The Electronic Retailing Association

Member Company Interview with Verimark, South Africa. Verimark is the DRTV pioneer on the African continent and market leader.

with Michael van Straaten, CEO Verimark

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Verimark is the pioneer of DRTV on the African continent, also pioneering the distribution of DRTV products through retail stores and its own stores: a business model not seen anywhere in the world at the time.

 

Michael, thank you for taking the time to give a Member Company Interview. According to a Nielsen Report, Verimark is one of the largest buyers of television airtime in Southern Africa and is known to employ around 1300 people. Please tell us about the history of your company.

Verimark opened its doors 40 years ago (1977), selling unique and innovative products through demonstrations at consumer shows (in South Africa) and shortly thereafter also in retail stores. The company pioneered Direct Response Television (DRTV) Advertising on the African continent 26 years ago and has been the market leader ever since, with a market share estimated in excess of 50%.

The company’s long term success led to a public listing on the Johannesburg Stock Exchange (Main Board) in 2005.

Unlike most DRTV companies, Verimark has also adapted DRTV to establish brands which are recognised and aspired to by most consumers. That’s why some Verimark products launched 25 years ago are still today among our top sellers.

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Michael van Straaten, CEO Verimark

 

After completing a BCom (Hons) degree at the University of Stellenbosch in South Africa, Michael spent 3 years in the accounting / auditing profession, completing articles and qualifying as a Chartered Accountant (CA). In 1981, he then joined a 4 year old company, Verimark, as a 50% shareholder. Michael took over his current position as CEO 23 years ago (as sole shareholder), until Verimark listed on the Johannesburg Stock Exchange (JSE) in 2005.

Michael also has a string of achievements to his name, including being twice elected as a finalist in the “South Africa’s Best Entrepreneur” competition, he was named “Role Model for the New Millennium” by a Business Chamber of Commerce, he was selected as one of South Africa’s Leading Managers by Corporate Research Foundation, and was chosen and featured as a role model for entrepreneurs in the international Entrepreneur Magazine.

Contact: Michael van Straaten

Verimark Holdings Ltd

Tel:  +27-11-699-8004

Fax: +27-11-699-8010

e-mail:  michaelv@verimark.co.za

website:  www.verimark.co.za

The Verimark business model

Verimark developed a business model that converges the power of Direct Marketing (DRTV) with the impressive volume benefits of wide retail distribution. Verimark not only pioneered the concept of prominent ''As Seen on TV'' space in retail stores, but we are internationally recognised as the benchmark of this business model. Verimark’s products are today available in about 2000 retail stores, as well as at more than 80 Verimark company-owned and franchised stores.

As Verimark’s success record has proven, it all starts with innovation - selecting / developing and sourcing the latest, most unique, top quality products with the highest sales potential. Verimark then conceptualises, scripts and produces short and long form TV Commercials (sometimes more than two per week!). Each product with its TV Commercial goes through a unique testing methodology, to decide if the product will be “rolled out” or not. Verimark’s current success rate is approximately 70%+, whilst in the USA it’s around 5%. We also source some products with commercials from other DRTV companies across the globe.

Unlike most DRTV companies, Verimark has also adapted DRTV to establish brands which are recognised and aspired to by most consumers. That’s why some Verimark products launched 25 years ago are still today among our top sellers.

The company’s success at retail level led to another first in the world – dedicated “As Seen On TV” space in stores. Only in recent years (about 17 years after Verimark began doing this) have similar trends emerged in the US and Europe.

Which product categories do you have in your product portfolio?

Verimark product categories incorporate the following: Kitchenware, Cookware, Home Cleaning, Exercise and Fitness, Health and Beauty, Educational and Fun Toys, DIY, Security and Automotive

South Africa is your core market. In which international markets are you already active?

Although Verimark did trade with ±40 countries up to 10 years ago, a decision was taken to discontinue this part of our business and to focus on our core market – South Africa. Given the subsequent deterioration of the local economy and the depreciation of our currency by 23% per year over the last 5 years (in total 115%!), the decision was reversed and our international business reactivated in 2016.

...growth opportunities definitely exist in this market with a population of 1.2 billion. The biggest challenge though is that there have never been any DRTV activities in these markets, except in North Africa.

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There are over 80 Verimark Franchises / Company Owned Retail Stores

What do you see as the international market opportunities for Verimark?

As many of our retail partners also have stores up in Africa through which we distribute products on a limited scale, growth opportunities definitely exist in this market (with a population of ±1.2 billion). The biggest challenge though is that there have never been any DRTV activities in these markets, except in North Africa (Egypt, etc).

Since Verimark re-entered the international market in 2016, there has been phenomenal interest from overseas companies in our innovative and success-proven new DRTV products. The number of people that queued up to talk to us at the ERA conferences in Barcelona and Las Vegas was incredible.

We have since sent out many samples to interested potential distributors across the globe, and many have placed test orders. It looks very promising. A big part of this interest is due to the number of international companies which have known Verimark and its ability to continuously innovate.

What are the challenges of doing business in Africa?

South Africa, as with most other emerging markets, experienced some challenges over the last number of years, given the weakening economy. The biggest challenge is the continued depreciation of our currency (the Rand). This resulted in a continuous increase in our selling prices, which had a negative impact on sales volumes and growth. The only way to counter this trend is to increase the rate of new product introductions, which Verimark has done over the last 2 years (and especially during the last 6 months).

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Verimark’s products are today available at circa 2000 retail stores, displayed in a dedicated Verimark branded 'As seen on TV' area

Were you able to overcome these challenges in 2016?

As per our results announcement for the first half of the finanancial year (to end August 2016), we have seen an improvement in profitability. The only reason for sales being similar to the previous financial period in 2015, is that continued Rand weakness resulted in Verimark increasing selling prices in February that impacted negatively on our sales.

The number of new products that tested successfully and were launched since, is looking positive. This, in addition to the response to our re-entry into the international market, is exciting.

What is your growth strategy and where?

Our Growth Strategy moving forward is to continue to increase the rate of new product introductions, as well as entering new product categories. We are also exploring local production of certain products. This will allow Verimark to offer more new and innovative products to the international market.

The economic environment is expected to remain under pressure with the declining business confidence in South Africa expected to continue into 2017. What does the future hold for Verimark?

As with any business, your past performance does give some indication of what the future holds. Verimark, over the last 40 years, did experience 4 similar challenging periods when the local economy and the Rand went into decline. We came through these challenges stronger than before and every time managed to deliver impressive growth. We do not see this current tough phase being any different to the previous times.

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Over 20 years success: "Floorwiz Pro" Floor Mop (top) & the Bauer Cast Aluminium Cookware.

What was the most successful product ever at Verimark and is it still in the product portfolio?

Unlike the general trend internationally, where new products in most cases have short life cycles, Verimark’s skill and experience in selecting winning products allows for longer life cycles of 5 to 20+ years.

Two examples of products that have generated exceptional sales over their long (and still continuing) life cycles are: Floorwiz Pro – Floor Mop (22 years), and Bauer Cast Aluminium Cookware (23 years)

Although both products were unique at the time, today there are admittedly similar-looking products available, but what still differentiates ours is the superior quality. Both products currently still feature in our Top Ten Best Sellers.

What was the first Teleshopping product that you bought for yourself and is it still in use?

The first teleshopping product I bought for myself was the Shogun Knife Set, and twenty five years later, they are still the preferred knives in my kitchen.

What is your history with ERA?

Verimark became an ERA member many years ago. However, we decided to discontinue our membership about 10 years ago, when our focus was placed only on Southern Africa. Given our re-entry into the international market, we rejoined ERA in early 2016.

You had an exhibition stand at the ERA conference in Barcelona in 2016 - was it worth the investment?

The vast interest Verimark enjoyed at ERA Barcelona (and Las Vegas too), demonstrated that the Verimark product range is as suitable for international markets, as in South Africa. Although it is expensive to exhibit in any foreign country, given our weak currency, it was definitely worth the investment from a cost and effort perspective.

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Verimark Head Office, Johannesburg, South Africa. Verimark was twice a finalist in the “South African Non-Listed Company of the Year” award.

Why did Verimark join ERA in 2016?

Obviously ERA is very active in Europe and the USA, but as South Africa is very isolated and thousands of kilometres / miles away from these continents, being a member of ERA has limited benefits. However, ERA does play a major role in connecting all the DRTV players across the globe, which is critically important for buying and selling DRTV products internationally, as well as to discuss what new product concepts worked or failed with like-minded companies. This is all part of relationship building with ERA members that are active in our industry (DRTV).

Anything else you would like to mention?

We look forward to increasing the distribution of our many new and success proven products in the global market.