Cotton On, the Australian retail group that first entered the South African market a decade ago, has ambitious growth plans, aiming to nearly double its store footprint across its brands over the next three-five years.
To facilitate this the company has invested R300m in a new state-of-the-art office and distribution complex in Midrand to receive more goods and help it to continue to ramp up its online presence as part of its omnichannel strategy.
Natalie Wills, Africa country manager, said the group aimed to increase its 176 stores across its brands to more than 300, adding that while the retail sector was intensely competitive, there was still opportunity for growth in SA.
“We hold ourselves true to who we are, that we are unique and that we have this Aussie lifestyle proposition that connects with our customer. Everything we do is uniquely designed.
“We don’t spend a lot of time looking at the competition, we spend a lot of time looking at what our opportunity is to grow and trying to bring a great product to the market for our customer.”
She said the group was confident about retail prospects in SA.
“Even with load-shedding, customers are coming back into malls. They are a place to shop, to have meals, and we do have that culture in SA of coming into malls and spending time there. I feel if you are providing the right value to your customer, if you are showing up really well, there is still great opportunity for physical and online retail.”
Nevertheless, the development of the new purpose-built 20,000m2 property in Waterfall City, which consists of an 18,000m2 distribution centre and 2,000m2 of offices over two levels, has taken power supply issues into account.
Phil Marais, head of supply chain at Cotton On, said the group had installed solar panels on the property’s roof, which will in time enable the entire day shift to operate on solar power. The building also incorporated other green technology such as the use of greywater for toilets.
Marais said the premises allowed Cotton On to receive three times more goods, the majority of which were imported from the Far East. The property had a further 5,000m2 expansion potential as the brand grew its physical store and online capabilities. It is situated opposite the Mall of Africa, which houses Cotton On’s largest store in the world.
He said the new premises enable the group to ramp up online orders from 6,000 a day to 10,000.
We are going to see how that goes but we feel very positive that there is opportunity to do more
— Natalie Wills
The property will also have room for locally produced goods, which Wills said the group was planning to sell more of over time.
Wills said Cotton On’s local production strategy was launched two years ago, with the group securing a supplier for local production in Durban. However, the supplier’s facility was damaged in the July 2021 riots, which slightly delayed the first batch of locally manufactured T-shirts coming to store. It had since been repaired and the first orders will be in store in October.
“We are going to see how that goes but we feel very positive that there is opportunity to do more,” said Wills.
She said the group had outgrown its old distribution centre in Pomona, Kempton Park. Because its head offices were in Rosebank, staff at the two locations had to travel long distances for physical meetings.
The company employs 1,500 people in SA. Wills said the group’s growth plans meant hundreds of new positions could be created.
She said the biggest growth in store openings would be among its Factorie and Typo brands, with an opportunity to more than double the number of Factorie stores from 40 to 90. For every Factorie store opened, about seven jobs were created.
There is also growth potential in the Cotton On brand — with Wills estimating the total number of these shops could increase from 70 to 100. A Cotton On store employs 10-12 staff.
She said the 300-plus estimate for the total number of stores was conservative because it did not take account of possible new outlets for brands such as women’s wear chain Supre, which Cotton On has just launched in SA.
Richard Cheesman, senior investment analyst at Protea Capital Management, said being a relatively newer player in the SA clothing retail market, with a smaller market share, gave Cotton On more scope for expansion opportunities.
He said it was difficult to read the state of the retail market as there has been a lot of disruption over the past few years due to the pandemic and the riots a year ago.
While the market was “not going gangbusters compared to 2019 pre-pandemic levels” it was performing much better than in 2021, with a strong recovery off a low base.
However, Cheesman said the retail market was not buoyant due to the effect of rising fuel costs and other inflationary pressure on consumers.
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