There is a growing market for distressed merchandise as consumers continue to shop down as a result of economic challenges.
Business Report spoke to Jam Clothing managing director Michael Ditz, who runs one of the country’s most successful chain stores selling store rejects and overruns.
“We buy and sell distressed goods. By buying chain store overruns and cancellations one eliminates a lot of risks, if the garment was initially made for a listed chain it will be good enough for Jam,” Ditz said.
“We do not sell fakes and if the merchandise comes as a reject we market it as a reject.”
What made Jam different from formal retailers such as Mr Price, Jet, Edgars and others was not the quality, seasonability or even fashionability of the clothing, “it is our average price point of R40”.
“We sell to two kind of customers, people who like a bargain and those who need a bargain. So we cut right across the spectrum,” Ditz said.
Jam Clothing sourced its clothing directly from factories making garments for international chains as well as from wholesalers that supplied the local retail chains. To make sure that the company does not infringe on other retailers’ trademarks, it has to remove the retailer’s label.
Coming from a clothing manufacturer and wholesaler background, Ditz and his business partners, Grant Fraser and David Altshuler, opened their first store in Berea, Durban in 1998.
“Thirteen years later we had 23 stores,” said Ditz. “It was at this point we decided to take it to another level and opened 40 stores in the past three years.”
This involved an entire restructuring of the business, moving to bigger premises and hiring more staff.
Jam Clothing now has 63 stores across the country, with the latest opening in Soweto last week, and one to open in Limpopo later this year.
Explaining the simplicity of the business model, Ditz said, “We need to keep our overheads low as possible and open as many stores as we can on our current infrastructure. We will soon be at 80 stores.”
Ditz was of the view that the distressed merchandise industry was growing and had already made its mark among popular retailers. “While we have competitors, we also have become competition to the regular retailers,” he said.
“With inflation rising and petrol going up, what we are seeing is consumers shopping down. We have also noticed that that our basket size is increasing. Maybe a customer who used to shop at a more expensive store like Edgars cannot afford those prices anymore and is now coming to Jam. These shoppers are spending more money than the traditional Jam customers,” he said.
Jam Clothing has experienced a significant year-on-year growth in comparable store sales, however,the number of transactions has not increased proportionately. “Therefore the shopper at the low end of the market is falling by the wayside,” Ditz said.
This has forced Jam Clothing to rethink its strategy of opening stores in the outlying areas in some provinces.
Despite operating its stores with a basic format and no frills, Jam Clothing said it was also challenged by salaries, rates, rental and energy costs.
“There is no room for frills, we cannot afford to pay fancy rentals with our business model. That is the reason we are not in any of the regional malls.”
The company employs about 500 permanent staff and 500 temporary staff.
Like most clothing retailers, Jam Clothing has a loyalty scheme, with a membership of 139 000.
Ditz was of the view that although the loyalty scheme had not helped grow market share, it had assisted Jam Clothing to retain its loyal customer base. - Business Report