The Game Plan: Diversification and targeted expansion at the centre of Axia’s growth strategy

Axia Corporation says it is focused on targeted expansion and product diversification to drive growth.

The company owns TV Sales & Home, the country’s biggest furniture retailer, Distribution Group Africa (DGA), which distributes most household brands to shops, and Transerv, the motor spares company. The company is mixing up its product mix in TV Sales & Home and Transerv, opening new stores.

The company spent US$2.23 million on capital expenditure in the six months to December. CEO Ray Rambanapasi and FD Simba Mambanda have been talking about their strategy.

Adding new manufacturing capacity

The company runs Restapedic, which is about to complete a factory at Sunway City in Harare with capacity to make 10,000 beds a month. Currently, the factory is selling half of this. The division recorded a 57% growth in volumes year-to-date, showing strong demand for its products in both local and export markets.

“We are selling everything we are producing, so there is definitely room to improve capacity and meet demand,” Rambanapasi says.

The company uses local timber for beds but imports other materials, such as wires and foam. It expects to source cheaper and better-quality materials this year, to make its beds more competitive. Apart from beds, the company’s Legend Lounge makes lounge suites. Sales volumes grew by 34%, resulting in 16% revenue growth.

Expansion: Picking the best sites

The company has 56 TV Sales & Home outlets. In the six months, sales volumes grew by 11%. Two new bedtime stores opened in Borrowdale and Gweru over the period.

“The key consideration is traffic at a particular site. Initially, we were saying Harare is where the money is, but as you open shops outside Harare, you realise how they are performing,” Rambanapasi says.

The company targets to own its top-performing properties. “We look forward to owning our top 15 stores,” says Rambanapasi. “It’s sometimes difficult when you start as a tenant.” USD sales are 75% at TV Sales & Home and 85% at Transerv.

Axia has increased its shareholding in Transerv to 87.75% from 50.51% after buying shares from the significant minority shareholder last July. Transerv reported an 8% increase in volumes and opened six new 6 retail branches and 2 fitment centres.

Diversification

The company is looking to tap into the demand for solar.  TV Sales & Home and Transerv have started selling solar products, and “the sales statistics are encouraging”. The company has also now started selling cellphones, and plans to adjust prices so it can compete.

The company is also mixing things up at TV Sales & Home, opening a branch at Sam Levy Village that sells outdoor furniture, but the company admits “a lot of work needs to be done to optimise the product range in this new concept store”. The business started selling cellphones in November and is reviewing pricing to push sales.

Retail crisis affects DGA

DGA distributes brands such as Colgate Palmolive, Nestle, Johnson & Johnson, Tiger Brands, and Unilever to retailers. But supermarkets are in crisis, held down by exchange rate policies that make goods more expensive than in the informal market. DGA’s volumes fell 39%, because the distributor could not agree payment terms with retailers. Last year, the company announced it would now focus sales at informal retailers. However, the company says formal retail business is recovering after new policy measures late last year.

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