Experiential retail, one of the hottest global trends in the retail and shopping centre industry, is expected to be seen more in South Africa as landlords fight to attract and retain customers.
A study commissioned by the South African Council of Shopping Centres, which examined the changes in tenant categories over the past three to five years, reported the country’s weak economic fundamentals and consumer confidence, coupled with high levels of competition, has seen landlords re-examine their tenant mix for their malls to remain relevant to their catchment areas.
“Managers of larger retail centres have placed more emphasis on creating an experiential shopping experience to attract shoppers, lengthen dwell time and differentiate themselves from competing malls located within a catchment area.
“Managers of smaller retail centres have focused on positioning their centres as convenience destinations in a competitive market,” the study notes. The study states it is important for tenantmix shifts to translate into improved trading and investment performance to ensure long-term sustainability.
The study was conducted by MCSI and its report is titled Experiential vs Convenience Malls – Tenant mix driving mall strategy. Experiential retail refers to the experiences customers have while visiting retail outlets and involves more than shopping, such as taking part in activities or having more interactions.
Data from more than 100 malls from MSCI Real Estate’s Retail Performance Benchmarking Service shows malls larger than 25000m² have an increasing weighting of experiential retail categories.
The report shows that since 2016, SuperRegional shopping centres (GLA measuring more than 100000m²) had increased their share of experiential merchandise categories from 52% to above 56% by the end of December.
Over the same period, the Regional segment (GLA measuring from 50000m² to 100000m²) saw an increase from 49.5% to 52%; while Small Regional centres (GLA measuring from 25000m² to 50000m²) showed an increase from 46.4% to 49.5%.
The report indicates that contrary to space allocation, convenience-focused categories in Super Regional and Regional mall segments have outperformed experiential categories with regard to trading density growth.
“The Small Regional retail segment saw the most benefit from increasing experiential space, growing its trading density over the past one-, three-, and fiveyear periods to December 2018.
“Increasingly, malls in this size bracket have been adding features such as ice rinks, family entertainment centres and new-age theatre cinemas to complement their food service offerings,” according to the report.
With regards to Community Centres (GLA measuring between 12000m² and 25000m²), the report shows that, in contrast, experiential retail categories under-performed. This was particularly the case over the past 12 months, where negative trading density growth of -14% was recorded.
This highlights the fact that consumers view these as convenience stops rather than an experiential destination. “Given the challenging and competitive operating environment, it is currently harder for retail centres to deliver benchmarkbeating total returns – even more so for the larger retail formats,” the report says in its concluding summary.
While the study says large-format centres have been allocating more space to experiential retail categories, it notes “there isn’t yet evidence to suggest that an overweight allocation to experiential GLA translates into superior trading density growth or investment returns”.