Samantha Enslin-Payne
Coricraft, a local furniture manufacturer and retailer, has begun production at its new R50 million factory in Gauteng, which, it says, will cut manufacturing costs, improve service to one of its busiest markets and mitigate the risk of relying on one production facility.
Managing director David Jacobson said on Friday “some might say we have bitten off more than we can chew, but we will no longer be paying rental on a warehouse and instead will be paying off an asset”.
Before the opening of the new factory, warehouse and head office south of Johannesburg, the Gauteng market was serviced from its Cape Town factory, which was making 230 sofas a day. Jacobson said transport costs, which were about R300 a sofa, would now be cut.
He added that the new facility in Gauteng would improve service delivery to that region, which represented a large portion of its demand. “It also helps mitigate some of the risks associated with having just one manufacturing facility.”
Coricraft sells sofas that are made locally and imports wooden furniture, such as coffee and dining tables, from India, Vietnam, China and Indonesia.
Jacobson said wooden furniture could not be made as cheaply in South Africa due to labour costs. But sofas were more economical to make locally as shipping was expensive due to the limited number of sofas that could fit in a container. Wooden furniture was transported as flat packs.
Coricraft, which was established 20 years ago by Gerald and Corinne Yosh, was bought in 2005 by a private equity firm, Westbrooke.
Jacobson said since 2005 the business had changed entirely with new ranges offering better quality and a wider variety to middle- and upper-income consumers. The group has 31 outlets after opening 15 stores in the last three years.
But in the next few years store expansion would slow as the company had reached critical mass and most prime sites had been secured. The slowdown was also a factor.
Jacobson said from next year between two and three stores would be opened a year, including elsewhere in southern Africa. Coricraft had a store in Botswana and was considering Namibia and Mozambique.
Furniture retail is dominated by JD Group, Ellerines and Lewis, which have over 2 000 stores in southern Africa under various retail brands.
Sales of furniture and appliances have outperformed most other retail categories. Chris Gilmour, an equity analyst at Absa Investments, said this was because sales of more expensive items, such as furniture and cars, picked up the further one went into an economic recovery.
As the economy was still relatively weak, and could remain so, interest rates were likely to remain low, so consumers who were credit-worthy could continue purchasing.
Gilmour said that Coricraft filled a niche in providing fashionable furniture that the big credit retailers did not cover.
Jacobson said Coricraft’s model differed from competitor Wetherlys, which was a destination shop in large warehouse-style stores. Coricraft operated a smaller store format in shopping malls, which gave it higher trading densities of between R1 700 and R4 000 per square metre.
Gilmour said it was not clear that it was a better model than Wetherlys.
Wetherlys could not be reached for comment.