NAIROBI, Kenya, Aug 30 – Fashion retailer Deacons East Africa has set aside Sh10 million for an E- commerce platform that is part of a strategy to boost sales in the wake of plunging income.
The company posted a 244 percent increase in losses in the first six months of 2017 to Sh180 million compared to Sh52 million loss in the first half of 2016.
The firm’s chief executive Muchiri Wahome attributed the losses to the drought that led to the reduction in disposable income coupled with lack of consumer credit due to the interest rates capping that has limited private sector lending.
The firm also blames the reduction of footfall into malls by 60 percent due to the non-performance of major supermarket anchor tenants.
“98 percent of our stores operate in malls whose anchor tenants are experiencing stocking challenges,” Wahome told Capital FM Business.
Wahome says the new E- commerce platform is expected to cut operating expenditure by 20 percent and increase overall revenue by 10 percent.
“The E- commerce platform is slated for the first quarter of 2018 and is expected to help the company remain competitive by reaching a wider market and as a result increase its revenue through sales from the platform,” he noted.
The firm is currently selling through Jumia Kenya.
“Through our new platform, we have plans to target young customers whose life is predominantly on the phone. It is, however, going take time. I don’t expect online sales will surpass 10 percent in the next two years, but then, the opportunity thereafter is enormous,” he explained.
The firm also intends to focus on profit making brands and may dispose of loss making arms that are not adding value to the overall business plans over the next five years.
Among the brands exiting includes the Angelo Shoe brand whose stores will become Adidas stores as well as the baby shop brand franchise whose model has been switched to open market instead of franchise buying.
“This is a continuous process and the board will continue to evaluate what is working and what is not,” he said.
The Nairobi Securities Exchange (NSE) listed firm plans to review its capital structure either through debt or a rights issue with the board yet to confirm on the channel of choice.
Deacon’s fashion brands include 4u2, Angelo, Mr. Price, Truworths, Babyshop, Bossini, and F&F.
This year LC Waikiki, the world’s leading retail fashion brand entered Kenya with a store at Two Rivers Mall which is seen as a huge competitor to Deacons.