Lewis loses out on in-store payments during lockdown
• Default could trigger need to broaden payment mechanisms
Furniture and appliances retailer Lewis says account payments dropped by a third in April as stores were forced to close because of the lockdown.
A large number of Lewis clients make payments in-store.
Though the company, which owns furniture stores such as UFO and Beares, implemented other payment avenues through partnerships with food retailers that remained open in level 5 of lockdown, 70% of customers who are used to paying in-store, did not pay, in comparison with April 2019, in which it had a 71% collection rate, Lewis said in a trading statement.
The payment default underlines weak demand from consumers whose already fragile disposable income is taking a pounding from retrenchments and pay cuts at firms seeking to survive the Covid-19 pandemic.
Lewis reported a R260m hit from Covid-19, saying sales fell about a quarter in March, the last month of its financial year, as SA entered lockdown.
“The feature of the group’s decentralised store-based business model is that the majority of account payments are made by customers in stores, and these are mostly in cash.”
Payments improved to 74.8% in May and June, still lower than 2019’s 83.3% for the same period.
The non-payment challenges in lockdown could trigger a need to improve and broaden payment mechanisms. Not all lower-income earners use smartphones with banking apps or even debit orders.
A payment through code on SMS, called a USSD code, is possible, said Arthur Goldstuck, MD of technology research firm World Wide Wox.
Payments changed fast and improved radically in lockdown at multiple stores, he said. “Covid-19 has already resulted in a revolution in contactless payments.”
Thanks to lockdown and customers’ desire to avoid touching credit-card machines and cash, Pick n Pay and Checkers now allow scanning apps, that allow consumers to scan a QR (quick response) code at the till with their smartphone and pay this way.
Goldstuck added that as customers get used to different ways of paying, they will not want to go back to using cash and credit cards.
“There may be a steep learning curve for some, but once people get used to contactless modes of payment, and it becomes a standard way of transacting for the next year, neither they nor the companies with whom they do business will want to go back to the old way,” he said.
“Companies that hold out against this evolution are strategically challenged, and will probably be punished in the marketplace.”
Lewis lost out on an estimated R80m in sales in March, and lost out on customer account payments of R180m that month, it said in a trading update. It sells almost 57% of all furniture on credit.
Merchandise sales grew 4.7% to R3.7bn for its year to endMarch, but has raised provisions due to concern that non-payments from customers will rise.
Lewis expects headline earnings per share, which strips out certain one-off items to give a better indication of underlying performance, for its year to endMarch to decline by between 25% and 37% from the prior period’s 376.2c.
PAYMENTS IMPROVED TO 74.8% IN MAY AND JUNE, STILL LOWER THAN 2019 ’ S 83.3% FOR THE SAME PERIOD