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 percent of total consumer spending.
"We believe that a re-focus in these locations could represent a paradigm shift in the way retailers view their expansion plans," says Marc Zlotnick, Managing Director of Forsite, a company providing professional property services to retailers who want to expand, relocate or penetrate new markets.
"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.
"We acknowledge that there needs to be sufficient spending power in a particular area to justify and warrant the development and sustainability of township and rural shopping centres. At Forsite we believe that the second economy is strategically vital for the future expansion of retail networks.
Our experience and know-how enables us to assist retailers to find relevant retail 'hot spots' and match these to their particular trading landscape.
"Some of South Africa's most successful retailing operations have had their eye on this ball for a while already, they are well ahead of the curve. Shoprite is a prime example. When you look at it now, retailers like Shoprite had this foresight well ahead of their competitors and we believe that this vision was a key to their current success. They are well-established in these areas with a well-developed network and strategy". 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 a few fashion outlets who have set up shop and trade in areas where there is currently little competition. Most of them and are doing well. However, there are still great opportunities for second and third-tier retailers especially franchises and stores in fast food, groceries, fashion, mobile, electronics, financial services, furniture and DIY."
Zlotnick offers the following tips to retailers who are interested in exploring second economy retail opportunities further:
- Think out of the box: There are abundant opportunities in township and rural areas. In areas sometimes less than a couple of hours away from urban centres, or closer, communities are often starved for formal retail offerings. Before discounting expansion into these areas look closely and talk to companies who understand the locations, dynamics and market opportunities in township and rural areas.
- Be appropriate in what you offer: People in township and rural areas are seeking convenience in shopping, value for money and cultural relevance. Rural shoppers may live far from the bright lights, but they are just as savvy as urbanites.
- People are all brand conscious: While poverty is obviously a barrier to growing brands, income has little bearing when it comes to buying brand-name products. Research shows that in the township consumer's mind a brand-name product has to be far superior to a no-name knock-off. Research shows that brand-name products are viewed as liberators.
- Interact with the community: Township and rural shopping centres
are the quintessential "market squares", where people naturally gather to trade, meet, interact, etc. They are the natural centres of communal life. Retailers should entrench themselves, their brands and their offerings by becoming involved in communal life, finding ways of making their goods and services relevant and being seen to be socially active and responsible. - View informal traders as an opportunity: Often a barrier to entry for retailers is the personnel to operate and manage shops in outlying areas. There are many experienced local traders who have been informally plying their trade in the area for a while. The local fellow who has been operating a spaza, or a sweet kiosk, or maybe even selling braaied mielies.He knows the local landscape, he is part of it. He also wants security, safety and the opportunity to make more money: a career path into the formal retail sector would afford him as many opportunities as it would serve the retailer. There are various incentives for the retailer in assisting with this type of skills upliftment.
- Get help from a company that understands second economy retailing properly: The dynamics of the second economy are as diverse as they are vast. There are many successes stories and there are unfortunately failures too. Before venturing into this arena there needs to be proper research done and meaningful advice given. Partner with a company who not only understands this market, but is able to develop a proper understanding of your retail offering too. That way you are best assisted in finding the best locations for your stores.
Publisher: eProp
Source: Foresite