COMPANY PROFILE -Steinhoff International
Business Sector :Retail
Operating Geography :Africa
About Steinhoff International :Steinhoff International is a South African international retail holding company which was founded in 1964 by Bruno Steinhoff in Westerstede, Germany. It has its presence in 4 continents in Africa, Europe, North America and Asia Pacific and over 30 countries. It operates through Retail, Manufacturing, Sourcing, Logistics and Corporate Services. Steinhoff has approximately 12,000 retail outlets, 26 manufacturing facilities and approximately 130,000 employees as of 2018. It follows a strong and efficient business model where it sources and manufactures products at low cost and then distributes it to the customers through its extensive retail footprint. This has marked its growth. Its business office is located in Stellenbosch, Western Cape in South Africa with headquarters at Amsterdam, Netherlands. Its business model is “Our business model is to be a low-cost producer and distributor of furniture. Our marketing thrust is global, catering for the mass middle market,”
Steinhoff’s mission is to give customers the opportunity to buy products that will add value to their lifestyle at prices they can afford.The group’s strategic focus is to strengthen its position as a global leader, supporting its brands to be the number one or two retailers in the markets they serve. Steinhoff Africa Retails vision for the consumer is “Provide everyday products at affordable prices at customers’ convenience”.
Steinhoff International Revenue :
€13.42 billion – FY ending Sep 2016
FY 17 revenue figures not release due to ongoing investigation.
Ownership / Major shareholders :Its acting Chief Executive Officer is Mr Van Der Merwe (Daniel Maree).
The following list shows its top five shareholders and their respective holding equities and percentages.
1) Public Investment Corp. Ltd. (9.91% holding)
2) Christoffel Wiese(6.20% holding)
3) OppenheimerFunds, Inc. (3.11% holding)
4) Investec Asset Management (Pty) Ltd. (3.01% holding)
5) GIC Pte Ltd. (Investment Management) (2.95% holding)
Competitive Analysis of Steinhoff International
|1. Well established Supply Chain in place|
2. Decentralized vertically integrated business model
3. Substantial Strategic Investments to Drive Growth
4. Preserve brand equity by keeping retail brands local
|1. Stagnant automotive revenues
2. Accounting irregularities and fraud investigations
|1. Potential in Emerging Markets|
2. Predictive analytics for personalization
3. Growing purchasing power in Europe
|1. Global and regional competitors
2. Technological advancements by competitors
3. Cheaper Chinese goods pressurizing margins
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Detailed SWOT Analysis of Steinhoff International
1. Well established Supply Chain in place: Steinhoff International has a global footprint. One of their strength is their well-established supply chain in place. Various specialists are divided into groups and these groups control and manage everything from raw material sourcing, manufacturing and product sourcing to shipping and delivery. Owning and managing such activities not only enhances the group’s ability to deliver goods but it also ensures that the products are provided at an affordable price.
2. Substantial Strategic Investments to Drive Growth: Steinhoff has made substantial strategic investment around the globe. The acquisition of Mattress Firm forms the world’s leading multi-brand mattress retail distribution network and paves way for Steinhoff’s entry into the United States. Investments in Europe, for instance, investing in 50% of the equity of GroupeCafel(Cofel) – the leading manufacturer of mattress in France will further strengthen its position in Europe. Poundland is Europe’s largest single-price value general merchandisers and its acquisition presented a unique opportunity to increase its relevance and product range to its core customer base to compete in the discounted markets. Other strategically important acquisitions include Tekkie Town in South Africa and Fantastic Holdings in Australia. Moreover, in 2016 alone the company opened 4492 stores worldwide (Including 4373 stores Poundland and Mattress Firm combined)
3. Decentralized vertically integrated business model: Steinhoff has a decentralized and vertically integrated business model which provides significant influence over its entire supply chain. It includes control over production, sourcing, packing, distribution, manufacturing, etc. The in-depth knowledge and entire control gives Steinhoff power to compete in global discount markets and manage its costs effectively, thereby reducing costs and increasing margins. Steinhoff has around 9 million square meters retail space, 2.5 million square meters warehouse space, 4 million square meters property portfolio and 26 manufacturing facilities which aides in the vertical integration of its business model.
4. Preserved brand equity by keeping retail brands local: Steinhoff’s strategy of merger and acquisition helps them to expand into global market. Currently, the company has more than 40 local brands in 32 countries. The countries are spread in 4 continents which include Africa, Europe, North America and Asia-Pacific. However, to maintain the brand equity earned by the acquired company in the local market and to gain most out of the brand equity, Steinhoff does not change the names of acquired companies. This ensures that the company recognises the cultures of the local countries and communities and also makes the most out of these acquired companies.
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1. Potential in Emerging Markets: Asian markets and Latin American are completely untapped by Steinhoff. It is yet to make entry into the Asian market and Latin American countries. Moreover, South Africa and others countries of BRICS have similar characteristics and the business model can be used expand in other BRICS nations as well. However, a lot will depend on how Steinhoff manages to get out of its current crises and hold the empire that it has created globally.
2. Predictive analytics for personalisation: Predictive Analysis is a method by which historical data of the business is studied to find out the business trends which can help foresee future emerging patterns which can help in taking decision for future course of action. In 2017 usage of Predictive analysis has become a trend. Another strategy which retailers use is ‘personalisation’. Personalization includes designing offers and promotions separately for each individual so that the customer returns to shop to the same company. Personalization helps in achieving customer loyalty, increased customer spending and time saving. In a recent survey by an analytics agency Adlucent; 46% of consumers feel personalize ads reduce irrelevant content and 25% of them feel it helps them purchase and discover new products. In the absence of personalization, companies risk losing customers to its competitors. Companies that use personalization in the retail space have seen a 19% rise in their sales, according to KPMG’s Global Consumer & Retail practice 2017 survey. Since this is a relatively new concept, investment in predictive analytics and personalization is an opportunity for Steinhoff to steer clear of its rivals before all the competitors join the analytics bandwagon.
3. Growing purchasing power in Europe: According to the GfK study the average European spending and saving is of €13,937 in 2017 which has increased by 1.9 percent. This indicates the tendency of Europeans to spend more. This comes at a point when the Europe was facing issues like Brexit, refuges crises, terrorism as well as tensions between Turkey and Russia. Central and Eastern European countries nations had the highest purchasing power increase in Europe. More purchasing will mean consumers will have more money to spend which will result in higher spending on essential as well as luxury goods. Its European subsidiary has received a two year loan from the US hedge fund Davidson Kempner; due to which it shall now not have to rely on its parent company for working capital. Due to this their shares have risen by 82% in the first few trading days of 2018.Steinhoff’s European operations include Pepco and Poundland which too showed an increase of 5.6% in sales in Dec 2017.
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Major Competitors :The top competitors in Steinhoff's competitive set are IKEA, Tempur Sealy, Serta, Select Number, Nature's Sleep, Simmons Bedding Company, Sleepy’s, Sterling Sleep, Benders Mattress, Sterling Sleep Systems and Art Van.
Major Brands :1) Household Goods
- Bensons for Beds
- Fantastic Furniture
- Hifi Corp
- Incredible Connection
- Lipo Austria
- Mattress Firm
- The Tile House
- Harris Scarfe
- John Craig
- Pep / Powersales
- Poundland / Dealz
- Shoe City
- Tekkie Town
Key Business Segments / Diversification :
Recent Acquisition / Mergers / Alliance / Joint Ventures / Divestitures :Open Table Preview
|Shoprite||Food retail||2016||Acquisition||Shoprite is a grocery retailer and Steinhoff a discount clothing retailer. This has increased their potential for rationalisation in areas of logistics, IT, back office systems and distribution. Steinhoff has 23% economic interest in it. Valuation is undisclosed.|
|Mattress Firm Holding Corp||Manufacturer||2016||Acquisition||It is a $2.4 bn deal. Mattress Firm sells beddings, furniture, mattresses and other related accessories. It has a major 25% stake in US market. This has increased Steinhoff’s US business.|
|Fantastic Holdings Ltd (FHL)||Furniture Retailer||2016||Acquisition||It is a $361 million deal with 100% stake in the company. This partnership has increased the sales and convenience of doing business in Australia.|
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References used in Steinhoff International Analysis Report
1. Steinhoff Website
2. Annual report 2016
3. Annual report 2017
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Steinhoff International SWOT and PESTLE analysis has been conducted by Aniket Deshpande and reviewed by senior analysts from Barakaat Consulting.