Slump hits not-so-great malls of China
SA’s discount ‘China cities’ latest to feel the pinch
ORIENTAL City, opposite Rivonia Village shopping centre in Sandton, offers a stark contrast to its bustling neighbour.
Just about the only people in its empty walkways are shop assistants who stand outside their stores sharing jokes to while away the time.
For the owners of these stores, it is no laughing matter.
“Business is bad ... the environment is tough and there are no customers,” said the owner of a clothing store, who did not want to be named.
For the past 20 years he had sold clothing imported from China, but said the current environment had “slowed”.
He did not expect it to improve any time soon.
“Some of my friends have gone back to China. It’s not easier there than it is here, but it’s become much more difficult in South Africa — even getting a visa is an issue,” he said.
Chinese wholesale markets or malls are often the go-to alternative for consumers looking for a discount on their basket of goods. But it seems that even they are struggling in the face of a weak consumer environment.
At Oriental City, landlords rent out trading space for about R200 a month for 2m². About half of the tenants import goods from China, said Jonathan Qin, MD of Oriental City Investments.
Oriental City has six shopping centres in Gauteng, including in Bruma, Atlas and Centurion, as well as a warehouse in Selby, and an Asian supermarket.
“Depending on the state of the shopping centre, we have good ones,” said Qin.
“But we are also struggling and we have to face the challenges BUSINESS IS BAD: Bruma Lifestyle Centre in the east of Johannesburg is going through a tough time as its target market feels the economic pinch we have . . . and instead find opportunities in them.”
Qin said the store in Rivonia was the company’s least busy.
If its empty Asian-cuisine restaurants are anything to go by, many of its tenants are barely surviving.
Qin said shopping-centre owners needed to adopt a more innovative approach to draw in consumers. “We are focused on providing opportunities for local entrepreneurs not only the Chinese,” he said.
Oriental City is not the only discount mall that is struggling.
Roy Naidoo, centre manager at Durban’s China Mall, said: “We have not seen international trade coming in a year, because of the rand value and the economy is tough.
“People are scared to invest in South Africa.”
Naidoo said China Mall had 71 shops that were being upgraded, and 16 stores were standing empty.
“We are running a special on our second level where we are awarding free rental until the end of December, where tenants only pay for the electricity,” said Naidoo.
“We would like to see more Chinese stores getting into the country or maybe more foreign nationals coming to open business in our mall, besides local national stores,” he said.
Part of the reason for the slowdown in trade activity was that low- to middle-income consumers were struggling and neither chain store retailers nor importers were gaining any reward from them, Naidoo said.
China Mall has the same model as chain stores: finding locations that attract low- to middle-income consumers “because you know you are not going to get someone from Umhlanga coming to our mall”.
According to Trading Economics, imports rose 8.9% month on month in March, mainly driven by imports from China, which contributed 15.3% of total imports.
While importers may be having a tough time, it doesn’t seem that landlords renting space to national retail brands are getting it right either.
Keillen Ndlovu, head of listed property franchise at Stanlib, said there had been a slowdown in retail sales driven by the weaker economy and an increase in the number of shopping centres.
“We are going to see more refurbishments and the extension of existing shopping space, rather than new developments coming up.
“There’s a lot of work to be done in existing shopping centres, so refurbishments and the tenant offering, as well the tenant mix from food, beverage and entertainment, should become a popular thing going forward,” Ndlovu said.
The retail offering had actually expanded at a time when the economy was slowing.
It would be difficult to determine occupancy rates in Chinese malls, because the rental agreements were very flexible, whereas rental agreements with the landlords of big traditional shopping malls were signed for several years in some cases, Ndlovu said.
Discount retailers may find the weak economic environment sends shoppers their way.
“Chinese malls pose a threat to mainstream shopping centres, more so on clothing , where you find much more affordable items and they tend to do well,” said Ndlovu.
In terms of the general environment, more retailers would become picky about location and were likely to right-size their business by closing lessprofitable stores “given that there has been such a massive roll-out of stores”, he said.
Back in Oriental City in Rivonia, the clothing-store owner has just sold a large consignment of imported Chinese faux fur hats for R900.
Despite the sale, he expects the rest of his day to consist of sitting behind the counter in an empty store, occasionally opening the till to count the money he has made that day.
It’s become much more difficult — even getting a visa is an issue We are awarding free rental until the end of December