- Business for the retailer has been adversely affected by competition from informal boutiques
- The company is slowly losing its competitive edge of being able to sell on credit because of macroeconomic volatility and hyperinflation
- Total credit sales for Q1 2021 were 31,5%, way below average.
Truworths Limited Chief Executive Officer, Bhekithemba Ndebele says government must take a proactive approach in protecting the profitability of clothing retail business from the many informal sector boutiques that have sprouted all over the country as a result of the high levels of unemployment.
In an interview with this publication, Mr Ndebele said government should enforce duties on clothes brought into the country for resell in boutiques as most of these are none tax paying and therefore added to the fact that they are not paying duty, have been able to offer competitive pricing that sways consumers away from formal retail businesses like Truworths.
“What we want to see from government is the enforcement of duties on finished clothing products coming into the country, because for some of the products being sold in boutiques, the pricing does not show that any duty has been paid,” he said
He added that although informal boutiques had always been there, in recent times Truworths had lost its competitive edge over them, which is that it offers credit sales to customers while these informal shops don’t.
This he said was a result of the volatile macroeconomic environment in the country wrapped with high levels of hyperinflation.
“One of the biggest competitive advantages we have had over boutiques over the years is that most boutique operators do not give access to credit, and we built a customer base based on access to credit which we could not offer to a lot of our customers to contain the risk of loss presented by a volatile macroeconomic situation.”
For the year ended 12 July 2020 credit sales amounted to 48,1%, offered at inflated interest rates as safety net for loss reduction.
Meanwhile, for the first quarter ended October 2020, credit sales only amounted to 31,5% of total sales of which under normal circumstances they would have amounted to more than half.
He further lamented the fact that the as a formal retail business there was no way, Truworths and other retailers in the same line of work could get around paying duties and thus it was very hard to keep up with the competition coming from boutiques that have sprouted all over cities in the country.
Mr Ndebele however applauded the tax exemption by government on none cotton fabrics that the company uses in its manufacturing division.
“From a manufacturing perspective, we have a big advantage because for all none cotton fabrics that we import for manufacturing come in duty free which is a big incentive and a big saving.”
This came about in 2017 and was expanded in 2018 after consultations between government and players in the textile manufacturing sector to ensure business continuation and profitability and now Truworths hopes the government will once again come to their aid.
Equity Axis News.