Edcon trims top managers in revamp
Executives reduced to nine as part of turnaround strategy
SOUTH Africa’s biggest clothing retailer, Edcon, is trimming its top heavy management structure, as part of a strategy to transform into a leaner organisation so as to regain lost market share.
This as it announced last month it had improved its debt position after securing a repayment deal on a R7.9 billion debt and access to R1.85bn to pay down two bonds.
Bernie Brookes, the newly appointed Edcon chief executive, said yesterday that one of the first steps of the turnaround was the restructuring of management, which had resulted in executives being cut to nine from 17.
Further job cuts were on the cards at head office where about 3 300 people were employed, but no jobs in stores would be affected.
“We will be making reductions at head office between February and March. We don’t have an idea of a number yet of how many jobs will be affected at head office.
“We don’t plan to do anything in store. We cannot have an unsuccessful business and have it top heavy,” said Brookes, who joined Edcon after nearly a decade heading up Australia’s retail chain Myer.
Edcon, which has 12 million customers and owns clothing retailers Edgars and Jet, CNA and homeware retail store Boardmans, would be driving change for customers and investing in training of staff as part of a strategy to regain lost market share, Brookes said.
Sword
He admitted that the company had “fallen on its own sword” and research had shown that it did not know its customers.
“I don’t think we know them at all,” he said.
In a bid to drive sales, Edgars stores have started to boost their private labels, including Stone Harbour and Kelso, and would be more selective on international brands and focus only on those that resonated with customers.
“Some of the international brands are very expensive,” sad Brookes.
Analysts have previously said that Edcon had over invested in international brands including Topshop and Tom Tailor in an attempt to fend off local and foreign competition from Inditex’s Zara and Hennes & Mauritz, which are both carving out footholds in South Africa. However, this was at the expense of its own brands.
“The international brands make us look expensive. The prices of these international brands have moved up with the weaker rand and are often out of the price range of our average customer, “said Brookes.
At its retail division, including Jet and Jet Mart, there was a failure to differentiate on value, which was most critical to discount shops, he noted.
“Currently, these stores are positioned as mid-market offerings rather than a true discount format. In so doing, there is a failure to differentiate on value, which is the most critical discount attribute... There is a need for organisational flexibility to operate Jet and Jet Mart as true discounters with a lean cost model,” said Brookes.
He said in a bid to improve cash sales and credit sales it had introduced an option of lay buying. In addition, the group had its own credit book last October after selling its book to Absa in 2011. “We are not giving away credit easily. We are very cautious.”
Rewarded
Customers would be rewarded through a revamped loyalty programme based on the individual profile of the customer.
“We have customers with difference accounts. We have got to give them more rewards and more incentives. We have to to use the data of our customers to give them offers that are relevant,” said Brookes.
Edcon has struggled since its R25bn purchase by US private equity firm Bain Capital Partners in 2007 and has seen the market share of its flagship Edgars chain slump to 11 percent from 17 percent four years ago, Brookes said. – Additional reporting by Bloomberg
We don’t plan to do anything in store. We cannot have an unsuccessful business and have it top heavy.