Consumers, retailers in for a tough festive season
The upcoming festive season is set to be tough and highly competitive for retailers, according to Marius Muller, CEO of Pareto Limited. "Holiday sales are likely to be flat and hard-pressed to beat inflation. Consumers are really feeling the pinch. There is massive pressure on their disposable income," comments Muller on the outlook for 2015 festive season sales.
Marius Muller, CEO of Pareto Limited.
The financial stress felt by consumers and retailers alike stems from South Africa's weak economy. "I have great concerns about the state of the economy. Perhaps even more worrying is the lack of firm macro-economic plans to get the economy going," he says.
Muller is not alone. Under a cloud of negative sentiment and uncertainty about the future, value for money is going to be top of shoppers' lists this festive season.
However, grocers can still expect tills to ring loudly this holiday and Muller believes that fashion will perform well, relative to other retail categories. He adds that, on the other hand, the high price points of electronics retailers is at odds with small holiday budgets, and means they will struggle to perform.
But there is one place where bigger is better this festive season...
The regional mall
People are hard pressed for time - a scarce commodity that is becoming more and more precious. "Consumers do not have time to go to a mall that does not have all the offerings shoppers seek," says Muller.
As for shopping centres stuffed with Christmas trees draped with sparkling lights, dancing cartoon characters, smiling Santas and crafty elves, Muller says: "Festive entertainment is undoubtedly a great contributor to creating a wonderfully enhanced shopping experience. But, in the final analysis, the only issue that really counts is whether retailers are carrying the products consumers are looking for."
Despite less disposable income making it more difficult to buy extravagant gifts, Muller believes South Africans will be taking the time to shop for gifts nonetheless. However, those who start late on their Christmas shopping lists will invariably go straight for the gift cards.
When it comes to how people will be buying this December, forget the old saying that cash is king: credit rules. "Cash is so yesterday and unfortunately debt is so today and will be so tomorrow, and the next day, and the next...," says Muller.
With a tough festive season ahead, it comes as no surprise that Muller believes there will be even greater competition among retailers in 2016. "The sector is likely to remain under pressure with financially-strapped consumers trading down to more affordable products and services," says Muller.
As South Africa's premier shopping centre investor and one of the country's leading retail property industry players, Pareto owns an unmatched portfolio of regional and super-regional shopping centres. Besides being the full owner of Cresta Shopping Centre, Southgate Mall and Value Market, and Westgate Regional Shopping Centre, all in Johannesburg; and Menlyn Park Shopping Centre in the East of Pretoria, it also wholly owns The Pavilion in Durban; and Mimosa Mall in Bloemfontein. In Cape Town, Pareto co-owns Tyger Valley Shopping Centre. Pareto also holds 25% of Sandton City and its surrounding assets including three high-rise office blocks, the Sandton Convention Centre and three hotels: Sandton Sun, The InterContinental Johannesburg Sandton Towers and Sandton Garden Court.
