In the early weeks of the pandemic, as grocery shoppers turned to online retail to keep pantries and fridges stocked, the prophets of mall doom came out in force.
After all, SA's 2,000-odd shopping centres ranked the country eighth in the world in terms of mall space, according to the South African Council of Shopping Centres (SACSC). Surely that was an indication that the country had overinvested in these facilities, and that something had to give?
When more than 20-million square metres of floor space suddenly went quiet at the end of March 2020, and the payment gateways of e-commerce entered a higher gear than ever before, these may have been reasonable questions.
A year and a half later, the answers are not what one might expect.
First, it is clear that an e-commerce revolution has taken place. In SA, according to the “Online Retail in SA 2021" study by World Wide Worx, online shopping contributed 2.8% of total retail last year, double the 1.4% of 2018. The size of online retail increased from R14.1bn to R30.2bn in that time, even as traditional retail fell back.
By the end of 2022, the proportion may well reach 5%. That is a tiny proportion of total retail, but it is the pace of growth that terrifies many traditional players.
However, the truth of that 5% is somewhat more nuanced than a mere replacement of one form of retail by another. Flawed strategy has played a far bigger role than the threat of e-commerce in the retail failures of recent years.
As once-mighty CNA reduces its footprint to 60 stores by December — from a height of 350 three decades ago — it will be overtaken by the upstart PNA’s 83 stores. One can read the mind of the mall on their contrasting shelves: the vast magazine sections of CNA have given way to the gift sections and art supplies of PNA.
Digital has destroyed magazines but cannot replace personal experience. In years to come, PNA’s long shelves of educational books will no doubt vanish as textbooks go digital, too, but one imagines new categories will move in on those sections.
At the SACSC conference at Sun City last week, Kundayi Munzara, executive director of Sesfikile Capital, said vacancies in South African shopping centres stand at between 2.5% and 5%, neatly matching the slice taken by online retail. However, these are relatively normal vacancy levels, and the only surprise is that the numbers aren't higher, given the impact of the pandemic on smaller retailers.
If you want to understand the future of physical retail, you must also read the mind of the mall through its relationship with online retail — and with its customers.
Few would argue that the biggest e-commerce success story of the past 18 months has been Checkers 60Sixty, which brought the miracle of one-hour delivery of online orders to the masses. Aside from a fine-tuned strategy and a vast army of store pickers and delivery bike riders, this was made possible through turning almost every Checkers store into a fulfilment centre for online orders.
Now go into one of Checkers’ newly refurbished stores during normal shopping hours. Whether it is in the Gateway or Cornubia malls in Umhlanga or Rosebank Mall in Johannesburg, there is a palpable buzz — making for a compelling customer experience.
Then look at the data from the country’s biggest real estate investment trusts (Reits): the Shoprite Group is the single biggest tenant of several, with about 132,000m2 at Growthpoint Properties, and 109,000m2 with Redefine.
In other words, the biggest success story in online retail since early 2020 has also become one of the biggest success stories of physical retail.
And, among the biggest tenants of the Reits, one finds most of the other leading lights of the digital world: Pep, which supplies half the smartphones sold in SA; Pick n Pay, which pioneered online groceries but had to buy fast-delivery company Bottles — now rebranded ASAP — to compete; TFG, now so much more than just Foschini; Woolworths, which has long led in online clothes shopping despite fumbling groceries; and the Mr Price Group, which swooped on online pioneers Yuppie Chef last year.
Almost every one of these is expanding its physical footprint, largely to help them meet the demand from online. In SA, the two go hand-in-hand.
• Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za
