Publications
Partners
Technology is shaking up the way people shop across the globe, and South African malls have a decade to adapt or they will go the way of the dinosaurs.
This warning was sounded last week at the SA Council of Shopping Centres’ annual congress, where futurists and retail experts spoke about the game-changing threats and opportunities facing the industry.
The congress was held at Durban’s Inkosi Albert Luthuli International Convention Centre just days after US department store giant Sears filed for bankruptcy.
Sears, once the highest-earning retailer in the US, had over the years become a dinosaur in a changing world of more agile opponents on the one side and increasing online competitors on the other.
The development was not lost on the 1 400 delegates at the congress.
In South Africa, department store chains, including those in the Edcon stable, have lost market share and closed stores in recent years, leaving shopping centre managers looking for new tenants.
Telecoms entrepreneur and author Alan Knott-Craig told delegates that free universal internet access was imminent and it would prove to be a game-changer in the industry.
He said retailers had perhaps a decade to prepare for the fourth industrial revolution – a major new industrial era expected to blur the lines between the physical and digital spheres.
“In 10 years, everyone will have access to free internet in their homes,” said Knott-Craig. “This is bad news [for shopping centres] as it will lead to more e-commerce.”
Knott-Craig, who is the founder of Project Isizwe, a nonprofit company that is busy rolling out the country’s largest free Wi-Fi network, also spoke about the Sears bankruptcy.
He noted that online retail giant Amazon now accounted for 30% of grocery sales in the US, but said there was no need for local retailers to “panic just yet”.
“There are still several years to go before e-commerce disrupts the South African retail environment. But when the wave hits, local companies must be ready or they will panic,” he said.
Ken Hughes, a consumer behaviourist, said “digital natives” – those who have grown up with smartphones or other technology – made up more than 50% of consumers in many developed countries and it would be “game over” for retailers who failed to reach out to them in the right way.
“In the beginning, the technology certainly catalysed change. But, at this stage, consumer expectation has taken over as the driving force,” he said.
He reminded the shopping centre industry that theirs was not a bricks and mortar business – it was all about the customer. But he also said that this old marketing truth had been turned on its head by technology.
Hughes spoke about the “blue dot consumer”, referring to the little blue dot that follows you around when you open Google Maps online.
He said there had been a shift in value systems as the blue dot consumer was at the centre of their own little universe, and the challenge for malls and retailers would be in finding the right context to reach out to them and then to deliver an authentic, personalised experience.
Knott-Craig felt there was a future for malls if they could find ways to use new technology.
For example, technology allowed them to expand their security and surveillance perimeters into neighbouring communities, which would help them to develop as safe, accessible places.
To stay relevant, they should also expand their role as providers of community services and add offerings such as doctors’ rooms and libraries, and grow as collection points and meeting places for people.
NOT ALL GRIM DOWN SOUTH
South African shopping centres are being buffeted by the tough economic times rather any e-commerce headwind.
Retail property, if well managed and positioned, remained an attractive asset, industry experts said.
Malcolm Horne, CEO of Broll Property Group, a leading commercial property services company, told City Press that rumours of the looming demise of the country’s malls were greatly exaggerated.
He cited the difficulties facing the economy as a whole and noted that there had been pockets of growth in rural areas, particularly where smaller “community malls” of about 20 000m2 provided space for government grant payout points.
Horne pointed to the latest SA Council of Shopping Centres figures, which showed that the retail property sector consistently outperformed the non-retail property sector in the shorter and longer terms – 14% annualised return over five years compared with 11.7%.
he was also far from rattled by talk of the fourth industrial revolution turning traditional retailers into dinosaurs and the malls where they lived into Jurassic parks.
“I hear all of that ... we would be stupid not to think it will be disruptive,” said Horne. But he added that e-commerce was in its infancy in South Africa and platforms would have to overcome steep logistical difficulties and the expense of the “last mile of delivery” to make serious inroads.
On top of that, there were consumer trust and education issues to surmount.
“This is not an e-commerce story,” he said of the difficulties facing malls in the country.
Apart from the general economy, shopping centres had taken a knock in South Africa due to “indiscriminate development”.
He explained that this was where new centres or stores cannibalised existing businesses.
He said there also appeared to be an oversaturation of floor space in malls. Nevertheless, many operators were making their centres increasingly profitable by adjusting the tenant mix and assigning them the right amount of floor space.
Elaine Wilson, Broll’s divisional director of research, said vacancies were up in some areas, but down in others.
“When it comes to renewals, tenants are pushing back” and rejecting rent escalations, she said.
“We are no longer in a landlord’s market; we are in a tenant’s market.”
She said the big cities were “over shopped” in some areas, singling out Pretoria East as an example.
“The number of shopping centres there is crazy,” said Wilson.
Despite this, well-managed shopping centres continued to achieve sustainable trading densities.
She said this came from understanding the social fabric of the community that a centre served and then meeting its needs.
Wilson said malls were able to offer shoppers tangible experiences, something e-commerce could not easily do.
There was also great potential to provide people with more community services and “shoppertainment”.
