Case Study

Ellerines: The tale of a retail-credit business model in an emerging market

16 pages
October 2016
Reference: IMD-7-1820

Ellerines was a leading South African furniture retailer, with more than 1,270 stores; it was a household name in the country for 45 years and the main target market was the bottom of the pyramid, which was mainly driven by credit sales. In January 2008, African Bank Investments Limited (ABIL), a holding company of African Bank Limited (ABL), bought the Ellerines business with the aim of exploiting its credit customer base of a million names. ABL was one of the leading micro-financing banks in South Africa. The ABIL offer was the perfect opportunity for Ellerines to address the growing burden of regulatory compliance required under the new National Credit Act (NCA) and to possibly source capital at a lower cost, passing this on in part to customers through lower credit costs. ABIL set about implementing new strategic initiatives, mostly around centralizing the credit business with ABL credit unit and consolidating the brands across market segments. But these strategic initiatives proved disastrous for investors, employees and customers, with Ellerines and ABIL quickly showing abysmal results. On 7 August 2014, the iconic furniture retailer shocked the market by filing a business rescue process with the South African Regulator. On 10 August, ABIL itself was placed under curatorship by the South African Reserve Bank. How could these two reputable and profitable companies have failed so dramatically? Was this really a case of customers buying the credit terms more than the product?

Learning Objective
  • The case analyzes the key success factors for a credit-retail business model in an African emerging market. It emphasizes the roles and contributions of key elements of the business model, such as market segmentation, the value propositions for each segment, the economic logic, getting supply chain alignment, differentiators and stages of execution, and how these various pieces need to align to implement a business model successfully.
Emerging Market, Retail, Credit, Business Model, Bottom of the Pyramid, Market Segmentation, Alignment
South Africa
Ellerine Holdings, African Bank Investments Limited, Consumer Services, Retail, Consumer Goods, Furniture
Published Sources
© 2016
Available Languages
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Teaching note
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