Toys against the tide

Redgwoods, South Africa's largest toy and baby retailer, is expanding across the country, flying in the face of the economic downturn afflicting most retailers, to get into new profitable locations while modernising its existing store network countrywide.

The owner of outlets such as Toys R Us and Reggie's will open eight stores in the eight weeks between September and the end of October. In total, the company will spend in excess of R20m in a programme that will also see a further two stores fully refurbished by the end of the year, pushing the total number of shops to 67. On 24 September, the company will open its largest outlet in South Africa, Toys R Us Stoneridge; the store will have an area of 2400m².

While the economy faces strong headwinds caused by record oil and production commodity price increases and rising interest rates, the company remains upbeat, seeing in the challenges opportunities to reach new communities while improving its product offering as it seeks to expand and consolidate its market share.

“There is no profit in pessimism. We are in a business which is by definition founded in happiness, viz. births, birthday parties, celebrations and children. Good karma and a favourable outlook is a prerequisite to success in our game,” says company Director, Issy Zimmerman.

He says the business is far from reaching saturation point and is still looking to exploring expansion opportunities, citing the group's new outlets located in Nelspruit, Vanderbijlpark, Potchefstroom and Witbank as evidence of this philosophy.

Since the beginning of the year, two new Toys R Us stores have been opened in Nelspruit and in Woodmead in Johannesburg's northern suburbs. A new Reggie's store has also opened its doors in Norwood. Some stores are being relocated to better positions while some existing shops are being expanded.

“We believe strongly in re-investing into stores. Retail stores are not dissimilar to residential homes. If our homes are left uncared for, with little or no attention to maintenance, fashion trends and technology, they will become dilapidated and lose value,” Zimmerman said.

"...Refurbishment and upgrading the footprints is a necessity. If retailers do not re-invest in their stores and move with the times, they are just fooling themselves!"

While some retailers are in the unenviable predicament of having to make important real estate decisions on the basis of how much turnover they are going to "steal" from existing outlets in nearby locations, his group's projected store roll-out is being driven by profitable opportunities, and sound strategic imperatives, Zimmerman says.

The group's businesses are cash retailers, which has meant that it has been less affected by the National Credit Act than retailers who have been reliant on credit transactions for over 60% of their retail turnover.

"About 35% of our turnover is accounted for by the baby and juvenile categories. A large contributor to the baby category is the non-discretionary type purchases, such as baby consumables, diapers and certain nursery gear. We remain the leaders in this category in terms of product range, every day low prices and sell-through. Parents may have to tighten their belts somewhat, but hey, it's very difficult to take away from a child!" concludes Zimmerman.