Mr. Price and Homewood Partnership Conquers Covid-19
The local market has been turbulent for several years with several closures, bankruptcies, and accounting scandals. Trade was starting to recover after a period of stagnation between 2015-2018 but experienced an 86% decline month-on-month in the March-May 2020 period as a result of the COVID-19 pandemic and a hard economic lockdown imposed by the South African National Government. While trade bounced back from those lows, by September 2020 trade was still 35% down from 2019 levels and concerns over a sustained economic crisis on the back of an already weak economy weighed heavily on the sector.
South African furniture manufacturing sales were stagnant between 2015 and 2017, and by 2019 had declined by 7%. The dominance of Chinese manufacturers in low cost, labour-intensive sectors has meant domestic manufacturers have had to compete extensively on price, with the result that production has steadily shrunk and approximately 42 000 jobs have been lost since 2002. However non-price related factors can be leveraged by firms to compete against imports.
Homewood owner and founder, Ian Perry, was devastated by the thought of how crippling a 5-week full factory and retail closure would be for his business, which he has nurtured for over a decade. But out of the chaos, a beautiful partnership was formed. The lockdown led Ian to start thinking more about his business strategy and how he could turn this forced ‘down time’ into something constructive.
The EFC (eThekwini Furniture Cluster) has utilised the Clustering approach as an effective mechanism to provide support to the industry at economies of scale. Through the cluster, the industry has collaborated both within the sector and cross-sector, to overcome the challenges associated with COVID-19.
The EFC has been actively engaging the KZN furniture sector over the past few weeks in response to the COVID-19 crisis through online working groups with the objective to:
- Establish a forum for ongoing support to members.
- Identify COVID-19 risks to business functioning and possible firm responses.
- Develop an industry risk mitigation framework.
- Provide recovery support to member firms.
Ian started attending Covid-19 risk mitigation working groups and became a member after seeing the value our EFC Cluster could provide.
In late 2020 the EFC hosted a retail furniture sector outlook webinar which unpacked the retail furniture sector outlook over the next 12 months. A panel of retailers and an investment analyst shared their perspectives on the direction of the sector and what was required of domestic manufacturers to access market opportunities.
It was through this discussion that Homewood was later introduced to Mr Price Home, where they were able to leverage the opportunities identified in the webinar to collaborate on a sustainably sourced product range that was 100% locally produced and eliminated the risk of global supply chain shortages.
The Kotini Range is a range of cottonwood furniture that locates local, alien-invasive trees that are draining South Africa’s precious waterways and using these woods to produce handcrafted, luxury furniture.
The EFC, facilitated by B&M Analysts, supported the engagements between Homewood and Mr Price Home. Homewood was awarded a contract with MRPH to produce an initial order of the Kotini Range for eight of Mr Price Home’s national stores with the potential to generate further sales in the coming months.
This new market opportunity spurred on by the EFC’s initiatives has the potential to increase the firm’s employment by 40 employees should the initial order be successful.