annual report
2007

marketing

Lewis’ strategic approach to marketing has played a pivotal role in driving increased sales not only by achieving a high level of brand awareness, but also entrenching customer loyalty to generate repeat sales.

The advertising strategy is merchandise driven and focused on monthly promotional campaigns, with regular and consistent advertising being used to create top-of-mind awareness. Television advertising is used to build the brand and attract new customers, while brochure marketing is the main advertising medium to “take the shop into the home”, with all current and recently-settled customers receiving a monthly brochure mailing.

Brochures are also distributed using the “knock and drop” method into catchment areas with the highest potential for attracting new customers, eliminating areas which attract a low sales return. Leaflets supporting each brochure campaign are also distributed in high traffic areas during peak commuting times.

Lewis was again ranked second in brand awareness levels among furniture retailers in the authoritative Markinor Top Brands survey. This year’s survey included a higher proportion of non-metropolitan respondents.

The group operates an in-house advertising studio and this ensures the most cost-effective production and efficient distribution of advertising material to the stores. All print and television commercials, as well as promotional material, is produced in-house while the media buying function is outsourced.

Creative input is obtained on a project basis from specialist advertising agencies from time to time.

The group strives to develop lifetime relationships with customers. A significant portion of sales continues to be generated from the current and settled customers through targeted direct mailings and selected offers. This “re-serve” programme identifies customers for further credit extension based on their payment behaviour and current level of indebtedness to the group. The customer base is segmented and targeted promotional offers are mailed to customers monthly. Marketing promotions are integrated into the store operations and debtor systems which ensures follow through by sales staff in stores.

Local promotions are focused on regaining settled and retaining existing customers, with personalised monthly in-store events and product demonstrations being held in every store. Joint promotions with corporate partners also play a role in attracting new customers.

As Lifestyle Living operates in a higher income market to Lewis and Best Electric, the marketing strategy focuses mainly on advertising in monthly magazines and weekly regional press. Seasonal catalogues featuring new merchandise ranges are inserted into targeted magazines.

A vital element of the group’s marketing strategy is the Lewis Club, a customer loyalty programme which offers free and automatic membership to any customer taking out insurance when purchasing merchandise at Lewis.

Lewis Club members receive a monthly magazine which has a readership of two million people. The magazine includes special offers, discount coupons and competitions, while the editorial content focuses on general interest and topical lifestyle issues relevant to the Lewis customer profile.

merchandising

The group’s merchandise procurement strategy is based on creating strategic partnerships with suppliers both locally and offshore which ensures exclusivity of product, unique design, value for money and generally enhanced margins. This has enabled Lewis to move away from the “sameness” that pervades the middle income furniture market, without compromising quality or affordability.

Imported merchandise is balanced with local furniture manufacturing, where the group sources a large proportion of furniture from suppliers which offer this product differentiation.

The furniture import strategy has contributed to increased sales and the shift in the product mix with furniture sales accounting for 50% (2006: 47%) of total sales. Electrical appliances accounted for 25% (2006: 25%) and audiovisual products 25% (2006: 28%).

Quality control on imports is contracted to a Hong Kong-based supply specialist who manage and support all imports.

As the largest furniture retail brand in South Africa, Lewis can guarantee large volume orders to suppliers which enhances price negotiations. Products are sourced from a diverse range of suppliers, including regional suppliers which improves delivery lead times to stores.

The Lewis distribution model is based on merchandise being delivered directly by suppliers to stores which both increases efficiency and eliminates costly distribution centres and warehouses. Stores are responsible for their own deliveries to customers, with an estimated 90% of deliveries being completed within 24 hours of the sale.

The importance of merchandise innovation is paramount to the success of the group. We have an experienced management team that will continue to deliver, what we believe to be, a strategic competitive advantage.