The founding of PEP

In 1955 the sole owner of a general dealer shop in Upington, Gustav Gottschalk, decided to sell his small store due to his advanced years. This store, called the Bargain Shop, dealt in second-hand furniture, shoes, clothing, food, medicine, bicycles and even donkey carts. Gottschalk ran the shop profitably for many years with the help of his very capable assistant, Piet Strauss. He was adamant that he would sell the store to Gawie Esterhuyzen, who was a partner in a legal firm in Upington, handled some of his legal affairs. Gawie approached Renier to help him operate the business on a part-time basis - they both contributed capital with Renier adding £400 and Gawie £300 and the balance of £800 to be paid over time. During the following two months Renier spend his Saturdays at the shop under guidance of Gottschalk to learn the tricks of the trade, for as he readily admitted, he had no experience or knowledge of how to run a shop. When Gottschalk finally left the business, Renier was fortunate enough to keep the skills and experience of Gottschalk’s employee, Piet Strauss, and the latter soon became a friend and his right hand in the running of the store. Strauss was an invaluable source of knowledge, skill, tact, and was hardworking and trustworthy. 

Renier now became involved full-time and began to restructure the nature of the business. The trading space was enlarged to about 170m² by leasing two more rooms in the small building in Brug Street. The stock composition was changed from Gottschalk’s wide selection to largely low-priced clothing and the elimination of credit sales. The shop began showing a growth in sales and profit during the next few months and Renier enlisted the part-time help of Alice and Kotie Elof, with Gawie working on Saturdays. Having realized that there was a need in the market for what the store was now selling, it gradually became clear to Renier that it was indeed a viable business. Towards the end of 1956 Renier ended his partnership with Gawie Esterhuyzen and bought out his share of the business for £1,800, but the two erstwhile partners remained good friends and Gawie continued with his legal practice.

Renier now had to take care of virtually every aspect of his fledgling business himself, one of the most important of which was the purchasing of stock. This required him driving one or more times per month to Cape Town where he bought just enough stock to fill up his vehicle, and then drove back to Upington the same day to have the stock on the shelves the next morning. In those days the road between Cape Town and Upington was a dirt road for a large part of the way, and it took Renier on average at least 10 hours to complete the journey one way.

In 1957 Renier converted his store into a private company and called it Bargain Stores (Pty) Ltd which was the holding company. He continued to experiment with different products, prices and methods of promotion, but by now he had formulated his business idea and although it was not at the time expressed in so many words, he knew that the way to go was to sell clothing effectively and profitably cheaper than any other business. The store continued to grow and was profitable throughout 1958. In January 1959 Renier, at the age of 28, opened a second store called Upington Volksklere (Pty) Ltd, in Scott Street in Upington. The idea was to use the new store for a period of a year to further experiment with selling discounted clothing.

By the end of 1959 Renier had developed a successful marketing mix and an identity for his business. In 1960 he amalgamated the two stores into what was named BG Bazaars and moved to a larger premise in the heart of Upington’s business district, with a small warehouse. With the business beginning to grow rapidly Renier increased his personnel, which now included his sister, Baba, brother Gert and his wife, Nella and others. With the business on a firmer footing, Renier decided to expand beyond Upington and to other areas in the Northern and Western Cape.

As an experiment Renier introduced the quite innovative concept of self- service (as opposed to being served by someone from behind a counter) into his stores, enabling customers ‘to touch’ the clothes and to try it on in dressing rooms. Contrary to the tenets and philosophy of Apartheid (in particular, the Separate Amenities Act) Renier also allowed black and white customers to use the same dressing cubicles. Although there was disaffection among some of the white customers, this act of defiance was one of Renier’s early anti-apartheid gestures and preceded his later clashes with the Afrikaner establishment. To his surprise the all-powerful and raced-obsessed NP government did not forcibly intervene in this time. 

By the mid-1960’s the four BG Bazaars stores were turning out a healthy profit and Renier’s intention was to open at least 10 stores in towns like Kimberley, Postmastburg, Prieska, Vredendal, Calvina, Malmesbury, Moreesburg and Paarl – these towns were in a defined geographical area between Upington and Cape Town on the route of Renier’s frequent travel to Cape Town. The company’s successful business principles were based on good quality clothing, shoes and blankets at very low prices, with friendly personal service and with low overheads. The stores were neither flashy nor fashion houses – just plain value for money, big volumes and low margins, similar in philosophy to today’s giants like Wal-Mart, the biggest retailer in the world. 

By 1965 Renier, Gert and Baba were financially independent and relatively well-off, but Renier wanted to expand the business and realized that further expansion would require more capital and resources than his family possessed. The fast-growing pace of the business and its initial success brought forward numerous people with offers to invest money into the business. At this point Renier decided on a policy which attempted to link investors and employees, in other words people who wanted to invest in his business had to be prepared to work actively in the business, and similarly, those who worked for him also had to invest in the group (the only exception was the commercial traveler, John Lee).

This policy did not appeal to all investors and many backed out and instead of the hoped-for R250,000, only R50,000 was raised. Renier explains: ‘Unfortunately, some of the men with the biggest mouths got cold feet and some of the big money talkers were without substance. My family’s commitment to the idea was, however, complete’. Although Renier was only 33 years old when he undertook the next step in his career, namely the founding of Pep Stores in 1965, he already had ten years of invaluable experience in retail. In addition he firmly believed in his own abilities and in the direction in which he was going and he was convinced that with the help of his friends, family and employees, he would succeed. By this time he had established the foundations of his company’s future success and through experimentation he had developed a simple but effective recipe which had all the trademarks of having been conceived on the shop floor. It was a product of thousands of transactions with thousands of customers, sensing their basic needs and wants as consumers, their desire to get better value for their money and to be treated like human beings.

There was nothing magical about this recipe – it was based on common sense and narrowly focusing on a niche market, as is obvious from looking at its basic components:

• Higher turnover, lower profits.
• Merchandise in the lower and popular ranges.
• Selling goods which meet the requirements of customers.
• Offering a new kind of shopping experience to customers  - better value for less money in a friendly, pleasant and enthusiastic environment.
• Low rental, low prices, low advertising costs, self-service, mass display in shops, open display in windows.
• Staff training as an investment rather than expense.

Having established a sound foundation for further expansion Renier established a separate company which was to incorporate the existing stores in the Northern Cape. He favoured retaining ‘B.G. Bazaars’ as the name of the new company. After some brain-storming it was decided to use the name Pep Stores, proposed by John Lee.

The new company was founded in 1965 as Pep Stores (Pty) Ltd and in September that year it took over B.G. Bazaars in De Aar, which officially became the first Pep Stores shop. In December two further Pep branches were opened in Postmastburg and Kimberley, while the remaining B.G. Bazaars branches continued to operate independently – there were incorporated only in 1969 under the Pep banner. It soon became clear to Renier that Upington would not be suitable as the headquarters of the new company because of its modest size and relative isolation from the main urban areas which contained most of the country’s population and prospective customers.

In 1966 Renier and his family took the long and dusty road to Cape Town by car. They left behind them the familiarity of Northwestern Cape and the close-knit community of Upington, as well as their friends and family, to risk everything on a business venture in a city that at first appeared alien and overwhelming. The family settled at first in the northern suburb of Bellville, even though it meant that Renier had to travel a considerable distance each day to the company’s head office in Woodstock, located in the same building as its previously-established warehouse.

The first five months (up to February 1966) of Pep’s existence was characterized by a small financial loss, but after obtaining credit with some suppliers, Pep’s financial situation gradually improved after 1966, resulting in R10,000 profit and a 600% rise in turnover by February 1967. By now the number of shops had increased to ten and towards the end of 1967 the company took possession of its newly-build head office and warehouse in Kuilsrivier in Cape Town’s northern suburbs. In 1967 Christo Wiese, who worked at Pep during his university holidays, joined the company on a full-time basis as company secretary and second in command below Renier. His job included finding premises country-wide for the new stores and recruiting staff.

By 1968 Pep had 29 stores with a average turnover per store of R79,000 and although the company’s sales had doubled to R1,4 million, profits remained low ing it to a total of 29 by the end of 1968. Economies of scale and rapid growth during this period, up to February 1969, led to a doubling in sales and an increase in pretax profits by tenfold. Over the next year the company’s rapid expansion (now with 58 stores) necessitated new technology and in 1969 Pep received credit to acquire R500,000 worth of new cash registers and by the end of the financial year of February 1970 sales had increased by l30% to R6,6 million and profits by 268%.

With the groundwork laid the next phase in Pep’s evolution focused on fine tuning the methods and practices and creating the Pep identity.  In particular how training and motivation techniques gradually instilled in store managers and senior management the famous Pep ‘spirit’ and philosophy during the next formative half-a-decade of Pep’s history.