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Festive season retail expected to improve on 2012

Property owners of large retail malls feel that the 2013 festive season could see a marginal increase on 2012's sales and though online sales continue to grow, the bulk of South Africans still enjoy the trip to the mall, despite the economic pressures.
Festive season retail expected to improve on 2012
© Gordan Jankulov -

Peak season

James Templeton, CEO of Emira Property Fund, says the festive period is an important time for retailers but with economic growth being relatively muted, the retailers and shopping malls are going to have to work hard for their share of increasingly cautious spending this festive season.

"The continuous rise in the cost of living in South Africa means that consumers are finding themselves under more and more pressure," says Templeton, pointing to soaring food prices and travelling costs, while debt is high and savings are poor.

Worry over the economy cannot take away from the fact that the festive season is obviously a peak time for retailers and has always been the best month of the calendar year for retailers. "In general, foot counts and spends peak over the festive season. However, for smaller centres like convenience centres and centres in some CBDs, the festive season trading impact is not that high.

"Festive trade is extremely important to our retail centres on the coast, for example in Durban and Plettenberg Bay where we own a variety of centres, as they are able to increase turnover substantially in December and January."

Antoinette Coetzee, retail analyst at Redefine Properties is feeling somewhat upbeat about this year's festive season, despite worries that the struggling economy will force consumers to tighten their belts during the upcoming holiday period.

"While concerns around the health of the consumer continue to grow, I don't believe we have a one-size-fits-all answer to consumer positioning this year. We do however suspect there will be less spending support from unsecured credit this year."

She adds that higher petrol and transport costs as well as increases in administered prices in a year when real wage growth has slowed, will certainly put pressure on the pockets of some consumers.

"But that said, we still see potential for a number of consumer segments in specific areas to outperform," says Coetzee.

Growth in line with inflation

With the current economy in mind, he believes that this year's festive trade will increase, albeit marginally, from 2012. "The trend in the last year or two has been for growth in revenue at our centres in line with inflation, with foot count being relatively flat, this is expected to continue," continues Templeton. Retail assets made up for 35% of the company's diversified portfolio by value as at June 2013, with investments in both higher LSM urban areas as well as lower LSM outlying areas where growth in rentals have been well above inflation.

With savings levels still under pressure, he notes that credit will probably still play an important role this year. "A worrying factor is the latest reports indicating a decrease in cash withdrawals - an indication that consumers are tightening their belts and increasingly turning to credit.

While concerns about the economy are unlikely to dissipate, the festive season is still a critical time for retailers. "December 2012 accounted for 12% of South African retail sales in that year. Suitable planning for stock levels and merchandise drop times can make a significant difference to the overall profitability of a business, especially if the January markdown is limited," continues Coetzee.

On whether this festive season will outperform the last, she says, "Given the growth we have seen so far this year, we would expect some real growth through Christmas. But again, we anticipate material differences in performance both within and across categories."

"Supermarkets, fashion and clothing stores, eateries, beauty and electronic stores will benefit more than other stores this festive season," forecasts Templeton.

For Coetzee, gift cards will trump other gift choices this year. "There's a growing trend to move to gift cards as it's easier to manage the budgeting side of gift giving, and some savvy customers realise the sales start very soon after Christmas."

Commenting on which sectors will likely benefit more from the festive trade, she feels that, based on last year's figures, apparel, cosmetics and electronics will be on the top of the shopping list this year.

Online continues to grow

Online shopping will play a bigger role this year as more consumers have smartphones and access to the Internet. "But internet penetration and effective, timeous deliveries are still an issue for consumers, who also want the holiday spirit they experience at malls," adds Templeton.

With shopping becoming a form of entertainment, it is important to attract shoppers during the festive season, and the company is offering longer shopping hours at its larger centres. It is also boosting advertising, hosting gift fairs, offering photos with Santa, gift guide magazines and festive season entertainment to draw consumers in.

According to Coetzee, online shopping will not pose too much of a threat to shopping centres this year. "We think it's unlikely to have a bigger impact this Christmas than it has had throughout the year. Certainly for some categories - books, music and electronics - the offering and convenience of online can be more attractive than shopping with the crowds. One must keep in mind though the many exchanges post-Christmas and concerns around the ability to return or exchange Christmas gifts bought online may also influence customers to stay at the mall."

Festive challenges

However, the festive period does come with its own set of challenges. For Templeton, shopping centre management, dealing with increased security, parking congestion and general cleanliness are priorities. Retailers are pressurised with keeping stock levels up and managing longer operating hours. Consumers are dealing with a decrease in disposable income and mall owners are operating in an increasingly competitive arena with a growing supply of retail space.

"One of the larger challenges is managing increased shopper numbers while still offering customers a great shopping experience," Coetzee says. "Ultimately the success of the festive trade will come down to merchandise, store displays and value propositions, but there will be opportunities in being the first store to catch the early Christmas spend. Longer trading hours and incentives are also opportunities for retailers to capture a greater share of the wallet."

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