SA enters the ‘experience economy’

There’s no denying online shopping has gained huge traction since the onset of the pandemic last March. Yet the desire for a spot of in-store retail therapy after months of lockdown and social distancing is still very much alive. If anything, the pandemic seems to have been a catalyst to lure Covid-weary consumers back to brick-and-mortar spaces.

That’s a key message emerging from last week’s SA Council of Shopping Centres annual conference.

"The basic human need for personal interaction has triumphed," says Paul Simon, veteran retailer and co-founder of We Are Egg, a 3,000m² "plug and play" retail platform with 180 traders in Cape Town’s Cavendish Square shopping mall.

In fact, Simon believes physical retail is poised for its greatest upward swing ever, with consumers hungry to shop and socialise outside the confines of their own homes again.

But the general consensus is that brick-and-mortar retailers and mall-owners need to reinvent their product and service offerings if they want to recapture the consumer spend lost to e-commerce over the past 18 months.

"We need to redesign and reinvent tired retail concepts to ensure we bring back the pleasure of shopping," Simon explains. He adds that fixed, long-term leasing models need to be replaced with more affordable and flexible rental options to bring more independent operators and variety to malls.

"There’s still a disconnect between tenants and landlords," he says. "We need greater collaboration and innovation so we can rise up together."

Sakina Nosarka, head of retail at Old Mutual Property, agrees that the critical role brick-and-mortar stores play in the broader retail landscape has been reinforced over the past 18 months. She refers to former online-only players such as Yuppiechef and Amazon, which are now ramping up the rollout of physical stores.

"Though consumers may begin their retail journey in the digital realm, it needs to continue in-store with a human touch," she says. "That’s still where most of the spending will happen."

However, Nosarka says the pandemic has also highlighted the need to rethink outdated retail models. She believes consumers are searching for a far more personalised and engaging shopping experience. As such, retail players will have to move fast to meet the evolving needs of shoppers, or risk being left behind.

She notes, for instance, that SA retailers and mall-owners are not yet fully capitalising on the power of social media.

The industry also needs to adopt a more sustainable and socially responsible approach, says Nosarka.

"How and where products are sourced will become increasingly important criteria on which consumers base their buying choices," she says. "Ethical retail is not a trend, it’s a reality. Consumers will reward ethical brands with their loyalty and spend."

Matthew Brown, retail futurist and CEO of UK-based retail trends agency Echochamber, has a similar view. He believes there’s an opportunity for the physical retail sector to come back better and stronger, given the growing realisation that online shopping can’t replace the in-store experience.

At the same time, though, traditional "big box" shopping centre strategies won’t work post-Covid. "Old-style malls are no longer viable," he says.

Brown believes lifestyle destinations that "surprise and delight" will replace the "big tunnel" approach typically associated with traditional enclosed malls. Retail schemes of the future need to fully embrace the true mixed-use concept to create community-orientated spaces where people can live, work, shop, eat, exercise and socialise, he says.

Though mixed-use is not new, Brown notes, the pandemic has accelerated the trend. And it will gain further traction on the back of remote working, given that large urban malls can no longer depend on office workers to support lunchtime trade.

Brown says innovative retail players in the US and UK are investing huge amounts of money to create "amazing spaces" that will make retail part of a wider urban ecosystem to bring the full gamut of tourism, leisure and entertainment offerings to consumers. He predicts that the most successful retail destinations post-Covid will be those with a strong hospitality underpin, where wine bars, rooftop restaurants, reading lounges, cafés, cinemas, live music, theatre and even yoga classes are incorporated.

Though everyone seemingly agrees that the pandemic has dispelled the popular notion that e-commerce will sound the death knell of the brick-and-mortar mall, there is nevertheless an acknowledgment that online shopping is a reality that will not go away.

But it’s no either/or. Industry experts say the future is "phygital retail" — the latest catchphrase, referring to the merging of on-and offline shopping.

As Warrick Kernes, CEO of Insaka eCommerce Academy, notes: "We need to rewrite the narrative on e-commerce — it should no longer be seen as a threat to physical retail, but rather as an opportunity to bring more feet into malls and support in-store sales."

We need to redesign and reinvent tired retail concepts to ensure we bring back the pleasure of shopping

—  Paul Simon

Latest e-commerce data shared by Arthur Goldstuck, e-commerce expert and founder of World Wide Worx, supports the view that online shopping will continue to gain traction in SA.

He says the advent of the pandemic created a major inflection in SA’s retail landscape: "From end-March 2020 we saw the true beginning of e-commerce in SA."

Goldstuck refers to pre-Covid expectations that e-commerce sales in SA could reach R20bn last year, up from R18.2bn in 2019. But online revenues in fact surpassed R30bn in 2020. That means e-commerce grew 66%, against a 25% forecast.

He expects an equally large jump of about 40% in online sales revenue this year, and a further 30% increase next year (see graph). That will take online sales as a percentage of total retail sales in SA to 5% (from less than 2% in 2019). It also suggests a meaningful portion of sales could be clawed away from brick-and-mortar stores over the next two years.

But Goldstuck, like Kernes, believes e-commerce won’t necessarily replace in-store shopping — provided retailers fully embrace it as a tool to enhance consumers’ physical experience. He says those who adopt best practice and incorporate both digital and in-store strategies won’t have to give away market share to online players.

"Outdated business models and poor management pose a far greater threat to sales and profits than e-commerce," he says.

Goldstuck believes retailers who successfully integrate online and in-store strategies will thrive in the new "experience economy". He points to retailers such as Shoprite Checkers, which has already gained huge market share over the past 18 months by adopting vigorous e-commerce strategies.

"Yet the group has one of the biggest physical retail footprints in SA," he says.