The sad case of the two leading fashion behemoths Edgars Stores Limited and Truworths Limited makes me ponder about a famous quote from Charles Darwin: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” According to Truworths Zimbabwe site they have 59 retail branches (Topics, Number 1 Stores, Truworths) countrywide and a manufacturing arm Bravette. They have been in existence since 1957, and offer a collection of leisurewear, contemporary clothing, formal wear, classical and women accessories. Whilst Edgars on the other hand was registered in Zimbabwe as a company in 1948 and its core business has been retailing of footwear, clothing, textiles and accessories. Edgars is organised into two business units retailing (incorporating Edgars and Jet) and manufacturing (Carousel).
Truworths registered a $1,3 million loss for the financial year ending 10 July 2016. Whilst it is true that the floundering economy has resulted in their customers being paid late or not being paid at all, there are other areas that they can compensate for which I will come to in a bit. Edgars on the other hand is smarting from a 90% drop in profits in the 6 months ending in July. Edgars and Truworths both didn’t declare dividends, their dwindling sales are attributable to the influx of clothes from Dubai and China being sold in downtown shops who paying less rentals, less salaries and less tax, if any at all. After experiencing a steady growth of the economy between 2009 and 2013 of 7% more retail shops sprung up in the Central Business District and as the economy started stagnating to an estimated negative growth of 0.3% in 2016, a new breed of entrepreneurs sprung up who were selling from their homes, car boots, back packs and from their work places (yes work places i.e where they are gainfully employed).
The new breed of entrepreneurs have done away with rentals, tax, salaries, social security, electricity and water and rates. This has enabled them to come up with products 50% cheaper than Edgars and Truworths. To top it off they also offer credit terms which are not as stringent as the aforementioned companies, they have also managed to offer the same quality products and have also become pretty flexible in that they can deliver their wares to their customers doorstep. The new players in the market are quite tech savvy you will find them on social media particularly facebook, whatsapp, twitter and instagram. The selling platform they offer is quite personal and gives the prospective buyer the option to negotiate prices and discounts, which is a nightmare with the likes of Edgars and Truworths if not impossible to say the least. If Edgars and Truworths do not come up with new ideas to reduce their prices, increase credit terms, be more flexible, improve interpersonal relations and aggressively embrace social media their viability and going concern could become questionable.
A lot of people say that they will never go under; they “are too big fail”, I always remind people what happened to the following companies in the United States of America (USA) which folded: Enron (2001- bankruptcy), Pacific Gas and Electric Co (2001- bankruptcy), WorldCom Inc (2002- bankruptcy) and Lehman Brothers (2008- bankruptcy). The reason why a lot of investors lost money is because no one ever imagined that these juggernauts in their respective industries would collapse spectacularly. For Edgars and Truworths its just a simple case of “innovate or die”