Retail outlets in rural areas offer good opportunities

Statistics show that the last decade has seen a significant increase in the number of retail centres being developed in townships and rural areas in South Africa. Between 1962 and 2009, 160 retail centres were developed nationally in township and rural areas generating about R34 billion worth of business sales, whilst having added about 54 300 permanent jobs to the national economy since the 1980s.

"Townships and rural areas have emerged as a new market for national retailers as we see an upward movement amongst township communities in terms of expendable income. This progressive movement has resulted in a considerable increase in shopping mall development in these previously untapped areas," says Marc Edwards, managing director of Spire Property Management, which manages retail centres in both metropolitan townships as well as rural areas throughout South Africa.

Research is essential

"Through Spire's growing rural retail portfolio we have seen many national retail tenants going into rural areas and experiencing unprecedented success with considerably higher trading densities than in urban areas. However, a move such as this does need to be well researched and implemented," advises Edwards.

"The first step is to partner with experts in the field. Landlords and tenants alike need to work with a property manager who understands the wants and needs of a national tenant as well as those of the consumers. Landlords need to ensure that they appoint strong community based centre managers to ensure that centres are effectively managed. They also need to work closely with national tenants to see where opportunities lie."

Public transport must be available

Edwards notes that it is essential for retail centres operating in rural areas to stay close to the community and ensure that the centre is valued. "Landlords must guarantee that security is in place and effective, and that public transport is accessible for shoppers - making the centre the convenience hub for the area. Sponsoring events such as a music bandstands in the car park and running promotions are ways to bond with the surrounding community and also brings feet through the door."

"Tenants must be prepared for a different shopping experience and to tailor their store to the consumers' preferences. For example, in rural areas bulk buying is standard practice and retailers must accommodate this need, whilst at the same time the emerging middle-income market segment that one finds in these areas often has a strong drive to acquire household appliances and aspirational items and are looking for a shopping experience rather than visiting stores to buy only basic essentials."

Meet the needs of the community

It is difficult to generalise about what works best in malls in emerging economy areas. Tenants need to carefully research what the needs of the community are and ensure that they meet these needs. But it is evident that what works in one area does not necessarily work in another - tenant mix, product offering and size have to be very site-specific.

"It is a fact that there are growth opportunities for retailers in rural areas as opposed to saturated and over-populated urban ones. Rural areas offer a real cash economy and well marketed tenants who have done their homework will be successful," concludes Edwards.