Times ahead are tough for retailers, as buyers change the way they shop and spend their own time. In a market where GDP growth is predicted to only be between 3% - 5% until 2015 and private consumption expenditure is averaging only 4% for the next four years, manufacturers and retailers are going to have to revisit their strategies if they plan to be a leader in this new world.
Against this backdrop, consider that South Africa is currently home to more than 37 million m2 of retail space. When last reported, we had 1 600 formal shopping centres representing half of this space - with 115 centres occupying over 30,000 m².
Shoppers today not only prefer to shop local but have no reason to travel too far for their needs. It is those retailers that are within the immediate catchment area that are the real beneficiaries and where the shoppers are most likely to visit. Obviously, the larger the store presence for retail and physical availability of brands the better, but this still will not guarantee success.
We all know that small business is struggling in this global age. The mom and pop stores in particular have been worst hit, as big malls have opened (with high rentals) and national retail have opened up new stores aggressively. Growth has been so intense that national retail is prepared to cannibalise on its own catchment areas to compete in this new environment. Small businesses are often spectators, as large businesses have economies of scale, better pricing and range for the shopper.
Testament to this global issue is that in the UK small businesses are getting frustrated and lobbying for legislation that will protect them. Their grievance is that only 12% of British households own some form of business assets and they are starting to question what big business brings to their communities once the cash register has rung.
Large retailers also have their challenges. Hypermarkets and superstores are still the biggest category in terms of revenue but are seeing their growth expectations limited, as shoppers search for convenience and shorter trips. Convenience and forecourt stores are growing quickly in South Africa because buyers want convenience. Pick n Pay is rolling out Express stores, Woolies is well established and Fruit and Veg City continue to roll out its Fresh Stop brand at Caltex.
Globally, a strong trend developing is that retail brands are moving to smaller formats like Walmart, which has introduced an Express store and Target with its Target City format. To take advantage of time strapped shoppers, most are gearing up for an 'open 24 hours' service. Time and convenience continue to be an important consideration for retailers who are desperate to be the destination of choice.
Ocado in the UK is an example of an online retailer having adapted for these new shoppers looking for convenience and value. It offers consumers (with free delivery) a choice of 21 000 different products mostly sourced from the Waitrose supermarket chain and provides the service of picking groceries and delivering them to customers' doors. Tesco has introduced a 'Click and Collect' drive through facility for the shopper who does not want to set foot inside the old brick and mortar facility - a time saver for the commuter on their way home.
While time and convenience play a major role in the future of retail, so has our understanding of the modern shopper. Post-recession buyers lack loyalty to brands/stores, behaving more 'polygamously' to their category and are very savvy in identifying true value. This is very evident in South Africa but globally the same trends exist, perhaps even more so where there is more parity and choice for the shopper.
Therefore, as these shoppers live in a world where there is major choice, great value and convenience, they are also more mobile than ever - choosing to be close to home and the family. They are being encouraged to work from home, where their productivity is more efficient and quality of time is improved. The question today's household is asking is "How can I make the most out of my 24 hours?" This trend will have an impact on the way buyers shop.
Shoppers are not travelling as much as they used to and it is geography, not demography that determines who and where shoppers are likely to be.
Not only are they cocooning more than ever but also shoppers are getting more involved in their own communities. They are becoming socially aware of what is happening and evaluating the impact of everything going on in their neighbourhoods - including the businesses that are based within them. They want to know what social value they bring. Some communities are growing their own vegetables, or even initiating community vegetable farms to beat inflation and environmental concerns.
A great example of a successful community social responsibility campaign is in Cape Town .The 'Love my Hood' project is aimed at creating urban consciousness for sustainable communities. A successful local restaurant group is pooling its resources, gathering items for local charities in its communities and then distributing them. The community is aware of what value it adds and is supporting the restaurant for this reason.
Today's shopper is a different animal. Gone are the days of loyal regulars that feed positive word of mouth to their circles. Our modern shopper does not lie awake 'in love' with us. They care very little for manufactured and retail brands but they have very high expectations. They expect good service, great value, convenience and a better range. The modern shopper also expects retailers to fit with the hours they keep and to give back to their communities. Our new consumers are mobile, therefore work smarter and save as much time as they can, electing to rather spend it with their family.
The old adage has never been truer - 'home is where the heart is' and even more so in today's climate. Winning retailers need to make shopping as easy, convenient and pleasurable as possible for shoppers within their catchment areas. Terry Leahy (ex-Tesco CEO) said it best, "The economics of retail are very local. There are economies cross border in many areas... but if you want to be the best you have to be the best local retailer."
Whatever it is that you offer, be the best local offering that you can be. If you are a national retailer, cater to your different communities because each has different needs and lifestyles and be the best in that catchment area.
