The FRUSTRATED WORKERS Who Built Mr Price

Mr Price is a fashion-leading clothing, footwear, cosmetics, and accessories retailer that offers on-trend and differentiated merchandise, at an extraordinary value to ladies, men, and children.

Through constant innovation and product development, staying on the pulse of international fashion trends and diligent resourcing, Mr Price is able to make trend-led fashion accessible to customers, at highly competitive prices. Selling predominately private label merchandise.

Mr Price Group divisions provide customers with diverse products, covering apparel, homeware, sportswear, and financial and cellular services

In order for us to understand how the Mr Price Group became one of Africa’s leading retailers, let’s take it back to the country of Ireland in 1858 when John Orr, was born to Dickson, and Letitia Orr, in Benburb, County Tyrone.

After working for several leading drapers in Ulster, John emigrated to South Africa in 1883 at the age of 25, obtaining employment in Cape Town with the retail store founded by John Garlick. After that, for two years John ran his own shop at Stellenbosch, before moving to Kimberley where he opened a small store in Jones Street called John Orr & Co. in 1886.

In 1891, John was joined by his brother Joseph, both brothers doing guard duty in Kimberley during the siege. Soon after the conclusion of the Second Anglo-Boer War they set up new branches in Durban and Johannesburg, although John remained in Kimberley to develop the fast-expanding business. There he started a ‘spot cash’ drapery in Dutoitspan Road to cater for the lower income wage earners; and further branches were opened in Benoni, Pretoria, and Maputo in Mozambique.

In 1920, the firm became a public company by which time it was employing 2,500 people and conducting some 20,000 transactions a day. This enabled John to consolidate what had by then evolved into a major retail enterprise, with its head office in Kimberley. During the twenties the Johannesburg and Durban premises were greatly enlarged, and new shops were opened in Springs and Pietermaritzburg.

John Orr became mayor of Kimberley in 1910 and was again mayor between 1916 and 1919. John Orr died in 1932 and Joseph in 1953.

The empire steadily continued to expand. Together John and Joseph built up the famous retail chain of stores which remained a household name in South Africa right through to the late 1980s.

The first Mr Price store was opened in an old Bakers Biscuit warehouse in Durban in 1985. Its founders, Laurie Chiappini and Stewart Cohen had a vision of creating factory shops that stocked fashionable clothing at reasonable prices.

Their prior experiences in retail working on shop floors had given them a negative view of typical businesses and they believed there was a better way of doing business, one where individuals could exploit their full potential.

So in early 1985, they recognised factory shops as the future but didn’t have the money to establish one. They felt clothing prices were too high and dreamt of a new kind of factory shop selling quality merchandise at lower prices.

This would be a third generation factory shop boasting attractive interiors, wanted merchandise and incredible advertising, but a very low cost structure to allow for low margins off high volumes.

The very first Mr Price stores were franchised due to lack of funds.

The following year, Chiappini and Cohen formed a consortium with Bank of England to buy the then ailing John Orr’s business which included the John Orr’s department stores and their two niche fashion chains: Milady’s and The Hub.

Less than 12 months later, the John Orr’s department stores had been disposed of, and the capital this freed up was used as the base for a new company, initially called Speciality Store Company, and later, Storeco, which included a growing number of Mr Price outlets.

Storeco was listed on the Johannesburg Stock Exchange in 1989, and two years later Chiappini and Cohen bought out Bank of England’s stake in the business.

In 1996 Storeco, acquired the jeweller Galaxy & Co. and the home textiles chain Sheet Street which has since become a leading retail brand of ready-made home textiles in five Southern African countries, with over 320 stores.

It wasn’t until the hugely capable and charismatic Alastair McArthur was appointed CEO in 1997 that the earnings really took off.

The group was renamed Mr Price Group in 2001, reflecting the fact that its Mr Price outlets had become the most profitable part of its operations.

Under McArthur, Mr Price adopted a market penetration strategy by expanding its operations and increasing its market share within South Africa. The company focused on driving customer traffic to its stores by offering affordable and fashionable merchandise. They achieved this by investing in their supply chain, improving store layouts, and increasing advertising efforts. As a result, Mr Price was able to capture a significant portion of the retail market in South Africa as the years went by.

An example of market penetration strategy can be seen from the case study when Mr Price implemented a vertical integration strategy by acquiring power factories to produce their own clothing. This move reduced costs, improved efficiency, and allowed them to offer lower prices to customers. By doing so, Mr Price increased its market share and strengthened its competitive position.

The first Mr Price Home was created in 1998 and two years later, the company started its first international expansion by entering the Namibian and Botswana market, followed by other countries such as Swaziland, Lesotho, Zambia, Kenya, Tanzania, and Ghana. This strategy of entering new markets allowed Mr Price to tap into the growing consumer demand in those countries and expanded its customer base. By spreading its footprint across different African countries, Mr Price reduced its reliance on a single market and diversified its revenue stream.

In 2005, Mr Price sold off two of its subsidiaries. Firstly the Galaxy jewellery division to a consortium comprised of management of that division. The company just didn’t see further “massive growth” in the division for the future despite the projections saying otherwise.

Secondly it was The Hub division, which comprised of 12 departmental stores and two shoe stores. The Hub was purchased by a consortium of management and a private investor supported by a leading financial institution.

Mr Price Sport was established in 2007. The next year Mr Price Franchising as well as Mr Price Sports divisions were launched. The customer service award from the Orange Index was presented to Milady’s in 2008, the most widely referenced customer experience measurement and benchmark in South Africa.

The first time Mr Price Clothing was voted the most loved and most visited apparel brand was also in 2008. In the same year Mr Price home was voted the most loved and visited homeware retailer.

In 2011, the Mr Price group celebrated their 25th anniversary with regards to changes in management and control.

McArthur was a retailing genius and current CEO Mark Blair understudied him closely when he was CFO of the group. To this day, no satisfactory explanation has been given publicly for McArthur’s departure. He left abruptly in 2010 and was replaced by Stuart Bird, who himself retired in 2019. Mark Blair replaced Bird as CEO.

Under Blair’s leadership, the company expanded its product range to include more than just clothing, offering a wide variety of homeware, accessories, footwear, and sportswear. He also focused on building a strong supply chain and efficient distribution network, enabling Mr Price to offer competitive prices and maintain stock availability.

Today there’s 604 Mr Price stores, 219 Mr Price Home stores, 171 Mr Price Sport stores, as well as 13 Mr Price Baby stores.

The standalone alone Mr Price Baby stores were introduced in late 2022, the group initially launched baby clothing in its store in November 2020. However by 2022, the company had pivoted to the standalone Mr Price Baby stores, which are now available in major malls across the country.

On top of expanding the Mr Price brand, the group also made a number of key acquisitions in addition to Miladys and sheet street.

Most of Mr Price’s growth up until that point had been organic, a feature that most analysts love. However, Mr Price took the strategic decision in the depths of the recent coronavirus pandemic to expand into the weakness caused by the virus.

The group bought Power Fashion for $105 million in 2020, a low-end fashion business not too dissimilar to Mr Price apparel with over 277 stores with a national footprint in South Africa and neighbouring countries Lesotho and Swaziland.

Power Fashion was founded in the 1950s by the Otto Family and is a high growth, family-owned apparel retailer based in Durban. It is value-focused and cash-based, servicing low to middle-income households.

The brand offers merchandise for the family, retailing largely apparel merchandise but also offering cellular products, basic household items, value cosmetics, electricity and other opportunistic products.

The Power Fashion acquisition was followed by Yuppiechef for 470 million rands in 2022, an upmarket kitchenware retailer.

Yuppiechef has two primary operations, namely Yuppiechef Online, the retail division comprising the online platform and seven stores, as well as a wholesale division, which develops, and imports branded goods for wholesale distribution.

The Power Fashion acquisition saw Mr Price increase its share of the lower end of the clothing retail market, while that of homeware retailer Yuppiechef gave the group the opportunity to gain access to a higher LSM customer base.

The group closed the acquisition spree with a 70% stake in Blue Falcon which owns Studio 88 Group for 3.3 billion rands, the largest independent “athleisure” retailer in southern Africa, with over 700 outlets selling well-known branded sports-oriented clothing and footwear.

The group operates through the Studio 88 store, Skipper Bar, Side Step, John Craig and Specialty which includes Aeronautica Militare, Paul & Shark and DMD Linea Italiana.

Studio 88 Group gave Mr Price an ideal entry into the high-growth urban wear and athleisure segments of the market. The acquisition increased Mr Price’s annual revenue to over R28 billion, and its footprint to more than 2 400 stores while employing over 25 000 people.

Another growth strategy adopted by Mr Price is diversification. The company expanded its business beyond its core offering of clothing and home products. Mr Price diversified into the financial services sector through its acquisition of the MRP Money brand and the introduction of its own mobile virtual network operator called MRP Mobile. This diversification allowed Mr Price to cater to a wider range of customer needs and generate additional revenue streams.

This strategic move allowed the company to leverage its existing customer base and expand into the financial services industry. By offering credit and financial products, Mr Price increased customer loyalty and created a recurring revenue stream while also capturing a larger market share.

Processing over two million items per day, the Mr Price distribution centre in Hammarsdale is the first highly mechanised warehouse of this scale in South Africa. It’s the main logistics site for the Mr Price group.

It has the following features and capacity:

About 620 000 square metres, with an expansion capacity of 1 million+ square metres. Induction capacity of 60 000 units per hour. 16 000 sortations per hour. A dual-use tilt tray sorter that handles both shipping and receiving. 7 vertical sorters that optimise the capacity of the shipping/receiving sorter, by enabling induction from both sides, moving up to 250 cartons per minute.

Previously, the Mr Price system was highly mechanised, now, it is highly automated. The DC uses a hybrid push/pull model. Employees had to be trained to manage the new automation. The warehouse management system is at the facility’s core, which intelligently manages and controls workflow, so employees can focus on exceptions.

The system allows Mr Price to monitor, in real-time, all the aspects of the DC and to make quick decisions, to optimise the facility’s output. The system also allows Mr Price to integrate only once directly and simplifies the development part significantly.

Mr Price is now able to take over functions they have been outsourcing. They now perform cross docking and shipping functions in-house, which gives them greater flexibility and saves money. 65% of the products that flow in the DC are cross docked. Over 14 000 cartons are sorted per hour, which allows inventory decisions to be made closer to demand to ensure that the right product is delivered to the right place at the right time.

The DC allows Mr Price to increase the accuracy and speed of their distribution operations, while handling much bigger volumes. Mr Price can thus distribute products agilely and looks forward to future growth.

Mr Price has recently been ramping up its ecommerce offering across its many divisions to take its share of the pie.

According to World Wide Worx and Mastercard’s online retail study, South Africa’s online retail industry reached 55 billion rands in 2022, a 30% growth from 2021 mainly driven by an ongoing boom in demand for home deliveries.

Mr Price initially launched its online offering in May 2012 through the MRP dot com brand to help gain market share from rivals Foschini, Woolworths and Truworths.

The online selling capability enabled the group to strengthen its relationships with target customers who were tech savvy and required a convenient and secure way to get their fashion.

By 2013, the company had already introduced the online offering to its other divisions Mr Price Home, Mr Price Sport, Sheet Street and Miladys.

Because of this, the group became the first retailer in South Africa to offer a universal basket, which is the ability to shop online at the various trading divisions and check out as a single transaction.

With the South African online retail market estimated to reach 400 billion rands annually by 2025, it will interesting to see how everything plays out but more importantly, how the Mr Price group nevigates through the inevitable challenges the industry will bring.

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