HomeChoice bets on Joburg inner city showroom
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 homewear, electronic goods, bedding and short-term loans through its mail-order catalogue and online presence. The move to have its own store fronts is part of a strategy of broadening its sales channels.
“For me, it’s really important that 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 store front has seen it attracting new customers for both its retail and loan operations. About 30% of its new store fronts’ 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.
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.
The results for the half year to end-June saw revenue rise to R1.52bn and operating profit jump 14.4% to R374m.
Keith McLachlan, a 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.