Strategy and Diversification
Best Home & Electric
United Furniture Outlets
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Social, ethics and transformation report 2023
QUALITY, EXCLUSIVITY AND DIFFERENTIATION ARE THE HALLMARKS OF THE GROUP’S MERCHANDISE RANGES.
The Group’s merchandise strategy is aimed at offering customers differentiated product ranges and this is achieved through innovative sourcing and long-term supplier relationships both locally and offshore. During the reporting period, the Group continued to hold higher inventory levels to meet customer demand owing to ongoing supply chain disruptions. New merchandise ranges are launched frequently across all brands to offer customers ongoing newness. Added-value features and components ensure differentiation and enhance the value of the merchandise. In the traditional retail brands which target the lower to middle income groups, the focus is on offering quality, value-for-money merchandise ranges. Products are sourced to meet the specific needs of this customer base. UFO offers luxury exclusive furniture to cash customers in the higher income market. In the current constrained economic environment sales are increasingly promotionally driven as customers seek value.
The merchandise offering covers three core product categories: Furniture: Bedroom suites, beds, base sets, mattresses, lounge and dining room suites, wall units and kitchen units. Lounge suites and base sets account for 62.1% of sales in this category. Appliances: Refrigerators, freezers, stoves, washing machines, microwave ovens and small electrical appliances, including well-known brands such as Defy, Russell Hobbs, KIC, LG and Kelvinator. Audiovisual: Mainly television sets, audio equipment and laptop computers from leading brands Hisense, Sinotec, LG and Panasonic. Management continues to focus on increasing sales of the higher margin furniture and appliance product categories, while more contemporary lines are offered in each furniture sub-category to attract younger customers.
Products are sourced from a wide range of local and international suppliers to ensure that customers are offered exclusive merchandise ranges. Local supply accounted for approximately 70% (2022: 67%) of stock purchases in the reporting period. As a member of Proudly South African, the Group is committed to promoting social and economic change. The Group sources locally by investing and partnering with local manufacturers, making a meaningful contribution to building a better South African economy, alleviating unemployment and retaining existing employment opportunities. Products are supported by local and overseas after-sales service to ensure quality standards are maintained. Prior to consignments being dispatched from international suppliers, samples of all imported products are assembled and tested for quality purposes.
Supply chain and distribution
The Group’s supply chain model is based on merchandise being delivered directly by suppliers to stores, supported by leading shipping and logistics providers for imported stock. As the Group does not operate distribution centres or centralised warehouses for the traditional retail brands, each store has a storage facility which is located close to the store, generally in areas with lower rentals than retail space. This strategy limits the build-up of obsolete stock and reduces markdowns. Traditional retail stores have dedicated delivery vehicles which enables an average of 90% of deliveries to be completed within 24 hours. Over the past two years, the Group has carried higher inventory levels to ensure the business had adequate stock cover to counter the supply chain challenges and meet customer demand. Inventory levels reduced by 14.7% as the supply chain stabilised in the second half of the financial year and stock holdings are expected to be maintained around the year-end level.