Byline: Bronwen Noble

In the fiercely competitive South African retail environment, technology is a game-changer for shopping centres.

Online shopping was initially tipped to be a cruel competitor for bricks-and-mortar retail, luring customers and their spend away from malls. Yet shopping centres remain the first port of call for most South African shoppers, and in deep rural markets the impact of online shopping is barely noticeable.

Today, malls have embraced the changing dynamics and are using technology to their advantage and innovating to adjust to the ever-evolving needs of consumers.

With the power of social media, big data and the internet of things, shopping centres can now understand and serve their customers better than ever before. They are also using new digital tools and data to make better leasing, operations and marketing decisions.

Internet videos of “dead” malls in the US do not reflect the future of South African malls, says Ken Reynolds, divisional executive: property finance at Nedbank CIB. “As long as our shopping centres are flexible and move with the times, we are unlikely to see anything like that.”

Where large US malls are closing down, the impact of online shopping is just one of many factors. “The degree to which online shopping influences physical retail varies across shopper markets and retail categories. Bookstores and record stores were hardest hit by the disruption of online shopping. Many US malls were anchored by bookstores,” says Reynolds.

This, he adds, is not the case locally, where malls are traditionally anchored by grocery and fashion retailers. “Many South African retailers’ online sales models add to the turnover of local stores, rather than taking away from them.”

The current weakness in the local retail sector stems mostly from the economic downturn, says Reynolds. This has left South Africa with too much retail space. “The way South Africans shop is different from many other countries. We have more shopping centre space per capita, but less high street retail space.

“Yes, some areas are now over-stocked with retail facilities, such as Pretoria East and the north of Johannesburg. But there are still areas that have no retail to speak of at all, especially in townships and rural areas.”

New shopping centre development has slowed down significantly in response to the lacklustre economy, especially in the metropolitan and urban areas where the market is being cautious about more competition and potential cannibalisation.

“The bigger trend is for investors to refurbish and expand existing shopping centres rather than cannibalising the market with new developments. The refurbishment and upgrade of an existing shopping centre builds on its existing base and in-place infrastructure, which also makes remodelling and rightsizing a mall a better financial alternative in many cases.”

People are social animals and cannot live in isolation, and Reynolds believes this is good news for shopping centres of all sizes.

In the digital era, experience is the trump card that physical retail can play to attract more shoppers and keep them coming back. “Shoppertainment”, interactive attractions and a greater variety of community facilities give people more reasons to visit a mall, besides shopping.

Retailers are also changing the way they view their stores. “We see more ‘showrooming’ at malls, where retailers display their goods but the buying is done online for delivery later,” says Reynolds.

Click-and-collect retail is growing in popularity. Here, shoppers buy goods online and then collect them in store where they can continue shopping and add to their baskets.

“Social media improves the competitiveness of centres, connecting malls directly with their customers. Also, Bluetooth and smartphones enable malls and retailers to send marketing messages to nearby customers, using proximity locators,” says Reynolds.

“The more you know about your shoppers, the better you can analyse them and serve them. Big data is playing a huge role here.”

People work in new ways in the digital world, which represents an opportunity for shopping centres. “Technology is driving the new trend of remote working and shared workspaces. By locating these workspaces in or near shopping centres, it boosts their appeal and supports retail trade. Workshop 17, the co-working and innovation space at the V&A Waterfront, is a great example of this.”

Nedbank CIB is more than a funder of shopping centre development and transactions. It also takes equity positions in shopping centres’ businesses. Its leading property team has developed a keen eye for projects that will show good returns.

“Responsible shopping centre funding and investing come down to economics,” says Reynolds. “A shopping centre development must be viable, sustainable and future-proofed to an extent, especially medium to larger shopping centres, which should be flexible. We also recognise that technology is playing a growing role in supporting the success of shopping centres.”

Article on Financial Mail, click here to view.

You have shown interest in this article, you might find this article “Industrial Sector Drives South African Property Returns” relevant as well.