Keep­ing the tills ring­ing

How to get shop­pers to stay longer and spend more

Finweek English Edition - - Business strategy - JOAN MULLER

WHILE OWN­ERS of shop­ping cen­tres have been coin­ing it on the back of South Africa’s con­sumer spend­ing boom, the ex­pected slow­down in re­tail sales is forc­ing mall own­ers to be­come more in­no­va­tive in cen­tre de­sign, ten­ant mix and prod­uct of­fer­ings.

The ad­di­tion of more than one mil­lion square me­tres of new re­tail space – planned or cur­rently un­der con­struc­tion, ac­cord­ing to latest sta­tis­tics from the South African Coun­cil of Shop­ping Cen­tres – will no doubt place fur­ther pres­sure on ex­ist­ing shop­ping cen­tres to re­tain their slice of the re­tail spend­ing pie.

Pi­eter Prinsloo, MD of re­tail-fo­cused listed fund Hyprop In­vest­ments, says the big­gest chal­lenge cur­rently fac­ing prop­erty own­ers is how to get shop­pers to stay longer and spend more. Shop­ping cen­tre de­sign and lay­out can play a ma­jor role. Prinsloo says cen­tres that have a sim­ple lay­out and are eas­ily nav­i­ga­ble tend to fare bet­ter than those where shop­pers can get lost.

Hyprop’s best per­form­ing cen­tre – its R6,7bn port­fo­lio mega-mall Canal Walk at Cen­tury City in Cape Town – is a case in point. Prinsloo says the cen­tre has two long, straight malls on each level, en­cour­ag­ing con­sumers to shop the length and breadth of the en­tire cen­tre.

An­other trend in re­tail de­sign is a move away from en­closed malls to­wards nat­u­ral, open-air shop­ping en­vi­ron­ments. Prinsloo says th­ese so-called lifestyle cen­tres – De­sign Quar­ter (Four­ways, north of Jo­han­nes­burg), Wil­low­bridge (Tyger Val­ley, Cape Town), WorldWear (Fair­lands, Jo­han­nes­burg) and Hyprop’s own Stoner­idge Shop­ping Cen­tre (cur­rently un­der con­struc­tion at Mod­der­fontein, east of Jo­han­nes­burg – are lead­ing the way in bring­ing new and un­con­ven­tional shop­ping ex­pe­ri­ences to con­sumers.

The rush for lu­cra­tive re­tail as­sets among both listed and private prop­erty funds has pushed the prices of prime shop­ping cen­tres sky-high, mak­ing it dif­fi­cult for prop­erty own­ers to grow their port­fo­lios. So prop­erty own­ers are in­creas­ingly go­ing the ex­pan­sion and re­fur­bish­ment route to un­lock value in their ex­ist­ing as­sets. Es­ca­lat­ing build­ing costs and a scarcity of well-lo­cated de­vel­op­ment land are also mak­ing it less vi­able to de­velop new cen­tres.

Old Mu­tual Prop­erty In­vest­ments (OMPI), which has Gate­way (Umhlanga), Men­lyn Park (Pre­to­ria) and Cavendish Square (Cape Town) in its shop­ping cen­tre stable, has em­barked on an ex­ten­sive ex­pan­sion drive to en­hance the re­tail of­fer­ing in its ex­ist­ing cen­tres.

Brent Wilt­shire, the group’s busi­ness de­vel­op­ment ex­ec­u­tive, says that over the past 12 months it has al­ready ear­marked al­most R500m for ex­pan­sions and re­de­vel­op­ments in KwaZulu-Na­tal alone. A big chunk of that will go to­wards ex­ten­sions at Gate­way, the sec­ond ma­jor ex­pan­sion at the

An­other trend in re­tail de­sign is a move away from en­closed malls to­wards nat­u­ral,

open-air shop­ping en­vi­ron­ments.

Umhlanga mega-mall within a year.

Mean­while, In­vestec-man­aged Growth­point Prop­er­ties, the listed prop­erty sec­tor’s big­gest fund, is spend­ing R27m to up­grade and re­con­fig­ure 6 000sq m of floor space at La Lu­cia Mall (north of Dur­ban) to help max­imise its of­fer­ing to shop­pers.

Oth­ers are fo­cus­ing ef­forts on im­prov­ing the ten­ant mix at their cen­tres. Listed fund ApexHi Prop­er­ties, whose re­tail port­fo­lio has grown from 300 000sq m to more than 1m sq m over the past five years, re­cently ap­pointed spe­cial­ist re­tail con­sul­tant Mark Ruf­fley to try and boost turnover by fine­tun­ing the ten­ant mix in nine of its shop­ping cen­tres.

Ruf­fley says that al­though the fund’s re­tail port­fo­lio al­ready has a low va­cancy, the aim is to fill the space with the right ten­ant profile. Most of ApexHi’s shop­ping cen­tres are smaller de­vel­op­ments in sec­ondary lo­ca­tions. Ruf­fley says his task in­volves iden­ti­fy­ing re­tail trends within each cen­tre by analysing foot­falls, turnovers and the area’s de­mo­graph­ics.

Says Ruf­fley: “This in­for­ma­tion al­lows us to con­struct an ideal ten­ant mix that will ap­peal to the tar­get mar­ket, which will build cus­tomer loy­alty, in­crease foot­falls, boost dwell time and ul­ti­mately im­prove turnovers to en­hance the yields on the build­ings.”

ApexHi is also pro­vid­ing re­tail train­ing for strug­gling ten­ants and in­de­pen­dent re­tail­ers to in­crease trad­ing den­si­ties (turnover/sq m). Ruf­fley says that 96% of ten­ants who at­tended train­ing ses­sions al­ready show an in­crease in turnover, the av­er­age be­ing 34%.

Sim­ple lay­out works best.

Pi­eter Prinsloo

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