Stuttafords was founded 150 years ago and was controlled by the Stuttaford family until 1978, when the chain comprised five stores.
It was acquired by Graham Beck in 1978 and was then sold to Greatermans (which was part of Kirsh Trading) in the 1980s, joining stores from the John Orrs and Garlicks group to form an eight-strong chain of Stuttafords stores. Stuttafords' ultimate owner in the late 1980s and early 1990s was a combination of Sanlam and Kirsh Trading. Pepkor acquired Stuttafords in 1992, when it bought out the Sanlam/Kirsh Trading operations, which also included Ackermans, Checkers and Cashbuild.
Stuttafords was always an incongruous inclusion in Pepkor's lower end of the market range of shops and by 1998 the mismatch had become untenable. Management took control of the business and initiated discussions on a buyout from Pepkor, which was finally concluded in 2000. In a combined debt:equity deal worth R106m, management and AMB Private Equity Partners (AMB PEP) took control. Today AMB PEP owns 50% of the equity of Stuttafords, and management and staff hold the balance.
Stuttafords has evolved into an up-market speciality store group, competing with other speciality stores such as Truworths, Woolworths and Edgars. It sells cosmetics, men's, ladies' and children's fashions, ladies' accessories, footwear, houseware and giftware. Eighty-five percent of customers are women. There are 16 stores in the chain, with all stores located in premier shopping malls in Southern Africa.
The first chart shows the "fashion curve" in SA, though it could be applied to most other countries.
Only a small proportion of fashion retailers would fall into the segment in the bottom left-hand portion of the chart - the fashion innovators. These retailers, unsurprisingly, have a small customer base, about 4%-5% of the total market. Fashion leaders, attracting about 25% of the customer base, are also a relatively small part of the market. Stuttafords and Truworths would fall into this category. The other 70% of customers are attracted to relatively low-fashion stores, categorised in the chart as fashion followers and fashion laggards. Edgars and Woolworths would tend to fall into these categories.
But these last two terms should not be considered derogatory. Retailers, like other businesses, concentrate on their core competencies. In the case of Stuttafords, those core competencies are high fashion and wide assortments. Edgars and Woolworths cater to the broad mass market and tend to fall somewhere in the middle.
The second chart illustrates this point.
The four core competencies in this chart are lowest price, latest fashion, widest range and best service. Using Edgars as an "anchor" because it serves a broad customer base, it's possible to pinpoint where other clothing retailers fit into the landscape, in broad relative terms. Stuttafords would be in the top right-hand quadrant, offering a wide range and high fashion. Truworths would be at the top of the chart in terms of high fashion, whereas Mr Price would tend to be perceived as lowest price, or at the bottom of the chart.
Charts such as these are subjective and only offer an indication of where retailers are aimed, relative to each other. For example, Edgars could argue it offers the best service because of the wide range of accounts it offers its customers, and that would move Edgars along to the left of the chart. Likewise, Mr Price might argue it offers highly fashionable clothing to a specifically younger audience, in which case it would move up the chart.
Having too many core competencies means some elements of each will be sacrificed. A good retailer might have one or even two core competencies, but no more.
A typical Stuttafords store is an aspirational lifestyle store, characterised by a wide assortment of styles categorised by lifestyle. Exclusive lines such as Levi's, Guess, Billabong and Pringle are largely imported and in-house designers follow international trends by developing house brands such as Ashbury, Define, Excursion, Oaktree and Joseph Cotton. Other national brands stocked by Stuttafords include Raoul and Caviar. One of the factors that differentiates Stuttafords from many of its competitors is it tends to stock the entire range of a label, whereas other store chains tend to "cherry-pick" items from the range.
It's a highly competitive and dynamic industry, with little room for error. It's also highly seasonal and sensitive to the effects of inflation and interest rates. The difficulty is compounded by the capricious nature of fashion trends and individual taste.
Stuttafords is positioned at the upper end of the market, in lifestyle measures (LSM) 7 and 8. In this segment, the effect of inflation is less pronounced than in cheaper establishments, but the effect of interest rate movements is more severe because of the relatively high debt levels in this market. For example, more than 70% of Truworths' sales are on credit, while at Edcon group (the owner of Edgars) 63% of sales are credit-based. Stuttafords' turnover mix is 30% credit, 70% cash. The credit base is six-month interest-free accounts. There's an administration fee of R6,50/month for active account holders, generating R3m/year that goes to covering the cost of running the book. This minimises the cost of carrying customer accounts for six months
Stuttafords' primary competitive advantage lies in its brand name and the value and quality associated with the brand.
Management has revitalised the Stuttafords status - from an old traditional department store to a contemporary, fashionable, speciality store.
The stores are located only in premier positions, with new openings being highly selective and tailored to their respective market profiles.
Stuttafords has also strategically sized its stores to cater to different markets, including projected sales/m² and customer profiles. Before the management buyout, many of the stores were too big, resulting in poor sales/m² and reduced profitability. Furthermore, extremely expensive foreign brands that moved slowly, if at all, were stocked. These two factors hampered profitability.
Since the management buyout, the store base has been "right-sized" and the assortment has been rationalised - resulting in improved profitability.
Good retailers offer their customers what they want. Reflecting an understanding of customers' needs, management has realigned the company's focus to highlight merchandise groups in store layouts and design.
The old layout concentrated on houseware, cosmetics and ladies' and men's fashion. These are still the main focus, but their order of importance has changed considerably. For example, in the flagship Sandton City store, menswear sales trebled after being positioned at the front of the store rather than at the back.
Merchandise buying was refocused accordingly to support this, resulting in higher sales/m² and higher overall profit margin.
Additionally, by relocating destination-type merchandise such as houseware, gifts and the wedding registry to the rear of the stores, traffic flow was enhanced with a commensurate increase in sales.
The introduction of sublease operators such as restaurants and audiovisual, cellphone and other nonstore services has further improved the return/m².
A key element in repositioning the Stuttafords brand was to reduce the average age from where it was in 1998 - mainly middle-aged white women - by changing the merchandise mix from classic to more contemporary styles. Stuttafords also appeals to up-market black shoppers, who have long been characterised by their focus on quality and brand.
