Fashion group Foschini sees potential in Nigeria, but needs shopping malls

  

The Foschini Group (TFG), South Africa’s second largest listed clothing retailer with 15 trading brands (including Totalsports, Markham and Donna-Claire), is creating a footprint across Africa. With the majority of products manufactured in South Africa, TFG operates almost 90 stores in southern African countries (in Namibia, Botswana, Zambia, Lesotho and Swaziland) and now plans to expand to Mozambique and Nigeria.

How we made it in Africa’s Kate Douglas speaks to Ronnie Stein, the chief financial officer at TFG, about the decision to expand to Nigeria and how the development of shopping centres can influence TFG’s footprint in African countries.

TFG has plans to expand to Nigeria. Why Nigeria?

Nigeria, which is a massive country of about 160 million people, really only has one shopping centre in Lagos. A new shopping centre has just been commissioned and once it’s up and running, we can get into Nigeria and can start operating there because once these shopping centres develop, we can increase our footprint dramatically. So we decided to go to Nigeria and open a Foschini and Markham store in July and with those two stores we are going to learn exactly what goes on in that country. Then once we understand trading, the logistics and all sorts of other factors – and we’ve got people on the ground there now – we can then start to increase our footprint. We do hear that in that country there are as many as 100 shopping centres being conceived.

Our strategy is to get to know a country by opening a couple of stores and once we understand it and the shopping malls develop we can add as much as – I would say – up to 12 TFG Group stores in each shopping centre. So you can imagine that if 30 or 50 shopping centres are built in the next five to six years, we could have up to 500 stores quite comfortably. Once we have a strong footprint in Nigeria, then we can go to other areas as well.

When do you predict to have a strong footprint in Nigeria?

Well we don’t really know. We have to rely on the shopping centres to be constructed and, when they are, we will open our stores. We will follow the shopping centres. My prediction is that in the next five years, if there aren’t 50 centres there will be 30 shopping centres. Then, if you look 10 years down the line, we think Nigeria can for us be almost as big as South Africa. It’s a long term strategy that we think could be very good for us.

Will garments and other products be customised to these African markets?

No, not at all. It will be the same stock as in South Africa. What we do find is that we are able to charge slightly higher prices outside South Africa because there is not that much competition and we need to do that to cover the additional logistics costs.

How are TFG stores currently doing in Namibia, Botswana, Lesotho and Swaziland?

They are the traditional southern Africa states, which we have been in for quite a long time and our stores run particularly well there. In Namibia we have 60 stores there now and they run with credit, pretty much like South Africa. We have recently actually just launched credit into Botswana and Lesotho with good success.

Why did TFG decide to expand to these countries?

Because they are on our border, so I mean it’s very convenient logistics wise – it’s very close by – and also because there is quite a good retailing environment in those particular countries.

Africa – we think – is going to be massive, not now but in five to 10 years, so we decided to start expanding our footprint outside of southern Africa and the first area we went to was Zambia. The reason that we went to Zambia is that there are already shopping centres in Zambia so it’s quite a nice place to trade there. We tried with two stores there that actually did pretty well. Because we have 15 trading brands, when there is a decent shopping centre in a particular country, and we are happy with the environment, we can quite easily put as many as 10 to 12 brands in that particular shopping centre so we can move quickly as the shopping centre environment in that country grows. We now have 12 stores in Zambia.




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