducing a distinctly modern "look and feel" in the division’s stores. This format is now well known to customers and has been favourably received by them. At the year-end, 27 stores had received the overall "new look" renovation within a period of some 18 months. The parallel "brand wrap" process, which is also a form of visual restatement discussed in more detail below, has been applied to 30 stores within an 18-month period.
A recent innovation is the "store navigation" factor, which incorporates a process of rationalisation of the layout and visual indicators of a store. This enables a customer entering the store to readily and quickly find the items which he is seeking and depart in the knowledge that he has seen all that was relevant to his search.
These processes are continuing.
The 2010 FIFA World CupTM football event received wide participation from the South African public and there was a modest spin-off for Markham.
A fashion trend that was noted is for men to wear a combination of smart and casual clothes, such as denim jeans with a blazer or sports jacket. In all these categories sales were pleasing. Denim jeans are clearly an acceptable item of workwear even in relatively formal professional environments and the division is making the most of this trend.
Close control of mark-downs and of costs was maintained, with encouraging gains in profitability.
Mark-downs made up 7,5% of sales, reflecting a small improvement on the previous year. The current level, considering a five-year history, represents substantial progress towards a stable and optimal target.
The five-year process of repositioning the Markham brand has been completed. There is now a pleasing modernity and coherence about the visual features of the division’s stores and its online persona, and the impact of this process is already yielding positive results. This should be sustained well into the future. The Markham Relay stores, a small-format model which stocked only casualwear, have now been converted into Markham stores which include a selected range of smartwear in their offerings.
The "brand wrap" process, amounting to a modernisation and rationalisation of visual display elements, has been extended from the initial test site in the Canal Walk centre outside Cape Town to 30 stores located throughout South Africa, and its popularity with customers has been established. It has been the key to easing customer navigation in directing shoppers to the items which they are seeking when they enter the stores. The brand wrap process furthermore maximises the inherent characteristics of the space in which the store operates, and is flexible and economical in its application.During the year 12 new stores were opened and a further nine were relocated or enlarged. One of the new stores is in Zambia, where trading results were satisfactory and where two further stores will be opened in the next year.
Markham already has a digital element to its operations and this is gaining in importance. A Facebook page which customers can consult for product information is being increasingly utilised, and feedback from their usage can be incorporated into the planning of the division’s strategy. Clearly, rapidly growing numbers of customers now go online before buying their apparel in order to check out what is available and what they find appealing. This greatly enhances the efficiency and pleasurability of their shopping experience when they arrive at a Markham store.
| Mark-down statistics | |||||
| 2007 | 2008 | 2009 | 2010 | 2011 | |
| Mark-down value (Rm) | 99,2 | 97,1 | 94,3 | 101,8 | 119,4 |
| % of sales | 10,5 | 9,8 | 7,5 | 7,9 | 7,5 |
STRATEGY
The repositioning of the Markham brand mentioned above has the objective of ensuring that Markham remains a relevant, aspirational brand, recognised for delivering fashion and style in a sophisticated shopping environment. This process is almost complete but will inevitably require periodical updating and alignment with market needs and trends. Smartwear continues to be in demand and growth in this area is again being targeted.
The number of new stores which are planned for the next year is upwards of 12. This follows a year in which extra space was gained in Eastgate, Gateway, Promenade, Rustenburg, Highveld Mall, Southgate and Umlazi.
Alongside the roll-out of new stores there will again be strong emphasis on cost controls in a drive to enhance profitability. Training programmes for all staff members will be continued in order to ensure that customers receive insightful and efficient service, and that the Markham reputation is enhanced.
| Store statistics | |||||||
|---|---|---|---|---|---|---|---|
| Current | Projection | ||||||
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Total No. of stores | 191 | 201 | 223 | 234 | 247 | 259 | 268 |
| Closures | 29* | − | − | − | − | − | − |
| Floor area (m2) | 58 230 | 61 298 | 67 889 | 71 303 | 76 250 | 79 850 | 82 100 |
| * Relate primarily to RJL stores | |||||||
The division is benefiting from the group’s supply chain initiative to reduce lead times for merchandise procurement and enhance the efficiency of distribution, hence improving stock turn. This process turns to a large extent on the division’s ability to allocate stock closest to demand in terms of garment sizes. One of the elements now reaching fruition is the concept of "hold-back" in the dedicated Markham distribution centre. Its effect is that a quantity of stock ordered in any season is held back initially and then allocated at appropriate times to stores where sales of the relevant items have been strongest, so maximising speed of reaction to customers’ purchases. Its ultimate effect is to boost turnover and assist in the minimisation of mark-down.
The division is now able to fulfil better than before customers’ size requirements for garments they seek, utilising for this purpose the group’s size-management software which is designed to ensure that the size ranges of stock arriving at a store will correspond to historical sales. There are opportunities in providing garments for smaller customers than had been traditionally catered for. "Tops and bottoms" in extra small size are accordingly being increasingly stocked in geographical areas where the demand for them is concentrated.The men’s fashion arena has limited local manufacturing capability, but there are fortunately a few sizeable firms in the Western Cape and KwaZulu-Natal with whom good relationships exist and from whom good volumes of the division’s supplies can be obtained.
The division’s efforts to develop closer relationships with domestic suppliers in order to increase the level of local production will continue. Greater reliance on local manufacture implies reduced vulnerability to adverse changes in the exchange rate of the Rand, and this is a longer-term goal.
Replenishment stock, which replaces items recently sold, accounts for 19% of the division’s turnover and emphasis is being increasingly placed on replenishment as a strategy. Weekly meetings are held to analyse sales figures and trends. The division’s quick response programme allows it to get back into stock during the season which has been favourable for turnover.
Increasing effort will be placed on maximising the online presence of Markham so that the tech-savvy element of the customer base can gain the best available information and can plan its budgeting and shopping in an efficient and sophisticated manner.
As one of its environmental initiatives, the division is making strenuous efforts to optimise the illumination in its stores while aiming to reduce the usage of electrical power. A saving in these power costs has been achieved in the Canal Walk shop outside Cape Town at no loss to the appeal of the store to customers. In fact, lower lighting in some areas can enhance the subtlety and attractiveness of the displays of merchandise.
PROSPECTS
Menswear has recovered to some extent from the poor economic conditions which prevailed in the period 2008 to 2010, when smaller towns as a result of retrenchment, were in particular severely affected. The recovery is not yet robust or universal and many customers continue to feel the pinch. However, the continuing roll-out of Markham stores and the other strategic steps outlined above in this report should help to sustain the momentum developed in the past year.
A new replenishment system will be introduced and there will be continued entrenchment of the division’s quick response programme.
The digital strategy referred to above will increasingly be used to achieve performance in the next year.