Verimark CEO on making a business out of selling stuff you don’t see in stores

Verimark is a fascinating company – South Africa’s only direct TV retailer, and increasingly, a force in South Africa’s brick-and-mortar retail world with stores in malls around the country. When Verimark got its start in 1977 peddling the type of strange new products that established retailers wouldn’t touch with a ten foot pole, there were plenty of skeptics who didn’t think the company could move enough volume. Fast-forward 30-odd years, and Verimark is going strong, with robust sales and an ever-growing store presence.

However, like all retailers, the company is coming under pressure these days as consumer spending weakens in the face of slow GDP growth and rising interest rates. In this interview, Verimark CEO Mike van Straaten takes us through the challenges the company faces, and why he believes it will come through stronger than ever. – FD 

GUGULETHU MFUPHI:  Consumer goods company Verimark, reported a 101 percent increase in full-year headline earnings per share. The group says that centralisation and consolidation of the business is starting to pay off. Mike van Straaten, Chief Executive of Verimark, joins us now for more. Mike, thank you so much for joining us again today.

MIKE VAN STRAATEN: Thank you for having me.

GUGULETHU MFUPHI:  No doubt, it does seem as though it’s a challenging time. You had to turn your business around in order to pull up profits and the depressed consumer environment not really assisting, as well.

MIKE VAN STRAATEN: Generally, it was a tough year for all retailers and for the consumer out there for many reasons. What impacted on us primarily was the weakening of the Rand. If you take a short snapshot over the last three years, depreciative was 58 percent over the last three years. The last financial year was 20 percent. That really had an impact on your pricing. Your products cost more, we had to increase those prices, and that negatively impacted on the sales volume. There’s really nothing you can do about it, and all importers are in the same position.

ALEC HOGG: It’s an interesting story – Verimark – because five years ago, you wanted to delist at 56. The share price is now 75 cents, but very thinly traded. Looking back, everybody seemed to fight you. Everybody was unhappy with you when you wanted to delist. Maybe now they’re saying ‘perhaps van Straaten knew what he was talking about’.

MIKE VAN STRAATEN: Alec, obviously that happened as you say, five/six years ago. It’s a long story. I probably need a separate program for that. At the time, about 20 management (including me), moved out. Some of them were asked to leave. Some of them left by choice. The reality is there was really a lot of uncertainty and I felt that was the right thing at the time. It’s a [unclear 0:01:47.6] process when the deal didn’t go through, and I believe these things happen for a reason. We’ve really knuckled down and subsequent to that period, Verimark did grow at about 38 percent in the one year, and I think 33 percent the year after that. That would be four and three years ago, respectively. Admittedly, the last two years have been pretty flat, we’re clearly doing exactly what we know best, and that is redefining those innovations, bringing them to the consumer and we are operating in that environment now.

ALEC HOGG: We spoke earlier to takealot.com and there’s Kalahari.com. How are the impacting on your business?

MIKE VAN STRAATEN: Minimally, because remember, if you look at the business model Alec, we go out there to find the very, very latest in innovation and those companies that you talk about are not that close to innovation. They’re successful businesses in their own right, as many retailers are. Our model is to find the best innovations continuously, and few companies can really sustain that over a 37-year period, which is how long Verimark has been going for. We actually work with Kalahari.com and they’re one of Verimark’s clients. The reality is as we’ve changed the model from being a purely DRTV company (you can only buy on television or via call centre), today 99 percent of our sales is in retail, so very little is going through that call centre or even on the web. It’s just so simple and easy for people to go to a retailer nearby or a Verimark store, and buy that.

GUGULETHU MFUPHI:  Won’t you also have to change that going forward? We have mobile apps. We have online…

MIKE VAN STRAATEN: That’s correct. We look at these things continuously when we cover the world. It’s not just about finding products but also to see exactly what the trends are overseas. I must admit that being the benchmark of this business model in the world today – and we are recognised for that – the other guys probably do 50 percent of their sales on the web, with 50 percent in retail. As I said, we are 99 percent retail and we have tried different initiatives, but it’s not that simple in South Africa. I think it’s something that we need to gear up and we are looking at it continuously, using YouTube with your TV commercials. Interestingly, what we actually noticed about a year ago, when we went on YouTube for the first time with all our TV ads… If you look at your rate of sale versus the enquiries on YouTube, it was actually miniscule. Secondly, most people were coming out of Russia or somebody else that wanted to look at your products and your innovations, and trying to just duplicate your ad. We therefore had to pull all our ads from YouTube.

GUGULETHU MFUPHI:  Wow, a good move on that front, I take it. Thank you so much for your time today. That was Mike van Straaten, Chief Executive of Verimark.

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