“Mallageddon” is another of the apt descriptions that are being flung at the retail sector – globally as well as locally. But is there indeed a retail Armageddon underway, or have retailers just been ignoring the undercurrents that have eroded and reshaped the traditional retail landscape?

“Mallageddon” is another of the apt descriptions that are being flung at the retail sector – globally as well as locally. But is there indeed a retail Armageddon underway, or have retailers just been ignoring the undercurrents that have eroded and reshaped the traditional retail landscape?

On 1 August this year, Stuttafords – the once iconic department store of South African retail – finally closed its doors, at the age of 159. This watershed moment illustrated perfectly the tipping point – and crossroads –  at which the retail sector finds itself. Nor is it just a South African phenomenon, but a global one.

In America, Macy’s department store announced in January that it would close almost 70 stores, shedding more than 10 000 jobs. Sears and JC Penney also announced store closures, while retail chains like American Apparel, Radio Shack and Urban Outfitters have disappeared completely.

Whether it’s in New York, London or Johannesburg, retailers are consolidating, streamlining, and retrenching. Most people boil it down to a sluggish global economy. In South Africa, of course, it’s not just sluggish, we’ve barely emerged from a recession. If you’re not in the 1%, disposable income has all but evaporated, but it is just one element of a very complex set of challenges facing the retail sector.

The perfect retail storm

Sluggish economies can recover and recessions can recalibrate, but this retail apocalypse is not simply a matter of disposable income. Consumer mindset has changed radically since the Great Recession. In the last decade digitisation has altered the business landscape and the ripple effect has spawned new economies such as the gig economy, the sharing economy and, most importantly, the on-demand economy. Collectively, these economies have not only shifted consumer behaviour, but also altered consumer attitudes on consumption.

The sharing economy has propelled the growing mantra of “less stuff, more stories”. The eco-friendly messages of “sustainability” and “social impact” are hitting home, and the concept of transient ownership is more widespread: you don’t need to own something in order to experience or enjoy it.

Coupled with a growing appreciation of transient ownership is the issue of brand availability and homogeny. Globalisation has brought what were previously unattainable international brands into the country. The store-within-a-store concept, to house these international brands, has become obsolete – one of the main reasons for Stuttafords’ demise. Department stores have simply become landlords to brands. Compared to the shiny shrines of flagship stores, these meagre offerings lack variety and curation. People are also travelling more, and many international brands have opened their own stores in SA, which brings us to brand homogeny. Almost every mall in South Africa houses the same retail chains. There is very little to differentiate mall offerings. This has built the lure and appeal of artisanal goods. Consumers are looking for something different: something unique and preferably handmade. The blurred cycles of fast, disposable fashion are beginning to look outdated and inappropriate.

The impact of e-commerce

Even if consumers are buying fast fashion, that spend is increasingly happening online.

In South Africa, online shopping is still in a nascent stage, so sceptics will argue that online shopping only accounts for around 1% of retail turnover and therefore has no bearing on this retail decline. I beg to differ.

In America, online shopping only accounts for 8% of turnover and yet the ripple effect is evident. Even if the percentage of online shopping is small, it is nevertheless rapidly altering consumer behaviour. Consumers might not be buying everything online, but the pre-shopping process is becoming fully entrenched. The more they research before they buy, the less likely they are to wander around a mall and make impulse purchases. This creates the rise of the “stealth bomber shopper”: someone who goes to the mall but parks at the closest entrance to where they need to go, so they can get in and out as fast as they can. There’s no dawdling, no browsing and therefore no incidental or impulse shopping. And yet we keep building or expanding our malls.

This is the elephant in South Africa’s retail space.

My mall is bigger than your mall

Globally, consumers’ appetite for malls is declining. They are no longer the centres where people gather, be it for entertainment, a first date or a shopping expedition. Digitisation has changed those needs, and many malls in America are either empty, disused shells, or being reappropriated as centres for healthcare or education. The slow but steady demise of malls in America is what economists refer to as ‘a market correction’. “We are over-retailed,” says Ronald Friedman, a partner at Marcum LLP, which tracks consumer trends. We should take heed. South African mall culture is where America was in the 1990s, and their decline started shortly thereafter.

South Africa has a chronic oversupply of retail space, coupled with diminishing consumer spend: a precarious combination. The IMM Journal of Strategic Marketing reveals that out of 2 082 shopping centres across Africa, 1 950 are in South Africa. In terms of the square metreage of retail space, South Africa ranks as sub-Saharan Africa’s most saturated retail market, with more than 10 million square metres of retail space, representing 88% of the available space in the region. According to the South African Council of Shopping Centres, South Africa has the sixth-most shopping centres in the world – and yet, we continue to build more malls.

In February this year, the Fourways Mall expansion project broke ground. Costing R23.7m, it will see the mall become a retail behemoth of 175 000 under one roof as the project will eventually engulf the existing mall with Fourways Game, Fourways View, Cedar Square, The Buzz Shopping Centre and Leaping Frog.

Reporting on this expansion, Construction Review commented that “The redevelopment is anticipated to aid in regaining support from this lost customer base and compete on the level of other super-regional centres following the introduction of large international retailers for instance Hamleys, H&M, Cotton On, Mango, G-Star and specialist entertainment offerings such as Bounce and KidZania”.

Ironically, two months after that article was published, Mango closed all their standalone stores, as did Nine West and River Island. Retail brands are contracting desperately, so none of the usual suspects can be counted on to fill this new retail space. Indications are that H&M is one of the only international retailers with the capacity to expand, but even with this capacity, retailers globally no longer see the point of having numerous outlets in one city. A combination of an impressive flagship store with online shopping has killed the need to have multiple stores in the same city.

To lure tenants into these mega-retail spaces, mall landlords still rely on metrics like “foot traffic”, which is the same as the music industry ignoring digital downloading and live streaming to calculate album sales in the digital era.

The last mile, digitised and on-demand

One of the most noticeable new trends in retail is the digitisation of the last mile (the final journey of product to customer). The last mile is now not only digitised, but more importantly, on-demand.

Like the sharing economy, the on-demand economy is rapidly reinventing the retail sector.

Rethinking a store’s function, and extending the functionality of a brand is where the new competitive edge lies, and usually this means taking the store to the customer.

In fashion retail, there has been a refinement of the “try before you buy” model. Amazon now allows you to keep an online order of clothing for seven days before returning items you don’t want. Fashion retailers in Antwerp have collaborated with hotels to provide a “fashion mini-bar” targeted at female business travellers. Just like a beverage mini-bar, these fashion mini-bars sit in the room’s wardrobe with items that might come in handy for unexpected occasions like an unexpected business dinner, rainy weather, gym gear, etc.

In food retail, e-commerce concepts like “click & collect” (buying online but physically collecting your purchases) have evolved. Amazon lets you order groceries via a mobile app and book a collection time at a “fulfilment centre” (a term set to become ubiquitous with hybrid retail) where you simply drive into a parking bay and a packer loads your order into your boot, without you having to leave your vehicle.

Walmart offers a different click & collect service using a giant, refrigerated vending machine that stores your perishable groceries until you collect them.

The future of shopping

So where to for retail’s future?

Let’s be clear. Malls are not going to disappear overnight, but building bigger malls is not going to be sustainable either. One of the fundamental new rules of retail is understanding that you no longer simply sell a product, but should provide a solution – an integration of product and service. This new dynamic is manifesting in interesting ways. Some brands have launched “brand museums” – a way of documenting a brand’s persona and adding the all-important role of storytelling – while others have converted their stores to centres of learning: e.g. don’t just sell me nappies, help me deal with being a new parent.

But for a glimpse into the future of retail, we need to look at the dovetailing of two very powerful forces: China’s Alibaba (the future of retail) and Gen Z (the next-generation customer).

While Amazon grabs most of the headlines for retail innovation, the core business model is still traditional: buy products from suppliers, add a profit margin and sell on to customers.

Alibaba’s founder, Jack Ma has a very different approach. Last year, he coined the term “New Retail” – the integration of online, offline, logistics and data across a single value chain. Add seamless, cashless payment systems into the mix and you have an almost perfect, post-retail apocalypse solution. According to a McKinsey report, this potent business model has ensured that China’s e-commerce market is already bigger than US, UK, Japan, Germany, France and South Korea combined.

Ma also pursues his twin goals of knocking down trade barriers and boosting the fortunes of small businesses. Alibaba has one of the simplest mission statements of any large company: “to make it easy to do business anywhere.” It is a model of philanthropic or conscious capitalism that most companies are only now trying to pivot towards.

Layer onto this the impact of Gen Z, the new obsession for marketers and employers as they make their way into tertiary education and the job market. Understanding them as consumers is a masterclass in future retail.

Selling products to this tech-savvy and world-wary generation is not going to be easy. Remember, even though they’ve not had spending power, they’ve been responsible for researching products online for their parents for years. They’ve been subtly guiding the family spend all along.

Like Alibaba, Gen Z doesn't distinguish between buying online, looking at things on social media and buying offline. However, technology has changed what Gen Z really want. Electronics and gadgets take preference to clothing. For fashion retailers, these teenagers are going to be very tough customers. Increasingly, for this generation, fashion is less about fitting in, and more about making choices that reflect their own identity. Aligning themselves with brands that mirror their value systems is key, and even then, the product is becoming secondary. It’s a social media generation, so experiences define them more than the products that they buy.

Marcie Merriman at EY explains, “Today’s teens live out their lives on social media, where social currency is built on experiences. They don’t want to buy stuff. They’re buying an experience and the product they get through it is kind of a bonus.” 

That should strike fear into the hearts of any retailer. Best you study the new rules of retail. Unsurprisingly, you’ll probably find a handbook online.

“...retailers are consolidating, streamlining, and retrenching”

“South Africa has a chronic oversupply of retail space...”

“Electronics and gadgets take preference to clothing”


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