Tuesday, June 25, 2024
Convenience centres are proving to be the most resilient retail format during the pandemic

The humble convenience centre, mostly nestled in midst of the rows of houses in burgeoning suburbs has emerged as the most resilient format in an industry that went through a collective event without precedent in modern retail. Besides dodging the distress experienced by large format malls, it delivered double-digit growth for most retailers.


With social distancing becoming mandatory, convenience centres appealed to many customers with its simple in-and-out navigation, direct access to stores and an open-air environment that made consumers feel safer in respect to Covid-19. In addition, convenience centres with a major anchor tenant, recovered faster after lockdown restrictions were lifted.


According to Nashil Chotoki, National Asset Manager-Retail, Redefine Properties, consumers did not shun retail, they simply opted for convenience centres for the safety it offered.


“Infact Woolworths and Checkers at Redefine’s Kyalami Corner posted double digit growth.”


The pandemic spurred convenience centres to innovate. During the lockdown, Kyalami Corner was one of the spots for Woolworths and Checkers to try out “Click & Collect” where customers ordered and paid for groceries online and then drove to the centre to collect. This kept customers safe and saving on expensive delivery fees for retailers.


“This has given us the confidence to raise the bar at Centurion Mall, our largest retail property where plans are underway to reconfigure the upper level as a convenience offering. We are also considering a “click and collect” technology platform based on the data and patterns analysed at the Kyalami Corner. The portal will allow customers to shop at all the stores in the mall, pay one combined bill, and have all their purchases delivered to the car,” Chotoki adds.


The hybrid model works for the South African environment where delivery is complex and costly. Moreover, unlike the US and Europe, packages cannot be left outside at the door in SA forcing retailers to work around the availability of the customer to fulfil deliveries.”


The working from home trend is also contributing to the move towards convenience centres. But not all convenience centres are built equal, with centres in office nodes likely to show subdued activity at least in the short term as people continue to work from home and prefer to shop in the neighbourhood. We have also noted that convenience centres in the township and rural areas outperformed the centres in the developed metropolitan areas.


That said, the retail sector itself is resilient even if the format wars are being won by convenience centres. As the hard lockdown ended, it bolstered consumer confidence to step out and this is reflected in the recovery of retail sales. Restaurants in the Redefine portfolio have bounced back from being down 50% in July 2020 to post minor gains of 1% growth in October 2020, as lockdown restrictions were relaxed despite being one of the last sectors to open.


“Apparel which occupies the largest area in large format shopping centres is one of the other sectors that has returned to pre Covid-19 trading. We are seeing strong growth coming from value retailers as consumers buy down amidst continued pressure on disposable income,” says Chotoki.


“We are in fact fielding a number of enquires by large clothing retailers for space in convenience centres. Before Covid-19, they would have been on the bucket list but not in the actual tenant mix. Clothing retailers have been proactive in the face of evolving risks and the changing preferences of the consumer.”


A dual strategy, online presence to allow customers to identify products they want and a physical store for trial and transaction, will be a key driver for the success of fashion retailers. Going forward, consumers are likely to make fewer stops making it imperative for fashion retailers to have a strong online presence as well as optimal stock availability at stores.


Technology and appliance retailers such as Samsung, will continue to use its physical presence to showcase products, afford consumers the luxury of touch and feel and encourage consumers to make purchase decisions in store. Consumers then compare prices online and buy the product.


It’s not all headwinds for the physical format as “buy online, pick in store” is gaining traction and developing into a fast-growing part of retail. For that reason, pure play online retailers like Takealot are experimenting with physical presence in malls so people can order online, and pick-up products earlier and at a reduced delivery cost.


“Looking ahead, we expect to see convenience centres trend favourably. They have been consistent performers both in terms of offering value to retailers and encouraging footfalls as customers pick out safe shopping venues. We can safely say they will continue to show resiliency to market changes from e-commerce and short-term volatility,” concludes Chotoki.


“As the country ramps up its vaccination programme, we expect to see a decent recovery in all retail formats as confidence levels lift.”