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J O H N

C R A I G

FEATURE


TURNED-OU T

Any South African man who cares how he looks will know he can trust John Craig, a retail chain that truly puts the customer first: MD Lily Moreira outlined her values and strategy to John O’Hanlon. 2

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John Craig FEATURE

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outh Africa’s transition from a divided society to one that provides an international model for integration is nowhere more clearly illustrated than in the business world. Initiatives like Black Economic Empowerment have been a valuable antidote to any lingering reluctance to embrace the new culture. But companies that were already swimming against the tide in the old days had a distinct advantage when the tide turned. John Craig is such a company. Founded 70 years ago and with its origins as a Jewish, family-run men’s outfitter it never saw the colour of its customers and would offer deferred payment terms without discrimination at a time when that would have been unthinkable for any but the privileged. A lot has changed since those days but the goodwill and loyalty that John Craig built-up in those days has been carefully nurtured. It is, says MD Lily Moreira, a niche player but its niche is large and significant – and it is growing steadily. John Craig is still a specialist in men’s clothing and footwear. It has 56 shops throughout South Africa (with the exception of the West Cape) and it caters for a mainstream market. This means it competes neither with the cheap clothing sheds at the bottom end of the market nor the high fashion boutiques favoured by the wealthy. A typical customer would be a man over 30, with a good career and all the aspirations that go with the expanding South African middle class, among whom incomes have trebled in the last decade. He will probably have a growing family and the responsibility of a house, so these factors will limit his disposable income, but he needs to maintain

his image socially and at work. ‘If you want to get ahead get a hat’ worked for Dunn & Co in another place at another time: John Craig doesn’t sell many hats, but you get the picture. These customers are comfortable with John Craig. “Our latest market survey came back with a number of key words people associate with our name: trust; loyalty; integrity; sincerity; stylish; quality; exclusivity – these all came up constantly,” says Moreira. “I don’t take any credit for these values – they were all there long before we came on the scene – but we made it our business to preserve them and we seem to be doing a good job!” It was in 2000 that Moreira and her management team took over the company in a management buyout. The company was by then in the hands of the industrial group Waco International, and clearly a non-core asset as far as they were concerned. John Craig had struggled to make any profits in the preceding couple of years and was in need of restructuring – that it could be successfully turned round was clear to the incumbent management but Waco had no strategic incentive to support that and was happy to divest. Having purchased the assets with the backing of a private investor (as one would suppose the banks were put off by the risk historical results were not encouraging) they set about rationalising the chain, starting by closing loss-making outlets that had been a drain on cash flow. “We thought there was a good opportunity to set the business on a sound footing but that it needed to be consolidated and worked at, and that is what we did.” Restructuring seems to have been more about refocusing the business on its traditional strengths than making big changes. In the early years of the decade it was returned to

We have come a long way in terms of training over the last few years and innovative ways of rewarding employees in terms of incentives

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John Craig FEATURE

profit: it was time to think about growing, she says, but the shareholders that supported the MBO were now looking at an exit rather than putting more money in to growth so she had to look for another way. “We didn’t originally set out to sell the business, but when Pepkor, the pan-African retail group showed interest in purchasing us we saw there could be great synergies in being part of a strong retail group. Pepkor’s backing would enable us to set up more stores and grow the product offering while still protecting our strengths.” In 2006 Pepkor acquired all the equity in John Craig. “Looking back after four years, I am certain that decision was spot-on,” says Moreira. “There have been massive benefits in areas where we needed help like logistics, training, driving down supply chain cost and of course capital investment.” At the same time, she adds, Pepkor is happy for John Craig to be run as an autonomous business when it comes to choosing how it approaches the market, what it stocks and how it relates to its customers. The last of these is probably the most important, and Lily Moreira keeps coming back to it. “I think if there is one critical aspect of this business it’s the culture. And that is a balance between how the customers see us and how the people who work for us understand what the customers expect. We have come a long way in terms of training over the last few years and innovative ways of rewarding employees in terms of incentives.” Personal service of a practical nature is what typifies a visit to a John Craig branch – not the hard sell. For example, appreciating that no two men are the same shape as each other (let alone the model in the catalogue!) if any

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suit or formal trousers bought at John Craig needs to be altered to make a perfect fit, those alterations will be carried out at no charge, very often on the same day. Most of the clothes John Craig sells are international brands that have proved popular over the years. This range is updated but only very selectively: even so, there are occasions when lines that sell well abroad aren’t quite right for South Africa. When a gap is spotted it is filled with one of John Craig’s own brands like Muratti or JC Collection. House brands are becoming a bigger contributor to the bottom line, she says, but they are not intended to take over from tried and tested product lines. In the next year or so, John Craig plans to open some stores in the one province it hasn’t reached yet. “We are looking at a few locations in the Cape area, and when we find out where our target market does its shopping we will be setting up there,” Moreira promises. She is definitely interested in the potential offered by neighbouring African countries too, though that expansion will probably take a year or two longer. Meanwhile, business as usual will satisfy her. END

We thought there was a good opportunity to set the business on a sound footing but that it needed to be consolidated and worked at, and that is what we did

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JOHN CRAIG FEATURE  

SA Mag - Issue 9 - JOHN CRAIG FEATURE

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