Festive season likely to deliver nominal sales growth for shopping centres

Posted On Friday, 19 December 2014 07:31 Published by
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The festive season is the most important trading period for South African retailers and shopping centres but, with the consumer crunch, the season is only likely to deliver nominal sales growth.

Andrew Konig

Macro-economic data signals that consumers are feeling the pinch. Although the stressors remain largely the same as this time last year, there has been widespread industrial action during 2014 from which many consumers still need to recover and there is certainly less of an underpin from unsecured credit, which could put some additional pressure on household disposable incomes.

This will be the case across most of South Africa, but there are a few areas that are worse off. Some regions have been harder hit by industrial action and job losses, which may mean disappointing retail sales growth.

This trend is set to continue, as consumers in South Africa will remain under pressure for some time to come. While it's tough to call, we believe retailers in the apparel, accessories, jewellery, cosmetics and electronic categories to be best positioned to benefit from festive spend this year.

On the other hand, indications are that big-ticket item categories, such as furniture and appliances, may fair less favourably. We're also nervous about retailers that are very dependent on credit as there will be significantly less support for spend from unsecured credit this year. More budget conscious consumers will likely choose to limit their credit use.

When it comes to gifts, early indications are that gift cards will be popular again this year. It's a simpler gift and many people find them budget friendly. When it comes to presents, newly-launched technology, such as the iPhone 6, will be at the top of many Christmas wish-lists.

And that isn't the only thing people want this festive season. They want a hassle-free shopping experience, with easy access to parking, extended shopping hours and desired brands in one location. For many, a child-friendly environment is also important.

Because most customers enjoy the festivities of Christmas shopping, great entertainment can drive footfall, which hopefully translates into increased spending too. This, combined with the recent postal strike, means we don't foresee a huge shift to online shopping this year.

Many customers choose to shop at retailers that have customer friendly return and exchange policies, especially because when it comes to gifts, it's the recipient that is likely to do the exchange not the purchaser.

While the peak festive shopping season heralds a welcome increase in ringing tills it also brings a complex set of challenges for retail centres. It's well published that mall security is top of mind for landlords right now, but managing the increased number of visitors, parking flows and cleanliness are also huge challenges.

Many of our initial expectations for festive trading are now being refined due to load shedding. South Africans are resilient but one of our customer's biggest frustrations is the inability to plan due to the unpredictability of load shedding.

While we may be wrong, we believe that customers will head to larger malls in the hope that generators keep the lights on. We also expect customers will try and complete their Christmas shopping in fewer visits reducing the opportunity for retailers to capture impulse spending. While load shedding is most certainly a concern over December and into 2015, there are so many other dynamics at play at present that it's near impossible to isolate the impact on general spend.

Many macro commentators are keenly focused on the national retail sales numbers as reported by Stats SA. Given the fundamentally different weighting of the index, we certainly watch the trend of the data, but more importantly use the category performance data as part of our benchmarking process.

One of the most exciting opportunities for Redefine is to continuously improve tenant mix offerings through the introduction of niche tenants. Whilst the market as whole may look very pedestrian in the medium term, there are opportunities for Redefine to improve market share of our centres.

We are encouraged by the fact that key categories such as Fashion & Accessories, Health & Beauty and Specialty Food are all performing well ahead of the Stats SA benchmark. More encouraging though is that the comparable store growth continues to outperform, supporting our thesis that improved tenant mix and differentiated offerings can see a whole category's performance improve.

Whilst there are a number of categories that are underperforming, which were highlighted in previous years, we continue to performance manage and reduce our exposure to those in question.

Last modified on Friday, 19 December 2014 08:41

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