Wednesday, 22 July 2009

South African fashion brands gain acceptance in Kenya

Kenya's biggest fashion and home goods retailer, Deacons, said on Wednesday (July 22) its five South African brands were successful in the east African nation whose people are known to shun patronising South African merchandise.
The privately-held Deacons has franchises for the South African Mr. Price, the upscale Truworths, Identity, Sheet Street. It has also created two of its own brands 4u2 and Angelo.

Worried about what they see as aggressive expansion by South African businesses in their market, many Kenyans have resist the new entries but seen more and more better capitalised and well resourced firms enter their turf.

But the experience has been different for the locally-owned Deacons which has seen Kenyans embrace its South African clothing and home accessories warmly.

"Anything that is South African that has come here to invest, they have failed and gone back and I think it is because of the cut and paste kind of story, where they pick up what they are doing in South Africa into the Kenyan market. For us, we localise it to our market," said Simon Mundu, finance and strategy manager.

Deacons has been in Kenya since 1958 but went through troubled times in the 1980s when the government banned all clothing imports to support the local textile industry.

The company had been importing its clothes from Britain's Marks and Spencer but decided to look south when Kenya rescinded its decision to ban textile imports in 1994, Mundu said.

Deacons now has 18 stores, including three in Tanzania and one in Uganda, and plans to add a couple more in Kenya by the end of the year and a new outlet in Rwanda next year.

"Deacons did not realise any resistance for the brands, I think chiefly because when Deacons started to introduce Woolworths into this market, initially they put the brand into the shop but the name at the entrance remained as Deacons, " said Mundu.

Mr. Price, introduced in 2007, is gaining ground and could outperform Woolworths, which has been in the country for about 15 years and beyond the reach of many budgets, Mundu said.

A new Mr. Price store in downtown Nairobi by the end of the year will target even more Kenyan middle class buyers, he said.

"There is a very serious shift, everybody would tell you that when people walk into the shops they know what they are looking for. Anything they see in Hollywood and other places, that is what they would come and ask for from you, so people are very fashion conscious at the moment and they want to look like anybody else in the world," Mundu added.

Although post-election violence in the first quarter of 2008 whipped Kenya's economy mercilessly, Deacons' saw tremendous sales then because all its stores are located in upmarket shopping malls that were largely unaffected by the fighting.

Inflation and an expected increase in electricity costs will have a greater effect on the retailer's performance this year.

"We are seeing sales going down. We are 8 percent down for the first six months against our budget. Previously, last year, we were talking of 10/15 percent above our budget. And we are not seeing the other half of the year being better. Given the conditions that are in the market," he said.

Deacons' plan is to double stores in five years, at a cost of at least 800 million shillings (10.41 million US dollars).

Source - REUTERS