Gauteng Business News

Send  Share  RSS  Twitter  19 Mar 2012

VENTURES: A BIG BRAND for Independent Hardware Retailers


Recent Gauteng Business News

With a retail turnover of R2.78 Billion 2 years ago and reaching over R5 Billion in 2011/12, Essential Hardware is a true South African business success story. With numbers this large over a 7 year period, it cannot be denied that the local community hardware store is not only alive and well, but thriving, catering for a necessary market demand and bucking the big brand blueprint.

Formed in January 2005 The Essential Hardware Group now consists of almost 200 voluntary trading Hardware Store Members throughout Southern Africa, and has grown at breakneck speed to become the 3rd largest retailer in the DIY/Building/Hardware Sector in South Africa.

“Recent events in Retail acquisitions highlight the plight of South African owned eneterprises, where, as they grow and list, they become targets of international Retail Chain acquisiitions, and destroy locally owned SME’s” Notes Michael Valsecchi, GM Essential Hardware. “This scenario has a ripple effect through the entire South African supply chain, an area not forgotten by the EH Group, where local suppliers, large and small, are actively enabled to get onto our retail shelves without the normal obstacles to entry being imposed that preclude smaller suppliers from getting a foot in the door.”

The local Storeowner knows best as to what his/her local community wants and needs, what products to stock and pricing and can formulate for their specific public. This formula sets the business well apart from the competitive pack. Testament to the success is in remote areas, where individual store turnover can exceed R22M per month.

The Essential Hardware Business Model

To cater for local store need, Essential has developed a fine-tuned a business model. The model enables the Independent Community Hardware store to become

• a Member of a National Big Brand,
• gain access to big Buying Power,
• access expertise in Best Practices in the crucial retail operations
• gain access to professional marketing tools and strategies customised to suit the LOCAL business need.

Importantly, the retention of each store’s independence and the ability to control the content of their local advertising needs is what keeps these Members known as the Community store, but with the Big Brand status, and all the trappings that are associated with that.

The Differences Doing it the Essential Hardware Way Compared to the Traditional Way

From a Supplier perspective there are also some major differentiators to the traditional Retailer. Essential Hardware enables access, by Suppliers, to individual Members directly and have established multiple platforms to encourage this. Essential Hardware Group have embraced a fully inclusive approach, flying in the face of the traditional retailer’s dictatorial methods, and making a big success of it. An indicator of successes is the measure of growth they have applied, comparing suppliers using the platforms provided against those not using the EH platforms and still stuck in the traditional retailer mindset.

The result In a 12 months period, ending Feb 2012: (average):

• Those using the Essential Hardware platforms grew 17.9% (ave)
• Those not using the Essential Hardware platform grew 8% (ave)

On a Macro level, and important to South Africa’s economy, the Essential model encourages South African manufacturers onto their shelves. This is achieved by doing away with the massive upfront listing fees normally associated with getting onto a chain-store’s shelves, and the traditional hoops that preclude so many African innovations ever reaching shelves. Essential saw this as an opportunity and support African innovation through many platforms.


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