Deacons stops airlifting cargo to reduce costs

 

Deacons East Africa has stopped bringing in stock from source markets by air, and instead shifted to sea transport.

At a briefing Monday ahead of its listing on the stock exchange, the fashion retailer said this has helped cut freight costs by up to 80 per cent.

Deacons, which lists its shares at the Nairobi Securities Exchange (NSE) today, gets its merchandise from South Africa, Dubai and China.

A review of the supply route to get stock delivered directly from manufacturers rather than going through South Africa is already yielding “significant” savings on transportation expenses.

“We are seeing out transport costs reduce by up to 80 per cent on the Dubai-China route,” Deacons Chairman Peter Njoka said yesterday.

And from South Africa, transport expenses have been halved following the decision to move merchandise by sea rather than flying it in.

Savings on transport costs place the firm at a better position to compete on pricing with its rivals in the fashion retail sector.

Target markets

The firm has also entered rental agreements with property owners in major towns in pursuit of new opportunities away from Nairobi. Eldoret, Kisumu and Meru are among its next target markets. These counties are home to increasingly wealthy populations.

“We will go in as soon as the malls are completed,” Muchiri Wahome, the retailer’s chief executive, said.

Deacons’ 33 outlets are in Nairobi, and the expansion outside the city is a journey back in time for the retailer that had outlets in several major towns until the 1990s. Difficulties in the importation of clothes led to the closure of stores, prompting a change of strategy.

It was not possible to tell which of the towns the next outlet will be opened, since it all depends on completion dates of ongoing real estate developments.

Mr Wahome said the retailer is working on raising the total outlets of 66 stores across the region, including Rwanda and Uganda.

Additional outlets will be come through an online selling platform, where customers can virtually shop before merchandise is delivered to them. Using the online channel to push sales involves minimal investment in actual brick-and-mortar outlets.

The fashion retailer has several franchises — Adidas, Mr Price and Mr Price Home, Reebok, Angelo, 4U2, Babyshop, Bosinni, Truworths and LifeFitness. It will, this morning, sell its shares to the public by introduction at a price of Sh15 each.

The listing is expected to help the retailer raise additional capital for expansion, while offering existing investors an opportunity to exit.

Deacons’ shares have been trading on the Over-The-Counter market for more than five years in cumbersome transactions that often take up to eight weeks to complete.