Do Business Well

Franchising is widely seen as the safest route open to those who want to enter the competitive world of entrepreneurship with a safety net. It has also been recognised as the vehicle of choice for the expansion of a small business into a national network. There is yet another facet to franchising, however, that is less well recognised, namely its power to transform an entire industry and the public’s perception of that industry.

One company that has taken this potentially stony path and have negotiated it successfully is Cash Converters, an international network of second-hand goods stores with its origins in Australia. Indeed, within a few short years, Cash Converters have managed to revolutionise the second-hand goods market by transforming its image from that of a dingy store of almost ill repute, frequented only by individuals in dire straights, into a high street shopping experience that holds strong appeal for the middle to upper market segments.

Cash Converters business model revolves around the buying and selling of second-hand household goods over the counter, for cash. Arguably this is something its traditional competitors have been doing for centuries. What distinguishes Cash Converters from others in this field is their approach, which has been designed with one objective in mind: To attract a high-class clientele, be they sellers or buyers, and turn them into regular customers. The way the company went about this can serve as a lesson in innovative marketing and the utilisation of franchising at its best, cleverly rolled into one highly profitable concept.

Background

Cash Converters first opened its doors in Perth, Western Australia, in 1984 and currently operates over 550 stores in 23 countries. In South Africa, the company commenced operations in 1994, based on a master licence agreement with the Australian principal and already, over 60 franchises have been sold. During the past year, global sales of the group exceeded one billion Rand, with South Africa contributing a credible 130 million Rand. Richard Mukheibir, Managing Director of Cash Converters Southern Africa, is convinced that careful attention to three key areas, namely people, branding and systems, form the foundation of Cash Converters‘ success.

People

It has become fashionable among managers to claim that “people are our greatest asset” but at Cash Converters, much more than mere lip service is paid to this statement. By its very nature, the franchise requires a hefty investment, but to qualify as a Cash Converters franchisee requires a good deal more than a healthy bank balance. The company is looking for individuals with a sound track record and a clear vision of what they want to achieve in life. They must be good quality people with a strong orientation towards family and community. It has been found that in many instances, married couples make ideal franchisees.

Initial training of franchisees takes 6 - 8 weeks. This is supplemented by ongoing training, store visits, regional and national meetings. It is worth noting that Cash Converters‘ concern for people does not stop at franchisee level. Regardless of the seniority of any job vacancy, franchisees are encouraged to hire people who show a discernable potential for growth.

Mindful of the fact that a good franchisor is expected to lead by example, Mukheibir applies this principle in his company-owned stores as well. “A guy we hired as a temporary salesman five years ago has grown to such an extent that he now fills the position of regional branch manager and oversees five of our stores, all of which are performing well above national average” he says with obvious pride.

Brand

Every single activity undertaken within the Cash Converters organisation is evaluated based on a single consideration, namely “is this activity likely to add value to the brand?” Senior management cheerfully admit that some of the things they do have never been done before in the second-hand goods environment. It is clear that this has helped them to transform the image of the industry, as the following examples show.

1. In a radical departure from the appearance of the traditional second-hand goods store of yesteryear, Cash Converters stores are located in high- class shopping centres and other prime trading areas. Well-lit, distinctively painted and excitingly merchandised, these stores encourage customers to buy or sell goods in a cheerful yet dynamic and highly professional retail environment.
2. The national advertising fund to which all stores contribute enables brand building drives at a level that would be well beyond the reach of even the largest individual operator in this field.
3. Carefully selected and trained attendants in corporate attire do their utmost to make the selling or buying experience as pleasurable as possible.
4. Every franchisee becomes part of the community he serves. He sources goods from the local community, refurbishes them as necessary and sells them back to the local community.
5. Cleaning and repair work is carried out in-store, while work that requires specific skills is outsourced to local service providers.

Every item sold carries a 90-day guarantee, thus further inspiringconfidence in buyers.

Systems

By virtue of the Australian connection, Cash Converters have systems in

place that have been tried and tested for the past 17 years. These systems cover every aspect of conducting business in such a way that customers are encouraged to return to the stores again and again, while returns achieved by franchisees are maximised. In this regard, the use of advanced IT systems is seen as paramount, not for the sake of technology, mind you, but because their intelligent application facilitates efficient operations throughout the business.

1. Buying and selling. A fully computerised system tracks every transaction by logging seller, buyer and other relevant details. Apart from meeting and in fact exceeding legal requirements applicable to the second-hand trade, the resulting database makes advanced relationship marketing drives possible.
2. Business status. Systems are in place to enable franchisees to have a clear picture of their business performance. Almost as a bye-product, salaries, wages and statutory records are generated, thus reducing the time the franchisee is required to spend on administrative tasks, yet he retains up-to-the-minute control.
3. Intranet. The company’s Intranet enables franchisees to exchange information with Head Office and other franchisees in the network. This isuseful in moving surplus stock and sourcing items that are hard to come by. It also helps Head Office to extract certain key financial ratios from each franchisee’s database and offer immediate assistance, should a franchisee’s performance levels drop markedly below expected norms.
4. Internet sales. In the not too distant future, customers anywhere will be able to search the company’s web site for rare items, for overnight delivery to their local Cash Converter store.
5. Market research. Head Office commissions annual market research studies that are made available to franchisees. Carried out by an independent research company, the results of this research confirm that Cash Converters approach is working. In response to the question: “What made you deal with Cash Converters?”
6. 43% of customers singled out the attractive “window display”, up from 39% a year earlier.
7. 30% of customers cited “word of mouth” as the reason for their selling/buying decision, up from 19% a year earlier.

Changing the image of an industry is no easy feat. The well-documented success of Cash Converters shows that, given the right approach and with the help of a team of carefully selected and highly motivated franchisees, it can be achieved.

Far from being destitute, many of the people who come to our stores to sell an item are upmarket individuals who see sense in disposing unwanted items for cash. Their desire to sell could be prompted by an impending move to another city or country, or it could simply be that the individual has either lost interest in an item or wants to upgrade to a newer model.

Buyers like to shop at Cash Converters because they know that they can choose from a selection of good quality items sourced from legitimate channels that carry a guarantee.

Either way, every transaction is conducted in keeping with our credo “To earn the respect and support of the whole community through our integrity and by the manner in which we conduct our business“. I firmly believe that this is the only way to build a business that succeeds in the long term.

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