Two decades ago it would have been difficult to walk into a major South African mall without coming across the red displays and TV-stacked shelves of a Teljoy store.
But the company, which started as a TV-rental business 48 years ago, has been falling off the radar. Now its new CEO, Rami Sassen, is taking the retro brand name digital.
“The business has really become an online retail store. We have no more branches and we don’t only rent out televisions,” Sassen said this week.
Teljoy, which offered TV rentals at R1 a day when it started, has expanded with other electronics items, as well as kitchen and household appliances, furniture and car seats for children — all available to rent, with the option to own after a stipulated period.
“No one thought you could rent out furniture online, but furniture has been absolutely amazing. We’re looking at growing our range with garden furniture and office furniture.
“We’re not afraid to bring in more products. A lot of the customers come to us and say: ‘Are you renting X, Y and Z?’ We say: ‘No, but watch this space.’ And we go tie up some good deals,” Sassen said.
When Theo Rutstein, the nephew of hotel magnate Sol Kerzner, started Teljoy in 1969, there was no TV service in South Africa. When he had the first TV set installed in 1974, the company had about 150,000 subscribers lined up.
From Dallas to cellphones
One of Rutstein’s fondest memories was an encounter with a woman who called Teljoy at 7pm on a Tuesday to repair her television because Dallas was on at 8pm.
“She was really very upset, so I said to her, ‘Where do you live?’ She said she lived in an apartment in Berea.
“I said, ‘You know what? It’s on my way home. I’ll drop off a portable set for you. It will be black-and-white but at least you will be able to watch,'” Rutstein said.
In 1987 Teljoy was listed on the JSE and expanded into the cellular business during the ’90s. It was unable to manage its fast-growing number of subscribers and was sold to Vodacom in 1999.
Vodacom was unsure what to do with the television-rental side of the business, so Rutstein bought it back and downscaled its operations.
At its peak, Teljoy had 55 retail outlets and about 400,000 subscribers. Today it rents out and services about 100,000 assets.
The company’s rent-to-own business model, targeting consumers who would ordinarily buy big-ticket items like fridges and the latest TVs on credit, provides monthly rents that consumers can upgrade, downgrade or cancel when they wish.
Teljoy repairs its products, while insurance is included in its rents.
“[If] your child hits a cricket ball [around the house] and it breaks the television, you phone up Teljoy. If we can’t repair it, we’ll replace it. No issue,” said Sassen.
Might capitalise on downturn
The rent-to-own method of financing furniture and electronics might appeal to cash-strapped consumers.
Investment analyst Chris Gilmour said Teljoy could do well if it exploited South Africa’s poor economic growth.
“Consumers are cash-strapped and unemployment is rising. Teljoy’s model is very compelling for people who just don’t have the money to buy this kind of equipment. If we were to see the rand dropping significantly from current levels – and I think it is likely that that’s going to happen — the prices of those items could rise quite steeply. That would open the doors for the likes of Teljoy to capitalise on that,” Gilmour said.
But for Teljoy to cash in, it must get its pricing right.
Independent retail analyst Syd Vianello said renting to own would only sit well with consumers if they could clearly see its value.
“The price of televisions has fallen so much over the years that generally people tend to save up and just go and buy them for cash. It’s all about the price for the rental versus the price you pay to purchase the product outright and how you feel about it.
“Television sets quickly become technologically inferior because of new developments, so it is possible that [Teljoy] could find a niche where people are prepared to rent to [upgrade to] a better model in two years,” Vianello said.
Gilmour said Teljoy’s marketing would play a role in how much it grew in coming years. In its slower years the company marketed new products to existing customers.
Sassen said: “We don’t have the massive budgets that our competitors have for billboards and television [adverts]. We advertise through digital marketing, but also word of mouth.”
Even with its modest marketing budget, Sassen said there had been an upswing in new business in recent months. He was confident Teljoy had cracked the management of its rental book.
“We haven’t got a fortune of competition doing the rental model because it is a risk. But we’ve perfected this over 48 years and no one really understands our model and we understand it,” said Sassen.
Its lean online operation, with 140 people at three distribution points in Johannesburg, Cape Town and Durban, will also save costs that its competitor retailers, such as Makro and Game, must consider.
According to Gilmour, online retailers have had limited success in South Africa because of the country’s expensive internet costs and poorly managed logistics.
If Teljoy could nail the logistics of its operation with a growing customer base, it would be another feather in its cap, he said.
“Shopping is becoming more and more of a drudge these days, in terms of parking and so many other things. If it can be done online it really makes a huge difference [to the consumer],” Gilmour said.
This article was first published by Business Live on 23 July 2017.