If anyone thought bricks & mortar retailers were going to lie down in the face of an online invasion they are very much mistaken. Likewise any retail landlord who hasn’t heeded the ‘adapt-or-die’ writing on the wall, is in for a shock.
South Africa’s traditionally big names have learnt to have an online presence to supplement their physical shop experience. Woolworths and Pick n’ Pay have online shops. While Look n’ Listen, for example, has become so integrated online it’s basically a hybrid retailer. Kalahari and Spree remain purely online vendors.
The next phase of integration is being previewed in places like the UK, from whom SA retailers can learn a great deal in this regard. Enter the “Student Lock in”: some of the UK’s largest shopping centres are using this marketing tool to draw in younger clientele,
After weeks of promotion on social media sites such as Facebook and Twitter, shopping centres close at the normal time, and then reopen from 9pm until 11pm for the ‘Student Lock-in’, only admitting shoppers who can show a valid National Union of Students (NUS) card. The events are intermittent and planned long in advance. Special offers, entertainment, food and music all add to a festival atmosphere. One of the UK’s largest shopping centre owners is Land Securities(LS). Events like ‘Student Lock-ins’ at LS shopping centres in Cardiff and Dundee have raked in the sales.
Other Student lock-in events revolve around online media promotions of film events. For example Gok Wan’s “How to look Good Naked” was promoted on line and shot at the Hammerson mall, packing in the crowds with retail benefits all round. Combining online promotion and social media with fashion, restaurants and leisure seems to be a way of keeping up with the attraction of online stores. People come to shopping centres for the vibe, to eat and be entertained.
But there’s more: in the US, Land Securities has brought the convenience of online shopping into seven of its malls, where Amazon.com collection lockers have been installed. Customers who cannot be at home, or are ordering things too bulky to fit through a letter box, are sent a code and date to pick up their parcel from the shopping centre. When customers collect in store, or return an item it’s another sales opportunity.
A MasterCard survey indicated that the number of people who make use of mobile phone access and thus using their phones to do online shopping in South Africa has increased hand over fist. Growth of mobile smart phones and iPads allows shoppers to shop anytime or anywhere. This can’t be ignored, so if-you-can’t-beat-‘em-join-‘em. Enter the QR Code.
A QR code (or Quick Response code) is a kind of barcode popular due to its large storage capacity and quick readability. QR Codes make it easy for a person to perform a certain action by scanning a code on their smart phone. The use by retailers to market products to consumers is obvious. Every Smart-phone owner is a potential user. More and more retailers are adding QR codes to their merchandise adding a further dimension to their shopping experience.
This allows shoppers to scan products via a QR code reader on their smart phones, and order and pay for the product directly without needing to do the transaction at a point of sale. Of course this is just one of many ways of shopping in a multifaceted shopping experience. Woolworths South Africa made use of this technology during its last big sale earlier in the year. Standard Bank is making big waves with its QR ‘Snap Scan’ for purchasing without cash or card.
Another UK innovation that emerged this year was “click and collect.” Department store House of Fraser moved its pick up facility from the back to the middle of the store reporting that customers are more likely to purchase items in addition to their online purchases they had come to pick-up. Being present meant that online customers are able to try on and exchange goods whilst in the shop.
The concept developed further into House of Fraser “virtual department stores”, a fraction of the size and cost of a full department store – which can get virtually any products on next day delivery. The stores consist of a customer services area, and many change rooms, making it easy for customers to pick up, try out, pay for or return items.
Innovations like this have brought out a creativity and an aggressive response to the so-called onslaught of on-line shopping, blurring the lines between worlds.
Interestingly there are even online-only and catalogue retailers who have started opening small shops to improve their customers shopping experience and to compete with finer tuned bricks and mortar customer service. What’s certain though is that shopping centre landlords are getting creative, innovative and fighting back by taking on the online retailers at their own game.
Some towns have up to 600 000 people, and consumer demand for convenience as well as steady population growth offers major prospects for retailers. In South Africa, people living in rural areas and townships (or second economy locations) spend more than R 308 Billion annually, representing 41 per cent of total consumer spending. [The Retail Lab]
The similar research shows that South African Shopping centre development trends are moving towards an oversupply situation in urban areas, yet retailers are still cautious when it comes to considering the opportunities within township and rural areas.
Some of South Africa’s most successful retailing operations have ploughed this field for some time. Shoprite is a prime example. Shoprite had the foresight well ahead of their competitors. Shoprite has over 1500 stores, making it Africa’s largest grocery chain and in a prime strategic position not only in South Africa but on the African continent.
Other retailers active in this arena include cell-phone retailers, some of the banks and clothing outlets who trade in areas where there is currently little competition. Opportunities abound for retailers, especially franchises and stores in fast food, groceries, fashion, mobile, electronics, financial services, furniture and hardware.
Secondary Market shoppers are brand conscious, no-name knock-offs don’t impress. Those in the market encourage interaction with the community, becoming involved in community life is essential. One must find ways to of make goods and services relevant and be seen to be socially active and responsible.
Retail in South Africa’s rural areas or “emerging economic areas” is growing and this success is evident in the retail sales and trading densities in these centres. Statistics show that the last decade has seen a significant increase in the number of retail centres being developed in townships and rural areas in South Africa.
“Townships and rural areas in SA have emerged as a new market for national retailers as we see an upward movement amongst township communities in terms of expendable income. This progressive movement has resulted in a considerable increase in shopping mall development in these previously untapped areas.” Said Marc Edwards of Spire to Cyberprop recently.
Edwards goes on to advise partnering with experts in the field; to appoint strong community based centre managers; to stay close to the community and to ensure the centre is valued; to ensure public transport is available to shoppers; to sponsor community events; to cater for bulk buying and above all carefully research what the needs of the community are.
“Rural areas offer a real cash economy and well marketed tenants who have done their homework will be successful,” concludes Edwards.
South African commercial property trends may differ in some respects to the US, but we still take many cues from that influential country and South African trends are certainly affected by American ebbs and flows. No less so in the realm of e-commerce shopping’s influence on how we build our retail centres.
It’s undeniable, for some time online shopping has had both a complimentary and supplementary influence on the retail industry. E-commerce has altered how consumers shop and retailers do business. The knock-on effect has been an influence on how stores are designed and a long term transformation of how retails centres are built.
But what about right now, do shopping trends confirm or deny the shift, what could be coming our way here in South Africa? Well if the 2012’s holiday shopping is anything to go by; it’s more of the same. Abigail Rosenbaum, senior economist for CBRE reports that online sales are on track to outperform brick-and-mortar holiday sales for the fourth year in a row.
Rosenbaum reports that “Taking core retail sales (total sales, ex auto and ex gas) as a gauge for brick-and-mortar sales, a performance comparison against online retailers shows e-commerce’s impact to be undeniable.” It seems that consumers are ‘choosing sides’ if you will. Outside of a two-quarter span during the recession, e-commerce sales growth has consistently beaten core sales. And the momentum seems to be in e-commerce’ favour. As of the last data point (Q3), growth was 17.3%—its best rate since 2011Q1. Core retail sales growth, on the other hand, has decelerated to around 4%, its lowest rate in several quarters.
According to ICSC, sales growth among chain stores went into the red in November (down 0.1% compared to one year ago). According to ShopperTrak, sales at brick and mortar stores decreased by 1.8% on the day after Thanksgiving (a high watermark for US shopping). However, IBM saw online sales on that same day increase by 20.7%, which seems to indicate that consumers favoured shopping online on the day after Thanksgiving.
NRF’s Stores Magazine, consumers’ 10 favourite online retailers are 1. Amazon.com, 2.Walmart.com, 3.eBay.com, 4.BestBuy.com, 5.Kohls.com, 6.JCPenney.com, 7.Target.com, 8. Macys.com, 9.Sears.com, 10.Google.com.
So, you may ask, how is this strong e-commerce performance translating into changes at retail centres—specifically with regard to their development? As Rosenbaum has looked at the pipeline of projects currently under construction or in the phases of planning or final planning, she has picked up a discernible trend. It seems there are a significant number of examples of retailers announcing reductions in the size of stores due to the increasing popularity of sales growth, but the trend seems to extend to shopping centres as well.
In the US smaller centres tend to be anchored by a grocer or smaller convenience-stores, and tend to comprise of tenants whose focus is on daily necessities, not unlike South Africa. The retailers of daily necessities tend to be more resilient to the impact of online shopping; between 1999 and 2010, e-commerce’s share of food and beverage sales in the US climbed from 0.1% to 0.4% while clothing climbed from 0.8% to 14.6%.
On-line retail sales are continuing to improve and strengthen, not only in the US but here in South Africa too. Rosenbaum believes the trend is here to stay.
Consumers are recognizing the opportuneness and the more robust inventory of shopping online. It seems that certain retailers, grocery stores and other daily necessities stores, for example, are somewhat invulnerable, though no retail should consider itself immune. These tenants and the centres that accommodate them appear to be the current focus of retail centre developers. Brick-and-mortar retail is certainly not vanishing due to increases in online retail, but some changes are coming; retailers and retail centre developers are adjusting to focus on smaller store formats and centres that are more resistant to e-commerce expansion. It will be interesting to see if/when these trends are taken up by South Africa shopping centre designers, if not already.
This last Christmas, whilst shopping for CDs/DVDs, like I have done for years, yes I’ve been slow to buy music online; I noticed the amount of CD/DVD shops closing had increased, yet further. Even bookshops are fewer, scaled down and not as important as they used to be. However, it’s more likely that we should look in the direction of how retail centres are designed and refurbished as influenced by e-commerce rather than trembling at the prospect of vacancies increasing. On-line shopping is making its mark and will not be ignored. It seems it will change how we build not whether we build shopping centres.
Old Mutual like any business, is in business to make profits. To what degree any business should express some sort of social conscience may be indicated by the community it does business in. In South Africa every company is under pressure to have (CSI) Corporate Social Investment programmes indicating a social conscience and a willingness to be part of social change.
Old Mutual Property, owners of Gateway Shopping Centre, announced on the 31st January “continues to look for innovative ways in which to make valuable contributions to sustainable community development and township upliftment.” This is referring, in particular, to the redevelopment of the Kagiso Mall in Mogale City.
This isn’t the first time Old Mutual Properties have done successful revamps of late. A few years back they were awarded the Golden Arrow Award for the revamp of the Riverside Mall in Nelspruit and awards were also won for the revamp of The Bluff Shopping Centre.
Kagiso is a township falling under the Mogale City municipality. The mall was an old 1980’s white elephant with poor occupancy rates. The shopping centre had become irrelevant to the community. Although the anchor tenant, Shoprite remained, a further 9200sqm of retail has been created, about 50 shops including late-night fast-food outlets.
Old Mutual Property’s Hein Smit believes this is “a sustainable contribution to the environment and township communities, which enables wider socio-economic upliftment.” He insists that the sustainability is all in the design which includes “utilising local skills and expertise in the development phase, re-usable building materials (which are donated to the local community if not used in the new development), rainwater harvesting, low energy lighting and improved insulation specifications.”
If one is looking for Old Mutual Property’s track record there is always the Phanghami Mall which took advantage of a more decentralised retail development area servicing 8 townships and various surrounding villages. Close to the Punda Maria gate of Kruger National Park it has a tourism component to the project. Aspects of community upliftment in the construction and management of the centre were considered vital to the scheme. R75 Million was invested.
Similarly Phumlani Mall in Tembisa on the East Rand was bought for R175 Million and revamped with the purpose of uplifting the community. With a reported tenant mix of 75% National chains one hopes there is something still in for local retail.
As commendable as these projects may be one has to consider them in the light of other projects on the go elsewhere. For example Old Mutual Properties has announced that it plans to invest a whopping R20 Billion in a “Town Centre” project focused on the Gautrain station in Midrand comprising 350 hectares of land. Old Mutual Property also has Rosebank’s The Zone in its quiver. This year the plan is to add an office tower in Rosebank to the budgeted tune of R340 Million.
Throw in R2 Billion rand to be spent on revitalising Menlyn this year it’s interesting to note that Old Mutual Property’s property portfolio is bordering on R35Billion 70% weighed on retail, 10% around offices with the balance in industrial premises. One doesn’t want to detract from the good work done in the name of Corporate Social Investment but we may to keep a little perspective before feeling all warm and fuzzy.