Hardware has frequently been flagged as one of the top contributors to the decline in Stats SA’s retail trade sales over the past seven months.
While the retail trade sales stats released last week Wednesday show a decline of 0.9% in June Y-O-Y with hardware declining -4.4%, it is encouraging to note that hardware is tracking a smaller decline compared to May (of -9.1%) despite navigating crippling power cuts, political uncertainty, muted consumer spend, and higher import costs.
Challenging economic conditions mean that building and hardware retail business owners need to be agile and able to adjust their offerings to react to customer buying trends. Readily available working capital can make all the difference to these business owners, especially independent retailers.
Nicole Swart, Managing Director of Merchant Capital, says hardware business owners must remain responsive to customer needs and trends.
During Covid, as new buying trends came online, many hardware retailers couldn’t pivot fast enough to offer DIY and protective gear to customers as demand for building materials deteriorated.
The hardware sector is considered a leading indicator for the overall health of the economy, and sales have declined from the peak experienced during Covid in 2020. Current buying trends have moved towards electricity infrastructure, water pumps and décor items.
While retailers in hardware, paint and glass were one of the largest negative contributors in the latest retail trade sales figures, part of this decline can be attributed to a correction off the peak that some areas of hardware experienced during Covid, which Swart terms the “DIY factor”.
Although the peak that DIY hardware sales experienced during Covid has tapered off, Swart believes the worst of the decline is over. “Sales figures are stabilising, and Merchant Capital’s hardware clients have remained steady and resilient.” Independently owned hardware stores, or those that are franchised but are owner-run have proved more agile and versatile.
Swart says Merchant Capital’s working capital solutions can be the catalyst to business growth for retailers who see the opportunity to grow, but face barriers when it comes to accessing the funding they need.
“We are in the business of growing our clients,” she says. “We work with our clients to ensure affordability and analyse their cashflow so they are not taking on the wrong type of debt. We make it our business to understand our clients, working together to develop customised, technology-led lending solutions that support their business objectives.”
Merchant Capital’s StockAdvance offering – a first in South Africa – allows hardware retailers, and general retailers, to buy either bulk stock or smaller, quick turnover stock with fixed cost, short term financing. They receive an upfront payment holiday, allowing them the time to receive and sell the stock without negatively impacting their cash flow. By being responsive to changing buying trends, they are then able to adjust and remain versatile.
Many clients return to Merchant Capital up to three times a year to fund stock purchases in this way.
Going forward, Swart says that challenges such as the price of imports due to exchange rate volatility, electricity supply and the decline in construction activity have been factored in, and the hardware sector is adapting well.
Supplied by PR.