Retail remains the most dynamic urban market with changes almost on a daily basis. Changes in South African society, especially during the past 4 years, also impact on the retail market, making it one of the most exciting fields to work in.
Shopper expectations and demands have changed, especially as far as convenience, variety and shopping experience is concerned. Customers today are far less predictable and much better informed. Markets have indeed changed and retailers have to change as well.
The changes in lifestyles have had a direct impact on shoppers and shopping patterns. In 1993 consumers used to shop at an average of 2,1 grocery stores, whereas in 2003 consumers shopped at 4,9 shops. The variety is so much wider and shoppers support grocery stores for convenience, bulk buying and speciality food products. Most of this is driven by convenience, which has a very broad connotation and definition. In 1993, females did 76% of all grocery shopping whereas in 2003 females accounted for only 60% of all grocery shopping. The shopping basket of male shoppers tends to be larger than that of women shoppers. In many instances price is not the biggest factor, today’s shoppers are seeking convenience, quality and freshness.
Convenience shopping is the name of the game. Market research shows that as a result of more frequent shopping, grocery baskets are getting smaller. Monthly shopping still exists, however, the higher the socio-economic status the less bulk shopping done. Convenience shopping is conducted twice or three times per week at a more convenient, local retailer, offering quality, fresh products and individual meals. Many of the filling stations cater for daily convenience purchases mainly because of ample parking, a well lit environment and a 24-hour, 7 days a week service. Most of the new filling station express convenience stores are bigger, offering fast food products, take-aways and bakery products. The opening of express Woolworths Food stores further emphasises the growing attractiveness of these stores.
For convenience centres to be successful the emphasis must be on a good location and a strong anchor tenant. For existing convenience stores/centres the challenge must be to do a little better every day and to offer a good store experience for customers who have a variety of alternatives.
Convenience food outlets are now catering for lower to middle income consumer markets as well. The middle and lower-middle market represents ±30% of the total urban market (households earning between R3 000 and R6 000 per month). Growth is to be expected from this market. Most of the township areas now have more convenience centres than 10 years ago. Major gaps exist for small centres (up to 3 000m²) within walking distance from large residential communities. The larger community type centres tend to focus on taxi ranks and high pedestrian areas.
Consumers today are seeking a shopping experience. Shopping is not only about consumption, but also about an experience. Traditionally the larger centres fulfil the shopping experience expectations of consumers. To meet and sustain such expectations in the longer-term, shopping centres have to offer good quality public space, ease of movement, whilst providing meeting places for relaxation such as coffee shops and restaurants. These facilities must make use of both indoor and outdoor spaces. This is one of the reasons for the popularity of so-called lifestyle centres.
In the United States the focus is on New Town centres creating a very attractive environment and shopping experience. Public spaces have become the main drawcard for these centres (e.g. Nelson Mandela Square). It becomes a ‘feel good’ place. Interactive shopping is a new key word. Interactive shops would include golf shops where shoppers can experiment with golf clubs, coffee shops with bookshops and music shops.
Most new shopping centres in the USA are mixed use developments. The focus is on retail, residential, offices, cinema, theatres and hotel facilities. The largest portion of operational costs is spent on landscaping and garden maintenance.
Eating places are the most important component of these New Town Centres. The whole environment focuses on increasing the shopping experience and the dwelling time in a particular centre. Village of Merrick Park – Miami, USA
The youth of today have considerable spending power and have major influences on spending. The importance of brands and branding should not be underestimated in retailing, particularly with the youth sectors of the market. Apart from shopping the social component of this market is very important, adding to the entertainment sector of a shopping centre. This market is also called the ‘one universal market’ because trends are set and followed world-wide.
There is a definite trend emerging towards longer shopping hours. This has been the norm in convenience stores for some time, but there are indications of this penetrating the larger and regional shopping centres. There is a tendency amongst most regional shopping centres to stay open later (until 18:00) while eventually the majority will move towards approximately 19:00 closing time. The implementation of extended shopping hours is very important, all tenants must participate, it must be consistent and not reverted to previous shopping hours within 18 – 24 months. It takes time for shoppers to adjust to these longer business hours. Sandton City recently announced their new trading hours: 09:00 – 18:00 every day.
The homeware sector of the retail market has grown exponentially over the last four years. This resulted in the opening of more homeware stores including Mr Price Home, @ Home, Home etc., expansion of Boardmans, Wetherleys, Wetlands, Woolworths Homeware Department, Sheet Street, Game, Pep Stores and Ackermans. Drivers behind the growth in the homeware product sector are the following:
- the growing affluence of the South African population and the upper end of the black market;
- increasing home ownership;
- mass housing and electrification;
- the international trend towards a shorter life span of homeware products resulting in more rapid replenishments.
Because of the success of the existing homeware stores, most of the retailers in this sector are considering major expansions in the near future. Diagram 1 gives a broad indication of this particular market. The critical mass of these particular stores in any centre is thus very important, offering comparative shopping.
In general retailers are far less worried about the impact of e-commerce now than during 1999. Currently world-wide e-tailing is responsible for ±5% of total retail sales. More and more centres are using Internet to promote the centre and to drive sales. Most shopping centres use websites as one of their marketing tools in promoting sales and in becoming an additional source of information. We are still far behind in using e-mails, websites and SMS’s. The development of good e-mail address databanks is currently a major issue.
Population growth is a key driver of retail growth. South Africa’s total population grew at 2% per annum from 1996 to 2001. As far as population growth is concerned, this will mainly depend on HIV/AIDS and the general consensus is that growth is expected to slow down as a result of AIDS. The World Bank predicts that in 2015 the total South African population will be 44,3 million instead of an estimated 60 million, indicating a negative growth as a result of AIDS. Depending on the target market and style of a particular shopping centre, the effect of AIDS could possibly have a significant impact on one centre type more than on other types.
The provinces of Gauteng and the Western Cape are the only two with a nett increase in migration compared to the decrease (an outflow) from the seven other provinces. The country is almost 60% urbanised and a large inflow to the urban areas is expected. This migration is mainly coming from LSM groups 1 – 5. This will put tremendous pressure on the supply of housing facilities, job creation and infrastructure. The contribution and the demand for retail will be limited to basic food and clothing products. This will stimulate the demand for more township centres, the CBD and small spaza shops. All this will create opportunities for retail development, but the target markets need to be clearly identified and specified.
According to research conducted earlier the most important finding was the fact that the upper end of the market, LSM 8 and higher, is showing rapid growth (21% p.a. growth since 1996), while the lower end of the market (
It is expected that this rate will accelerate with an increase in the upper end of the market, but also in the income category R3 000 – R12 000 p.m. With large unemployment the lower end of the market this will act as an entry level and will be very much dependent on the economy of the country at any given point in time.
The growth in the more affluent sector of the market is extremely positive for shopping, motor sales and housing.
The consensus is that a substantial black market is moving into the formal retail sector. The importance of this market is clearly shown by the following graphs.
The expenditure market for whites has dropped from 53% of the total expenditure in 1993 to 42% in 2003, while black expenditure grew from 35% of the total in 1993 to 45% in 2003.
Growth of shopping centre development in townships will accelerate in future. Mamelodi Crossing as well as plans to develop in Atteridgeville, Soweto, Sebokeng and others are amongst the forerunners in this new trend of shopping centre development in township areas. It is expected that the growth in township retailing will further be stimulated once the right mix and right size have been determined. There is also a strong commitment from the grocery retailers to be better represented in the township areas.
As indicated earlier retail in the CBDs continuous to perform well as the CBD remains the hub of commuters. The Carlton Centre is currently being upgraded and Pick ?n Pay will open soon, reinforcing the large potential in our CBDs.
General demographic changes include the following:
- more working women – in general households in more affluent areas have 1,8 workers per household. This indicates that most spouses are working outside the home. This has an impact on the convenience nature of retailing, buying patterns and needs as discussed above;
- there is also a strong tendency to have fewer children. According to the SAARF life cycle stages the proportion of couples without children from 1999 – 2003 have increased from 5,8% to 9,9% of all adults, new parents have changed from 15% to 9,9%, and mature parents have changed from 18,8% to 14,9%, and the same applies for single parents. All this indicates a much smaller family structure in future.
All the above-mentioned trends and changes will definitely impact on the need for specific types of retail categories, the growth in other categories, the changes in demographics, the role of convenience, shopping behaviour, experience and interactive shopping will determine the demand driven by retailers. This demand will have to coincide with the growth in population, income as well as general improvement in the proportion of the upper LSM categories.
It is expected that the LSM 8 – 10, currently representing 16% of the market, will increase to 20% of the total market by 2008/10. Broadly speaking, LSM 8 – 10 currently presents 1,6 million households, which would then increase to 2 million households. A further 400 000 households will have to be added to LSM 8 – 10 during the next 5 years to achieve this goal. 400 000 additional households in this category would contribute R2 billion per annum to money spent on consumer products. All this indicates that major growth could be expected and the influence on this on retail spending could be enormous.
Acknowledgment to Nedbank Corporate, some information provided by Mr Andrew Darby.
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