Banking & Finance News South Africa

Subscribe to industry newsletters

Search jobs

Forecast indicates a fiscally fierce festive season for SA consumers

National retail real estate owner Pareto Limited, which has extensive interests in shopping malls around the country, forecasts a tough festive season for consumers but says some retailers will still fare well.
Pareto CEO, Marius Muller
Pareto CEO, Marius Muller

Marius Muller, CEO of Pareto foresees that the retail market will be under pressure to perform this festive season owning to the fact that SA consumers are in a tougher position than last year. He anticipates this year's festive retail trade to be up from 2013 levels on a nominal basis, but not in real terms.

He believes that retailers in the electronics, jewellery, health and beauty categories are in prime position to benefit from South Africa's holiday spend. However, not every retailer in strong-performing categories is set to shoot the lights out with festive trade figures. "For example, a fashion retailer who doesn't respond to the growing consumer need for good-quality, value offerings will disappoint in comparison to those who do."

In the current market, he feels retailers will need to step up their games to entice market share from competitors. "Disposable income is under pressure. While lower spending on holiday trips could buoy up retail sales, many consumers are faced with tough choices and the reality is that something has to give."

He describes this festive season as "do or die" for many retailers, with a significant impact on their sustainability in the year ahead and a knock-on effect for mall owners, as poor retail turnovers place pressure on rentals and increase arrears.

Preparation is the key to outperforming, notes Muller and it is all about the right the merchandise. "Attractiveness of the merchandise in store is crucial. Consumers are now not only more savvy, but also much more prudent about what they spend their money on. While appealing to many, big events, displays and exhibitions do not automatically lead to increased sales. In fact, on occasion they can actually inhibit trade."

While cash is king this festive season, he says credit cards will also be used to bring instant gratification to consumers, who will be looking for that special festive feeling during their shopping trips. He believes that in-store entertainment is far more important than mall events. "People want to be engaged and delighted where sales occur. Right now there's strong focus placed on getting feet into the mall, but not enough attention is given to converting the feet into spend."

Online negligible

He notes that while online retail is set to grow this festive season, its overall influence in the retail arena is still fairly negligible compared to other developed economies. "However, the role of online retail is likely to continue to increase in South Africa and it is the domain of retailers and mall owners alike to find synergies through omni-channel retailing."

Working with the retailers at their malls, he takes a steady-as-you-go approach to retail, rather than the flash-in-the-pan approach that places high hopes on 'miracle sales' over the December period.

"We work consistently throughout the year with all the retailers that we believe have the potential of generally trading better. Our business model is one of long-term, sustainable development, to nurture competitiveness now and for the future," he concludes.

Pareto owns a portfolio of regional and super-regional shopping centres. It is the full owner of Cresta Shopping Centre, Southgate Mall and Value Market, Westgate Regional Shopping Centre, all in Johannesburg, and a 50% stake in Menlyn Park Shopping Centre in Pretoria. It also wholly owns The Pavilion in Durban and Mimosa Mall in Bloemfontein. In Cape Town, it co-owns Tyger Valley Shopping Centre and has a 50% stake in Cavendish Square. It holds 25% of Sandton City and its surrounding assets including the Sandton Convention Centre and three hotels - The Sandton Sun, The InterContinental Johannesburg Sandton Towers and Sandton Garden Court.

Let's do Biz