The challenge of business acquisitions is always ensuring the new business beds down quickly into a major group. At JD Group, the last decade has seen a number of ambitious investments, which have resulted in a greatly diversified business which is now well-placed for growth across a number of new areas.
“Today the JD Group is a diversified, listed South African business,” states Bennie van Rooy, CEO for the Consumer Finance Division. “Everything is where it needs to be and we have strong management teams across all of our divisions, meaning that the businesses can just get on with their focus.”
JD Group was launched in 1983 as Price and Pride – a retail furniture distributor. By 1986 the business had acquired Joshua Doore and gradually grew to the point that the business became publicly listed on the Johannesburg Stock Exchange in 1986.
Further acquisitions lead to the change of name to JD Group Ltd. in 1988 and by 1991 the company had become a cash business and was managing the credit business of JD Sales (Pty) Ltd. By 1993 the JD Group had grown into the largest retailer of furniture, household appliances and home entertainment on the Continent.
Today, following a number of acquisitions, the business operates in a number of markets, catering for the customer lifestyle through retail furniture, consumer electronic and technology goods, household appliances, building materials and DIY products, automotive sales and consumer financing. The retail side of the business includes well known brands such as Joshua Doore, Barnetts, Russells and Hi-Fi Corp.
“Our diversification has helped to reduce our reliance on one source of revenue – furniture for example, can be a very cyclical business and the impact of the economic downturn, whilst not as severe in South Africa, can affect consumer sales,” states van Rooy.
“Today automotive accounts for about 47 per cent of our revenue, with the retail business (furniture and consumer electronics) making up 40 per cent and 13 per cent attribute to consumer finance revenue.
“However, when it comes to profitability, consumer finance contributes about 50 per cent, automotive 28 per cent and retail 22 per cent, so you can really see the benefits of diversifying our portfolio of businesses,” he continues.
“Our automotive involvement began in 2011 (along with our building suppliers division) and we sell new and second hand vehicles at 88 dealerships across South Africa. We sell all major brands but have a strong association with Toyota, as well as General Motors, Nissan, Renault, Volkswagen, BMW and Mercedes.
“This business has performed well to date and offers us a good, solid source of revenue, without offering huge growth in the near future. Automotive is a durable product but is sensitive to changes in the economy and the exchange rates affect vehicle prices, so whilst the return is healthy, it is a more stable form of income.”
Headquartered in Johannesburg, the JD Group does not manufacture, but has a series of stores (over 1,020 furniture stores, 100 consumer electronic stores and 80 building supply stores) and numerous warehouses and distribution centres.
In total van Rooy says that the company employs around 25,000 people, with the bulk of the workforce concentrated in retail and sales and distribution.
“Training is of importance to us – all large companies in South Africa have a commitment to up-skilling their workforce and we are no different. We have a central HR function and one of its specialist areas is a centre of excellence, dedicated to training,” he confirms.
Each division has its own target market and van Rooy suggests that demographics play an important role in the group’s store location strategy. Equally important is each division’s ability to meet service standards. That calls on a reliable supply chain and distribution network and van Rooy indicates that procurement is centralised for the furniture retail and consumer electronics divisions, while the building supplies division manages its own supply chain.
The furniture division operates 30 distribution centres and outsources a fleet of vehicles which aim to deliver furniture to the customer within 48 hours – although occasionally that can be subject to stock availability.
One of the key aspects of running a smooth supply chain and distribution operation is of course IT. Van Rooy says that the JD Group has put great importance on this in recent years as the group has grown and diversified:
“We have invested in a major ERP system which is run by SAP,” he states. “Bedding the system down is paramount to us and it is a challenge to get everything in place to optimise the benefits.
“In 2012 we launched our R8 billion Domestic Medium Term Note programme, funding our consumer finance business and we have also invested in software for our logistics operations. Our balance sheet has changed from equity and bank funding to natural revenue now,” he adds.
Technology also plays a growing role in the marketing of JD Group’s various divisions and also collections, as van Rooy explains:
“We have started to use social media for a number of issues including providing Wi-Fi in stores and at the same time we are looking at ways to use SMS for some of our marketing. We are already using social media in conjunction with collections on the consumer finance side.”
Whilst van Rooy says that the global economic downturn had a lesser effect in South Africa, encouraging consumers through the doors remains a major challenge. JD Group has indicated that a number of retail stores may downsize or relocate to shopping malls in the coming months, in order to align with the target markets, a point that van Rooy reiterates:
“Opening and closing stores is a part of the business – we recently acquired 4 more dealerships and a new building suppliers company called Hardware Warehouse, while we have also opened a number of central distribution centres in the past 12 months.
“Our store network will always be open to changes and we will continue to look for opportunities to open new dealerships. We have a strategy to extend our building suppliers business to appeal to the middle market demographic and our finance division will support our retail efforts,” he concludes.