Newcomers muscling in on homeware comfort zone
HOMEWARE has long been an attractive area for retailers looking to diversify their profit streams. But newcomers are fast threatening their ability to capture market share.
Zara Home, the most recent entrant to the market, opened its doors at Mall of Africa in Johannesburg recently. It has seven clothing stores in South Africa.
Last year, global net sales for Zara Home hit à666-million (about R11.4-billion), up 22% from the previous year.
“Zara Home follows the same business model as all eight brands under the Inditex Group,” said a Zara Home spokeswoman.
“This means focusing on the demands of our customers.
“Collections are adapted according to customer feedback to ensure we produce what our customers are demanding. We then deliver new items to stores across the world twice a week . . . and we don’t advertise,” she added.
Charles Allen, a senior retail analyst at Bloomberg Intelligence, said Zara Home represented only 3% of group sales ebit (earnings before interest and tax), despite sales growth being ahead of all other divisions.
But for cash-strapped South African consumers, affordability is the name of the game.
Allen said homeware had been a more attractive market than apparel in many countries in recent months.
“The subsector is more fragmented, and it is possible that a fashion retailer may be able to develop a more differentiated home offer.
“There can be some specific issues in homeware, such as beds having different standard sizes in countries, which can provide a challenge. For example, Ikea’s bedding in Europe used to be only for Ikea beds — it would not fit regular beds,” he said.
Sheryl Baird, head of The Foschini Group’s @home, said the economic downturn had also hit the homeware industry. @home had delivered 11.7% growth in its last financial year, compared to 13.1% the previous year.
“This was on the back of a difficult economic environment and extreme inflationary pressures, due to the devaluation of the rand against major currencies,” she said.
As a result of these pressures, @home had to focus on continuing to “deliver good perceived value to its consumer base”, continually challenging its supply chain strategy, she said.
Woolworths’ home divisions, including Country Road Home, have also had slow growth with the decline in the strength of the rand.
As a result, in those divisions, customers were buying accessories rather than making bigger purchases.
A fashion retailer may develop a differentiated offer