THE BOTTOM LINE
Scary times as malls brace for online shopping to catch on
SA is way behind the e-commerce trend in the UK, but retailers and landlords know the tsunami is coming
The UK provides some useful, and somewhat scary, insights into the future of retail in SA. As much as 17% of retail sales in the UK are now online, versus just 1% in SA.
The high penetration of online commerce is already hurting retailers and their landlords in Britain. JSE-listed shopping centre owners Hammerson and Intu Properties are by no means immune.
David Brockton, an analyst at London-based Liberum Capital, said there has been “some churn in the tenant base” across the board as the retail sector struggles to adapt to changing consumer habits, as well as cyclical pressure linked to Brexit.
“The industry is still trying to establish what its position is longer term as e-commerce continues to eat into retailers’ sales.”
Bricks-and-mortar retail outlets are having to compete with nimbler, more cost-effective competitors such as Amazon.
“So the argument is to what extent the rents have to rebase to compete on a level playing field,” said Brockton.
No doubt SA mall owners such as Hyprop and Resilient will feel the pinch as e-commerce gains traction in SA, but Brockton is optimistic that malls will be here to stay for some time.
This is partly because people “still want to go out and look at goods, and there’s an element of social interaction that shopping malls bring”.
“Within our society there’s a desire to be in a place socialising and to be around other people. So while it’s easy to be bearish on the prospects of retail real estate, it will have a long term presence – there will be a valuation floor, we’re just trying to find where that level is in the UK.”