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HomeBusinessTruworths Succumbs To Competition from Informal Clothing Trade

Truworths Succumbs To Competition from Informal Clothing Trade

Retail giant Truworths Zimbabwe Limited sales units have been significantly hurt by unfair competition from the growing trade of second-hand clothes as well as counterfeit clothing brands flooding the local market.

Unlevel competition from the informal sector has resulted in loss of business for large firms across the country resulting in the erosion of the formal economy.

As a result, high unemployment levels have led to the unsustainable growth of the informal sector.

Zimbabwe ranks among the world’s most informalized economies, according to a report by the World Bank released before the COVID-19 pandemic.

“Units sold were negatively affected by informalisation of the economy which has resulted in cheap and fake imports selling at below local and international manufacturing costs. The business could not viable compete against these imports,” the group said in its latest financial update for the year ended July 2023.

Truworths earlier this year announced that it was scaling down on the number of outlets it operates nationwide in order to sustain business viability.

Among other outlets closed are Topics shops in Bindura, Mutare and Masvingo as well as two Number 1 outlets in Mutare and Mt Darwin, and one Truworths Ladies in Masvingo.

“High unemployment levels and low disposable incomes due to inflation had a negative impact on volumes sold, with customers resorting to buying products in the unregulated informal market at prices which the business could not compete against.”

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The group said total Units sold during the year (2023) declined by 33.8 percent due to the suspension of ZW$ credit from 1st of July 2022.

“The suspension of ZW$ credit was due to the increase in the prime interest rate to 200% per annum which made credit sales unviable for the business. However, the business resumed credit sales in February 2023 but ONLY IN USD.”

According to the group, in order to return to sustainable profitability, the business needs to offer credit in a stable currency and access long-term funding at affordable interest rates, conditions which do not currently exist in the economy.

Despite authorities’ efforts to curb the influx of second-hand clothes into the local market which mainly come via the Mozambican border, the merchandise continues to be smuggled into the country and sold openly.

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