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Mall owners and retailers take heed: experience sells

In many countries — SA included — shopping centre vacancies are ticking up. The reason: depressed sales, coupled with rising competition from e-commerce, force retailers to consolidate space and close underperforming stores.

Understandably, mall owners and retailers are increasingly grappling with the question of how to stay relevant amid the fast-changing habits of fickle shoppers.

Speaking at the annual congress of the SA Council of Shopping Centres (SACSC) in Cape Town last month, a number of international panellists warned that landlords and retailers will have to become far more innovative in their tenant mix and products if they want to curb rising mall vacancies and falling trading densities (turnover per square metre).

Shopping centres need to promote a sense of community if they want people to keep coming back
Herculano Rodrigues, associate director of UK-based retail strategy consultant Javelin Group, said the global retail landscape will change more over the next 10 years than it has over the past 40 years. One of the key industry challenges, said Rodrigues, will be what to do with a growing oversupply of shopping centre space as retailers downsize.

Rodrigues said this year in the US alone 20 of the biggest retailers will collectively close around 3,000 stores. “E-commerce hasn’t even hit SA yet, so the change in the retail landscape will be even more pronounced in SA than in developed countries over the next few years,” said Rodrigues.

However, some industry players believed that the advent of e-commerce has also created new opportunities for astute developers, landlords and retailers.

UK-based retail futurist Howard Saunders said the irony of rapid digital transformation is that people are increasingly returning to old-world values, with a renewed search for a sense of community and physical interaction. That has given rise to what Saunders terms “brand playgrounds” — stores that not only display products but offer consumers a social experience and a place to simply hang out. He referred to Nike’s new flagship store in New York, which houses a basketball court where people are encouraged to engage with one another while trying out Nike shoes.

Saunders says interestingly enough the trend is also being embraced by some of the big online retailers such as Amazon and prescription glasses and eyewear seller Warby Parker who both recently opened huge brick and mortar stores in the US to give customers a physical experience that e-commerce simply cannot provide.

Another major trend is that people are sick of mass produced products, Saunders said. There is now a global search for authenticity, which he believed has supported the rise of markets and the artisanal food and beverage revolution. “It’s no longer other big brands that are scaring the likes of Starbucks or Cadbury’s but rather the small barista, bread maker and chocolatier. Similarly, McDonald’s isn’t interested in what Burger King is doing — they are more worried about food trucks and salad bars.”

Saunders noted that in the US for instance, the number of markets has grown fivefold from around 10,000 to 50,000 over the past decade. He believed traditional malls will only survive if they embrace the same trend. “Mall owners need to bring entrepreneurs back into their centres.”

However, Saunders argued that it won’t be financially viable for smaller tenants to open shop in malls unless landlords start adopting more flexible lease structures that make provision for pop-up shops and affordable, short-term rental options.

Trevor Hardy, CEO of international brand strategists The Future Laboratory, voiced a similar sentiment. “The most forward looking businesses today are not those that are saying how can we use technology to make retail more efficient but rather those that are using technology to make retail more human and emotional.”

He said younger consumers in particular, typically aged between 17 and 35, want to opt out of fast-paced consumerism. “The new mindset is that more is not better. Younger consumers are less into acquisition and opulence and more into experiences.”

Hardy said the new sharing economy has also encouraged a mindset of borrowing rather than buying. “Shopping centres therefore need to promote a sense of community if they want people to keep coming back,” said Hardy.
SA industry players said local mall owners are already adapting their business models in a bid to survive shifts in consumer behaviour.

Wilna Savio, portfolio executive for property management group Broll, said SA retail landlords are now actively looking at ways to improve tenant retention and create more flexible lease scenarios. They hope this will counter rising vacancies left by the recent closure of retailers such as Stuttafords as well as international fashion brands Mango, Nine West and River Island.

She noted that after the closure of some of these “big box” stores they are being successfully “repurposed” through subdivision to create space for smaller tenants. Others are turning large, vacant spaces into boutique-type gyms, kids’ play areas, entertainment areas or food courts. “It’s now all about ‘shoppertainment’,” said Savio.

By Joan Muller for BusinessLive

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