Tailor made service
Lily Moreira, managing director of aspirational menswear company John Craig, talks to Jane Bordenave about the companyÔÇÖs emphasis on quality and the fundamentals of its growth.
Established 65 years ago in the heart of Johannesburg as a single-shop family business, John Craig has since grown to a chain of 59 stores in seven provinces. A management buyout and subsequent merger have allowed the company to grow rapidly in the last few years, both in terms of profit and assets. But perhaps the most notable piece of John CraigÔÇÖs history is that it was the first company to offer credit to black consumers. It is this aspect of the companyÔÇÖs past that has had perhaps the greatest influence on its current position.
There is a great deal of loyalty to the brand amongst the black community in and around Johannesburg. ÔÇ£During the Apartheid era, black people were not able to easily obtain credit,ÔÇØ explains managing director Lily Moreira, ÔÇ£so these customers fixed their aspirations on their appearance. John Craig offered the opportunity for men in the black community to purchase prestige, branded clothing, initially operating on a lay-bye system, which developed into a full credit service.ÔÇØ The respect shown by the store assistants to their black clients, including small courtesies such as remembering a customerÔÇÖs name, has built up a relationship leading to many customers remaining loyal for over 10 years. Although there have been extraordinary changes in South Africa since that time, the ethos of investing more money in a few quality items than spending less in lower-end stores has endured, as has the customersÔÇÖ loyalty.
Over the past 10 years, John Craig has seen a management buyout transform it from a loss-making business to a profitable one. This was followed seven years later by a merger with one of the countryÔÇÖs largest retail groups, Pepkor. The economic situation at the time of the management buyout in 1999 was a difficult oneÔÇöcompanies were trying to shed their non-core assets and this created an excellent opportunity for a small-scale management buyout. ÔÇ£The biggest challenge was turning the business around,ÔÇØ remembers Moreira. ÔÇ£We started by closing the non-profitable stores and evaluating assets. We then looked at stock turns and which brands were or were not working. The introduction of house brands, especially in formalwear, was a new venture that certainly seemed to be well received, as it was expected by the consumer that our quality was guaranteed. The company also had a lot of debtors. Shortly before the buyout, the company had introduced a 12-month account payment plan. This change absorbed a lot of cash from the company.ÔÇØ
Maximising resources was the key principle that led to the buyout team turning the company around. They did this by reducing costs and consolidating their R90 million assets, changing John Craig from a company that was making R1 million profit with huge overheads, to one that was making R6 million within three years.
The businessÔÇÖs profit margins continued to increase, but to really encourage growth it needed to join a larger organisation. This led to the merger with Pepkor. ÔÇ£As we were, we simply werenÔÇÖt big enough to grow as aggressively as we wanted,ÔÇØ explains Moreira.
ÔÇ£We are now present in the provinces of Gauteng, North West, Limpopo, KwaZulu-Natal, Free State and Mpumalanga. We are just starting to open stores in Eastern Cape, which is a great opportunity, and the next consideration will be Central and Western Cape.ÔÇØ The company aims to open seven new stores a year, increasing the availability of John Craig merchandise to a larger proportion of South Africans and growing the business. This project is aided by the fact that Pepkor has a property division, allowing John Craig to find new properties without having to spend time searching for them. The weight of a large corporation like Pepkor also allows for better negotiation on rental prices than John Craig would be able to achieve itself.┬á
The company also now has access to a 650 square metre state-of-the-art warehouse owned by Pepkor. Situated in Isando, 10 minutes outside Johannesburg, it allows the storage of items for distribution around the country and, as it is owned and operated by the parent group, the rent is affordable. ÔÇ£This is something that we would not have been able to do by ourselves,ÔÇØ says Moreira, ÔÇ£and it now enables us to focus on our house brand distribution and replenishment.ÔÇØ
The companyÔÇÖs own brand lines have also been growing in popularity. ÔÇ£It is an increasingly important part of the business,ÔÇØ states Moreira, ÔÇ£and we have seen demand grow steadily from five per cent to 30 per cent, where it now stands. We are able, through our house brands, to offer premium quality at a more affordable price. This is very much a customer led growth pattern; we are meeting demand rather than trying to force the product onto our customers.ÔÇØ
Currently John Craig is a niche operation, operating boutique-like stores that target men in the 30-plus age range, who want a more refined look than they can typically find in most stores. Nevertheless, John Craig is aware that it is still in competition with large department stores, so price competitiveness is essential. The personal touch offered by having smaller shops is one pull, as well as other services such as the free tailoring service and quality money-back guarantee it has always offered. The company has diversified over the years into insurance, credit and mobile phones, all of which set it apart from its main competitors, the independent traders.
After what has been a turbulent economic period, it is always heartening to see a company with such a rich heritage as John Craig continuing to grow and diversify its business. Plans for the immediate future involve expanding its store infrastructure and staff training to increase footfall. ÔÇ£Highly motivated and specialised personnel are key to our success; after all, the essence of the business is its staff,ÔÇØ says Moreira.
Longer term, the business may look to expand into neighbouring countries. ÔÇ£Quality, exclusive product and the customer experience are also keys to our success,ÔÇØ confirms Moreira. ÔÇ£Once we have completed our current goals, this will be something to examine further.ÔÇØ
