Harare- ZSE-listed clothing retailer, Truworths says the hovering inflationary pressures haunting the country will heavily affect its credit sales going forward.
This comes as the clothing retailer’s credit sales fell to 34.8% against cash sales at 65.2% during the third quarter ended 10 April 2022.
Credit sales are fundamental to a company’s growth especial in a nation like Zimbabwe where cash liquidity is at its lowest ebb and living conditions continue to soar.
Offering credit gives customers the flexibility to go ahead and buy now and pay for purchases at a later date.
For clothing outlets like Truworths, credit sales are of paramount importance to fighting a highly informalised economy like Zimbabwe where areas like Mupedzanhamo in Mbare and other vendors offer cheap apparel on the streets.
In that regard, credit sales will give Truworths a competitive edge against its business counterparts. Customers see credit sales as an avenue to save their money hence offering customers patronage over competitors.
Besides that, credit sales bring customer loyalty building strong relations between the company and customers, a profound milestone in retaining customers.
However, against the economic environment in Zimbabwe where the Zimbabwe dollar is depreciating on weekly basis by a margin of 5% and above, credit sales for companies are becoming a mission impossible, ruining customer retention and competitive edge over its businesses.
Since the commencement of the year when the Zimbabwe dollar traded at 112.8 against the US dollar, the margin has widened to 325 pushing year-to-date losses of the local currency to 65%.
“The resurgence of inflationary pressures necessitates that the business reduces its exposure on Credit sales and focuses on Cash sales,” said Truworths in a statement accompanying its third-quarter trading update.
Meanwhile, inflation has gained significantly since the beginning of the year from 60.61% in January 2022 to 131.7% in May 2022, which is also record inflation since June 2021, a 70.1% increase in just a space of five months.
Apart from global economic shocks caused by the Ukrainian war which are also hurting Zimbabwe, the country’s inflation has been rising even before the war.
The nation still lacks key fundamentals that can support inflation stability such as a trusted currency, trusted financial leaders and transparency in managing parastatal funds to avert corruption.
Because of that, the economy has suffered massive shortages of foreign currency and investments causing a shock in the formal market.
Alongside Nigeria, Zimbabwe has been ranked one of the highly informalised economies where parallel market activities define economic performance.
Various lobby groups have called on for the adoption of the US dollar for the short term to bring stability.
An independent economist, Vince Museve in an interview with Equity Axis said there is a need for the country to adopt the US dollar for a period at least of 5-10 years to bring confidence and stability as the country continues to lag in sound economic fundamentals that anchor currency stability.
However, the finance gaffers, Professor Mthuli Ncube and Doctor John Mangudya remain adamant about the concept of adopting the US dollar citing high risks and industrial drawbacks in the long run.
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