The tale of how the underdog triumphed in the midst of great challenges
Retailability CFO Malcom Smith shares the backstory of the Edgars acquisition.
When Malcom Smith joined Retailability in 2017, the company had just completed the acquisition of 220 Legit stores. Up until that point, it had been a family-run business, founded by Cliff Lines, who started in retail by selling second hand clothes from his car.
Acquiring Legit took the company from 200 stores to just under 450 outlets in six countries.
We are still the small guy, which we use to our advantage
Following that growth and leading up to 2020, Malcom and his team had been quietly building a strong system with the right platforms and controls to operate from. When Edcon announced it was going into business rescue in April 2020 and shortly thereafter that the stores were up for sale, Retailability saw an opportunity to continue expanding by acquiring Edgars.
To make this happen, the team had to do a very accelerated due diligence, further complicated by the Covid-19 lockdown and he says, “The longer Edcon was in business rescue, the less likely a buyer would be able to revive it and trade it successfully. So, we were under massive pressure to conclude the deal and implement our strategy. We had a small window between getting approval from the Competition commission to taking over.”
The acquisition of 130 Edgars stores bumped the company up to the 600-store mark, and completely transformed it, moving it from a speciality retailer to a big box retailer.
“As we have grown, we have had to put the appropriate systems in place with each spurt,” says Malcolm.
Set up for success
The journey to improve Retailability’s financial management started in 2017 when the team embarked on a journey to streamline and optimise the company’s financial reporting environment. They put in a budgeting and management reporting product, deployed a lease management package, and replaced their instore POS and merchandising system, in order to provide an appropriate control environment for the increased scale of the business.
Malcolm’s approach is one rooted in simplicity and keeping things fit for purpose, “It’s very easy to get caught up in fancy things. When we spend money, we try to do it in the most beneficial and cost-efficient way.”
On 11 September 2020, Retailability took over the Edgars businesses and opened Edgars stores for trading having migrated all processes from Edcon’s systems across to Retailability’s.
“One of the reasons that we could switch over completely to our system was that when we bought Legit in 2017, it proved to have been the perfect dry run for what we would need to do for Edgars.” With the experience of having done a full migration before, the team made some adjustments and were able to transition the systems successfully.
“If we had kept the platform, we may have never moved across so we made the call to make a clean cut,” admits Malcolm. “We pride ourselves in not having become corporatised in our thinking, which becomes harder as you become bigger and things become more complex. We always look at creative ways to solve problems, and we are quick, nimble and fast to execute,” he adds.
It was clear that with massive growth, they needed to automate processes a lot more to cope with the massive volume and new complexities of the business. Malcolm’s finance team previously had to extract data, build Excel templates and then wade through the transaction details manually. “We onboarded Blackline, a tool which has given the finance team the backbone we needed to accommodate future growth and bring credible financial controls and efficiencies into the business. It has proven to be a massive step forward for us,” he says.
Just as things were moving along, the July lootings dealt a huge blow to the company’s operations. “Like all other retailers we were badly impacted. We had just taken occupation of a new distribution centre and unfortunately that was destroyed in the looting. This distribution centre supplied all our stores and so it was critical that we found and opened a replacement facility as soon as possible.”
Now on the rebound, Malcom says e-commerce is an area of anticipated growth. “When we took over Edgars, we rebuilt and relaunched the online shopping website. It’s a key strategic driver of the business and aligns with our digitally focused marketing strategy.”
Even though they have made great strides with the automated transaction matching and reconciliation process, Malcolm is excited to further extend the scope of Blackline.
Another project he is excited about is implementation of a next generation Pin Entry Pad (PED) payment device. Retailability is believed to be the first retailer in Southern Africa to be deploying the PAX Android device.
Looking back, Malcolm says that saving Edgars has been a massive achievement for the company. He says, “We kept an iconic South African brand alive and, in the process, saved 6,000 direct jobs. which is phenomenal in this current environment. It was a story of David and Goliath and we are proud to have a good story to tell.”