Riding the waves of change: adapting to an evolving retail market

by Darren
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The retail market is constantly evolving and with volatile economic markets and shopping trends that are constantly changing, it is a real battle for survival for stores and tough competition for the attention of shoppers in the retail market.

Although online shopping also takes a slice of the cake, city dwellers will always flock to shopping centres as shopping isn’t purely functional. Shopping is a leisure activity and a source of entertainment. Walls & Roofs takes a look at various retail market trends, as well as statistics for future growth in the market.

According to the website trendwatching.com, urban dwellers have more disposable income, more leisure time and virtually limitless opportunities to spend. “As a result, retail therapy will remain a key prescription for city dwellers.” The website cites that while this is obviously true in mature markets, the real story is in emerging markets, where urban migration unleashes tens of thousands of new, eager consumers into the retail arena every day. Although the psychology behind shopping may inspire one to go on a shopping spree, Dr. Dirk Prinsloo from Urban Studies says that consumers are currently under pressure as indicated by the unexpected decline in retail sales to only 1% year on year increase from April 2012. “This is all the result of more and more pressure on the consumer from a variety of angles. Inflation, tariffs, high petrol prices and other costs all play a role in putting more pressure on the consumer.

Creating “being spaces”
One of several ways to create a cutting-edge retail shopping space is to infuse architecture with the psychological behaviour of shoppers. This means that a shopping centre designed to excite and intrigue consumers will make its mark and set it apart from its competitors. Trendwatching.com states that one way of doing this is to create spaces of “being”.  

According to the website, the definition of such a space is a commercial living-room like setting  in the public space, where catering and entertainment aren’t  just the main attraction, but are there to facilitate out-of-home, out-of-office activities like watching a movie, reading a book, meeting friends and colleagues, and so on.

Sociologist Ray Oldenburg describes such a space as a celebration of the places where people can regularly go to take it easy and commune with friends, neighbours and whoever else shows up. In Oldenburg’s view, this complements the Freudian concept of well-being as it provides a third element: a dependable place of refuge where one can escape the demands of family and bosses, and thus temporarily forget about one’s sorrows and shortcomings.
Is sipping coffee and reading the major hook for “being spaces”?Trendwatching.com believes that a “being space” can be more than just a social hub. “The trend is widespread in Asia in the area of games and entertainment, where gamers can game and ‘be’ 24/7, showers included.” The website further states that one can also expect more work-centred “being spaces” to pop up in talent magnets around the world. It is designed as members-only centres, catering for customers who need a space to be away from it all and actually get some work done.

Convenience in a nutshell
When designing a shopping centre, architects should consider leaving room for various open spaces in the centre. These spaces will be utilised as pop-up retail spaces giving retailers an opportunity for branding as well as expanding on the traffic flow from and towards their shops. According to Trendwatching.com, pop-up retail is a trend that is growing in popularity all over the world.

By utilising pop-up retail spaces, shoppers are confronted with products more easily as they don’t need to make a decision to enter a shop. Shoppers can be easily lured into such a retail space to look around and spend money.Trendwatching.com states that there is even an opportunity to combine pop-up retail spaces with “being spaces” to entertain shoppers while they scout products. “Accommodating consumers outside the home and office means that a brand is becoming a relevant and useful part of their daily lives, offering them surprise, discovery, empathy and transformation.”

An example of a pop-up retail concept that was successfully implemented is Swatch watches. Swatch’s pop-up watches are a European affair. The Swatch Instant Store has popped-up in cities like London, Paris, Barcelona, Amsterdam and Berlin. The target audience is 15- to 25-year olds and the duration of such a project is flexible. As soon as the masses find the store, it will close its doors. Limited edition watches are part of the inventory. “The pace of life is forever increasing. The public is becoming more and more unpredictable. Trends come and go at an ever faster pace and often spread across the globe instantly,” Swatch said.

Changes in shopping patterns, behaviour and centre development
According to the website urbanstudies.co.za, lifestyle changes have an important impact on retail sales and shopping behaviour. “Lifestyle centres are developed mainly to offer the shopper a different tenant mix and shopping experience,” says Prinsloo from Urban Studies. He says lifestyle centres in the United States of America mainly offer an attractive complex with a relaxed atmosphere and a variety of facilities/activities as part of the whole development. “This can include offices, residential units, hotels, theatres, conference facilities and retail. Melrose Arch is the best example of a mixed-use development in South Africa and there are a number of these developments in the pipeline.”

Prinsloo also states that the growth of shopping centre development in the traditionally black urban areas is expected to accelerate rapidly in the future. According to him development of shopping centres are now moving away from the metropolitan areas where most townships are well provided, to those rural areas where no development has yet taken place. “These areas are also becoming limited.”

“It is expected that the growth in retailing will further be stimulated once the right tenant mix and centre size have been determined.” He added that there is also a strong commitment from the national grocery retailers to be better represented in these areas.

According to him, centres that are currently being planned/developed in the township areas vary between 15 000m² and 57 000m². “These areas will always experience outflows of disposable income to the suburban centres and the central business districts, mainly because of work and transport opportunities, variety of stock as well as the fact that people like to socialise and browse.”

Local retail statistics
Statistics South Africa released their latest report on the retail market in April. According to their report, seasonally adjusted retail trade sales increased by 1,5% in April 2012 compared to March 2012. This followed month-on-month changes of 2,2% in March 2012 and -2,4%  in February 2012. The report states that retail trade sales in real terms increased by 1,0% year-on-year in April  2012 compared with the revised 6,7% increase in March 2012.

In the report it is noted that the year-on-year growth rate for April 2012 was affected by a relatively high base, since retail sales were boosted in April 2011 by the concentration of public holidays in late April and early May 2011 and additional school holidays after the Easter weekend.

The highest annual growth rates were recorded for retailers in hardware, paint and glass (8,7%)  and retailers in pharmaceutical and medical goods, cosmetics and toiletries (3,3%).  Retail trade sales for the three months that ended in April 2012 reflected an increase of 4,7%  compared to the three months that ended in April 2011. The largest contributors to the 4,7% increase were general dealers (4,1% and contributing 1,6  percentage points), retailers in textiles, clothing, footwear and leather goods (5,9% and contributing 1,2 percentage points) and all other retailers (7,2% and contributing 0,9 of a percentage point).
Opportunities in Africa

Clifford Sacks, chief executive officer of Renaissance Capital Africa, talked about opportunities to invest in the African retail market during the South African Property Owners Association (SAPOA)’s 44th annual international convention and property exhibition that was held recently. Citing U.N. statistics and Renaissance Capital research, he projected that by 2050 there will be two billion people in Africa and 50% of Africans will live in cities by 2030.

He also mentioned that by 2040 Africa will have a working age population of 1,1-billion.  “Africa has 52 cities with a population of more than a million people at the moment,” he said. “Eleven of the fastest growing economies in the world are in Africa.” According to Sacks, it’s not just debt that can drive growth. “Education, innovation, more business-friendly policies or simply political and macro-stability can boost growth.”

Case study in Africa
One of the most promising developments planned to put Africa on the map is Tatu City in Kenya. He gave an overview of the project, stating that Tatu City, located in Ruiru Municipality on the outskirts of Kenya’s capital Nairobi, is modeled as ‘Africa’s City of the Future’. Once complete, it will be a large-scale urban development consisting of mixed-use affordable residential, commercial, tourism, social and recreation amenities, with over 35% of the land dedicated to green and open space. Underlying Tatu City’s design is a visionary concept aiming to shift urban development in Kenya from the familiar single node model to a decentralized urban environment.

By doing so, Tatu will significantly de-congest the City of Nairobi by offering a unique live-and-work space for an estimated 70,000 residents and 30,000 day visitors. With the ongoing infrastructure developments in Greater Nairobi, notably Thika Superhighway, and proximity to the Jomo Kenyatta International Airport (JKIA), Tatu is well-positioned to be a social and economic hub.

“It represents a new blueprint for economic, social and infrastructure growth in Kenya,” Sacks explained. He said that the final approvals have been received and groundbreaking took place in April, which will be followed by initial infrastructure by the end of the year.

A global perspective on the retail market
John Kasarda, Professor of Strategy at the University of North Carolina, compiled a study on the Aerotropolis Model and how it can be incorporated in Africa to stimulate growth in the retail market. Dr. Kasarda is the leading developer of this airport area commercial model. “Governments can use this model as a strategic approach to improve aviation-linked commercial development making an airport area and region more economically efficient, attractive and environmentally and socially sustainable.”

He says allocating property for development around an airport offers businesses near or with good access to the airport speedy connectivity to their suppliers, customers and enterprise partners nationally and worldwide. “Such a development should contain the full set of commercial facilities that support airlines and aviation-linked businesses as well as millions of air travellers who pass though the airport annually.”  

Kasarda says an airport city developed near an airport serves as the multimodal, multi-functional commercial nexus anchoring air-enabled trade in goods and services, driving it throughout the region. He says that a design for the development of an airport city should include shopping mall concepts merged into passenger terminals, restaurants, leisure outlets like spa’s, fitness and recreational activities as well as incorporate culture like museums, regional art houses, live entertainment facilities and chapels.

He says the area surrounding the airport could benefit from the development of hotels, entertainment outlets, office and retail complexes as well as convention and exhibition centres. Kasarda added that the daily consumer population at many major airports is larger than that of many mid-sized cities. “Numerous airports achieve a greater percentage of revenue from non-aeronautical sources than aeronautical sources.”

According to him, rapid commercial development around many major airports makes them leading urban growth generators, as airport areas become significant as employment, shopping, trading and business destinations in their own right. “Airport areas develop a brand image attracting even non-airport linked businesses.”  

The rise of the Aerotropolis spines and clusters of airport-linked business and residential complexes are forming along airport transportation corridors up to 25km from some airports with significant economic impact measured up to 75km.  He says the development of an Aerotropolis or airport city in European counties created opportunities for a wide variety of projects to develop, covering almost any industry sector. “Just as you have central cities and the greater Metropolis, you will now have airport cities and the greater Aerotropolis in the future.”

The development of an Aerotropolis in KwaZulu-Natal  
Kasarda believes that South Africa should take note of this international trend and invest in developing its own Aerotropolis. “There are huge areas of undeveloped land in the King Shaka Airport region, with 78% of the 22 000 hectares land available within 15km of the King Shaka Airport.”  He says the airport is surrounded by a large provincial economy, poised for substantial growth.  

He says the Dube Aerotropolis, as he named it, will connect its businesses to markets near and far. “An improved multimodal surface transportation will connect Aerotropolis firms efficiently to regional and national markets.”

According to him, King Shaka’s expanding air routes will provide fast and efficient connectivity to distant markets. “The airport area, the province and the nation have the potential to become better connected and therefore more competitive.”

Kasarda explained that airport areas are becoming as much destinations as places of departure. “Tourists, business travellers and locals alike converge on airport cities and Aerotropolises to work, shop, transact business, exchange knowledge, meet, eat, sleep and be entertained without going more than 15 minutes from the airport.” He further added that airport cities are valuable regional and national assets, not just airport assets. “Properly planned and developed, such a city can promote KwaZulu-Natal’s competitiveness and business efficiency as well as that of the entire nation.” Kasarda suggested that investors and developers can select strategic sites on or near King Shaka International Airport and position their investments to be leveraged by growing air commerce.

He said KwaZulu-Natal leaders can champion a Dube Aerotropolis to meet the competitive needs of businesses, boost trade and foster economic development while creating well-paying jobs for citizens at all socio-economic levels and improving the quality of life of its residents. “To accomplish these positive outcomes in an economically efficient, physically attractive and sustainable manner demands the integration of airport planning, urban planning and business site planning.”

The Green Lease Toolkit
The Green Building Council of South Africa, in partnership with SAPOA, announced the launch of the Green Lease Toolkit recently at the 44th annual SAPOA International Convention & Property Exhibition held in Durban.

The Green Lease Toolkit was developed in response to a growing market demand among landlords and tenants alike. South African landlords have consistently requested guidance and resources to help them harness the benefits of well-designed, well-built buildings. Similarly, South African tenants are increasingly demanding “green” space in a bid to take advantage of the healthier and more productive indoor environments that green buildings offer. A “green lease” ensures that a sustainably designed building is operated in a sustainable way.

The Green Lease Toolkit unpacks the definition of “green leases”. It explores the shared responsibilities of landlords and tenants and provides a platform for sharing benefits of the enhanced performance of the building. The toolkit also helps in balancing the relevant costs between each party. The Green Lease Toolkit is a precursor to shifting the paradigm of “living green” into the mainstream for both owners and tenants. It also examines the principal benefits of selecting a “green lease”, such as minimising negative impact on the environment.

Other benefits of using this toolkit include improved working environment quality, increased staff retention and productivity, improved asset performance as well as reduced exposure to regulatory changes, reduced operating costs, and reputational enhancement and compliance with corporate reporting.

The Green Lease Toolkit unpacks this delicate balance and provides an answer to the “split-incentive” conundrum between owners and tenants. It addresses the motivational drivers for change from both perspectives and underlines the need for a collaborative approach to find the sweet-spot in yielding mutual and equitable benefits. It is also intended to be a very practical guide and includes checklists and samples of agreement types.

There is definitely an opportunity for retail markets to expand in Africa. The gradual growth of this market can only lead to positive outcomes for the countries on the continent that embrace changes and trends. Projections based on population growth and urbanisation already paints a picture of prosperity. It is in the hands of African leaders to hold the reins tightly and facilitate the development of the retail market to reap the benefits.

Full acknowledgement and thanks are given to John Kasarda, Clifford Sacks and Dr. Dirk Prinsloo from Urban Studies for the information given to write this article.

– Written by Nichelle Lemmer

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