HOMECHOICE
HOMECHOICE
Tech, Tech, Tech,
and Customer Experience Investments Driving HomeChoice PRODUCTION: Karl Pietersen
The hugely impressive, JSE-listed HomeChoice business is continuing to invest to bring its customer closer so that it can engage and interact on a digital level, using technology to onboard more customers and make it increasingly easy for products to be accessed. Retail and financial services have performed well and things are looking exciting for the future.
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It has been a tumultuous year for the South African retail sector. Consumers spending habits continue to shift, and the demand for new, faster, easier connections between buyer and seller is continuing to change. For some retailers, the changes have been too fast and too big and the top-heavy players have simply fallen over. A lack of understanding of the market, an inability to move quickly, and unsustainable cost bases have taken their toll.
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However, those that have invested in diversification, understanding of the customer base, recognition of international trends, and systems to back up ongoing digitisation, are those that are ploughing through the uncertain retail landscape, overcoming the challenges of a unpredictable economy, and are churning out good results while delighting customers at every chance they get. HomeChoice is the perfect example. The home shopping retailer has grown its omni-channel route to
market after starting out as a cataloguebased mail order business back in 1985. Featured in Enterprise Africa 12-months ago, HomeChoice SA CEO Shirley Maltz explained that the success of the company was down to an embrace of a digital strategy, and a crystal-clear understanding of who the HomeChoice customer is and how ‘she’ behaves. “We love our customer, she loves us, and we are very good at developing products for her. We want to focus on her, she is our queen and we will never move away from her,” Maltz said.
INDUSTRY FOCUS: RETAIL
HomeChoice has a clear and rich understanding of exactly who it is targeting, and who it has built a relationship with over the past 34 years. The customer base is 84% female, usually mothers, in the mass-middle market (75% LSM 4-8), earning around R10,000 a month, between 30 and 60 years old, living in South Africa’s urban areas, and utilising digital channels (specifically mobile) for shopping. Offering everything from kitchenware and home fabrics through to fashion products and electrical goods, HomeChoice’s product range is tailored to offer product excellence, at affordable prices, in a convenient manner. Traditionally, the company has a strong range of its own products but more recently, 140 branded products have been added to range at the request of customers. The innovative business has also entered the market of financial services through its sister company FinChoice. This allows the customer even further flexibility, offering various payments
// THE MOST SUSTAINABLE DRIVER OF GROWTH IS THE CUSTOMER AND HOW EFFECTIVE YOU ARE AT BRINGING NEW CUSTOMERS INTO THE GROUP AS THAT TELLS YOU THAT SHE IS LOVING YOUR PRODUCTS, AND I AM VERY COMFORTABLE IN TERMS OF OUR CUSTOMER ACQUISITION // 4 / www.enterprise-africa.net
methods and financial services that were previously not available to this market. In addition, HomeChoice, last year, opened the latest in a roll out of retail outlets in Rissik Street, Johannesburg. Maltz was clear that the company is not looking to venture into a traditional bricks and mortar retail network-type business, but these inventive stores were being installed to complement the HomeChoice digital strategy and encourage purchases through mobile and online channels. The opening at Rissik Street was the fourth for the company and represented the flagship of the range. It was received with particular warmth by HomeChoice customers who queued outside on the day of opening before clambering under the shutters as they rolled for the first official time. The modern and sleek store design offers customers the chance to touch and feel products before ordering them to be delivered to their homes. Today, there are seven showrooms throughout South Africa, and the company has furthered its ‘on the street’ presence by adding ChoiceCollect containers. These converted shipping containers allow for customers to collect and return purchases and have been strategically positioned in township economies including Soweto and Khayelitsha. “Our seven Retail showrooms and five ChoiceCollect containers are bringing the HomeChoice brand closer to customers, attracting new customers and offering added convenience,” says Maltz, who adds that more ChoiceCollect containers and more new showrooms will be added in the second half of 2019. Some reports suggest that the company is aiming for 30 retail showrooms in total, in a bid to continually attract new customers. “We want to be an omnichannel retailer with a high-focus on digital. Our showrooms will help us capture new market share – perhaps people who are nervous about shopping online or nervous about direct
// WE ARE CONTINUING TO INVEST FROM A CAPEX PERSPECTIVE – IT’S TECH, TECH, TECH, CUSTOMER EXPERIENCE, AND OUR SHOWROOMS // marketing. It helps us service clients by answering queries and recommending products, and it allows us to offer click and collect,” says Maltz. The company maintains its large call centre operation to assist customers, it continues with aggressive pushing of its mobile application and online shopping portal, and it is ongoing with the rollout of value-add services. Combined with its new retail outlets and ChoiceCollect containers, the results of HomeChoice’s efforts are clear to see, even in what is a challenging environment. Released in August, the HomeChoice Interim 2019 Results show that the customer – a digitally savvy, urban African woman – is not as depressed as the rest of the South African economy. Around 160,000 new customers were introduced to the group in the last six months and that is the result of call centre agents being fully multimedia enabled and able to interact with customers through Instagram, Facebook, WhatsApp and more. HomeChoice was up 8.6% on the previous year and reached R1.7 billion. Retail sales were up 7% to R0.9 billion and finance income was up by 7.7% with loan disbursements up 34.2%. FinChoice, the financial services division, continues to attract new business, providing personal loans, insurance and related products. Revenue for the period was up 18.8% to R424 million. There was an increase in stand-alone insurance premiums of 58% and operating profit
Top Technologies in the Courier Industry 2020 and Forward
Mobile devices remain the primary source of all real time tracking information. Using geospatial services, mobile data gives us a brand new perspective on analytics. A study conducted in 2016 by the IATA and SITA reveals that deployment of RFID technology could reduce the number of mishandled bags by up to 25 percent by 2022. RFID label technology is a game changer in the courier and logistics industry. Route and Capacity Optimization will become more usable with better data and improved co-ordinates. This facilitates better route planning as well as dynamic routes. Machine learning applications are essential as it learns from current logistics patterns. Maximising the throughputs of our conveyer systems enables us to move high volumes quickly and accurately. Our conveyer systems have been upgraded to increase sortation abilities. These systems are capable of vertical expansion.
Courierit’s focus on innovation requires us to constantly re-evaluate our technological requirements. Since we operate in a fast paced industry, whe where it is essential to leverage technology to ensure that you are aligned with customer goals and requirements. Our primary focus is to ensure that the technology employed benefits the day to day performance of our customers. Although we are always open to best practices across the world, we also take heed of the delivery constraints specific to South Africa. This ensures our business technology models are agile and responsive to South Africa’s diverse and complex landscapes.
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INDUSTRY FOCUS: RETAIL
// OUR SEVEN RETAIL SHOWROOMS AND FIVE CHOICECOLLECT CONTAINERS ARE BRINGING THE HOMECHOICE BRAND CLOSER TO CUSTOMERS, ATTRACTING NEW CUSTOMERS AND OFFERING ADDED CONVENIENCE // was up 16.2% to R158 million. While these results were satisfactory for Maltz, she was keen for the business to improve going forward. “We have around 915,000 customers in total and 26% of those in the retail route are registered on digital channels and 86% of customers in the financial service business. The reason we feel positive is that the informal economy in South Africa is much more vibrant than people think. We have 29% unemployment in South Africa but 74% of our customers have a secondary source of income. She may be classified as unemployed but in her mind, she is
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self-employed and sees herself as an entrepreneur. We ask our customers about that and 150,000 say they are self-employed and proud of it; and they are a lot more vibrant than you would think if you are not living in that informal environment,” says Maltz. Because of the nature of the customer base, Maltz is happy to stick to the digitisation strategy and continue converting the business to a totally digital store and digital financial services business. “The outlook is going to continue to be muted and difficult in South Africa but we are very committed to
our strategy. The most sustainable driver of growth is the customer and how effective you are at bringing new customers into the group as that tells you that she is loving your products, and I am very comfortable in terms of our customer acquisition. “ Customers are increasingly utilising digital channels and this is evidenced in the HomeChoice call centre where activity decreased by 3% and changed to become more of a digital support team. Over the next five years, HomeChoice expects this trend to continue with people choosing to interact in an increasingly digital
HOMECHOICE
HomeChoice Call Centre
manner. The company maintains its strong sales force of more than 4000 people who operate on a self-employed basis, similar to the globally famous Avon model, and HomeChoice will continue to support these sellers with training and development opportunities. Showroom and container business improved by 2% in the period under review, and mobile and social media interaction in the digital channel saw 41% credit extended up from 39%. This is another channel that the company sees growing aggressively as new technology is rolled out. Competition in the retail space is rife, and this will remain one of the main threats to HomeChoice’s market share. In the future, three million square metres of new retail shopping space is expected to be rolled out around the country, adding to the existing 2000 shopping centres. The JSE has seen
listed retailers shunned, with shares ending up in the bargain basement. Food retailers have been especially hard hit and it all comes back to having unsustainable debt structures and a lack of understanding of the changing consumer marketplace. Some industry commentators expect the only way out of the situation is for costs to come down or volumes to go up. Fortunately for HomeChoice, its market and model are unique, and its reach within the lives of its customers is still growing. Strategies underway to fully digitise the business are coming to completion and this retailer is one which will not be halted. “We are a fantastic business,” Maltz said in 2018. “We have so much opportunity. We have so many ideas and innovations and everyone is excited, and we have a lot of fun working here.” In 2019, she continues
enthusiastically. “We’ve managed our expenses tightly across the group and we are investing where we want to – technology is going to be our biggest investment as it has been for the last couple of years, both in terms of staff and systems. As we digitise our marketing, we are going to see our marketing expenses coming down. We are continuing to invest from a Capex perspective – it’s tech, tech, tech, customer experience, and our showrooms. We have also invested in our warehouse to improve efficiencies in our Johannesburg DC – we are focussed on improving her experience with us.”
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ENTERPRISE AFRICA
SEPT EMBER 2019