The future of retail is customer centric
At 7.5% in July 2022, inflation is adding increased pressure on consumers’ ability to spend, as earnings continue to be impacted by rising food and transport costs, escalating fuel costs, the increasing price of electricity, and the negative impact of loadshedding.
Amelia Beattie, Chief Executive of Liberty Two Degrees (L2D), a South African Real Estate Investment Trust (REIT) notes that under such circumstances, one thing has become increasingly important for retail property owners. It is imperative she says, to find innovative ways to create enhanced customer experiences, to attract customers to spend their share of the wallet within the malls.
“What has been surprising is that despite the current economic challenges, the company reported a 16.1% improvement in turnover growth compared to pre-Covid levels in 2019 at it 30 June 2022 results,” she indicates. “The top five retail categories driving this improved performance include apparel at 24.8% ahead of the 2021 period; department stores at 17%; food service at 41.8%; luxury brands at 34.3%; and health, beauty and wellness at 37.4%.”
Flux Trends founder and retail trends analyst, Dion Chang explains that he’s seen the same trend in the rise of the apparel category internationally post lockdown, driven by the social element with people going out more.
Beattie agrees and adds that L2D has also seen a similar trend in the athleisure category.
So, the question then is with Black Friday and the festive season just around the corner – where are consumers expected to spend their money?
According to Chang, there has been a change in spending post-pandemic, as people work off the frustration of being locked down for so long. “When it comes to luxury goods, many people are adopting the principle of ‘you only live once’ (YOLO). At Flux, we call it a ‘life audit’ – basically, where people have processed things and have decided to live more ‘in the moment’, leading to spending more on things like travel or restaurant dining,” he says. “Also, people are now starting to go out and socialise, so they’re putting more thought into their wardrobe. But it’s not only spending on luxury goods, it’s almost a case of everybody’s feeling like a little bit of a refresh, which involves treating themselves in some way.”
Flux Trends behavioural economist and analyst, Bronwyn Williams, notes that what is happening with inflation at the moment is impacting a lot of people, especially with regards to groceries.
Looking into experiential retail in the mall environment, does this carry its historic meaning considering the shift in consumer preferences post lockdown?
The mall culture in South Africa has always been about experiential environments, and Chang adds that the difference post covid is that experience has now proved to have a more expanded meaning where it’s not just merely about entertainment. Chang adds that the differentiator for retailers will be the service element as an experience, where retailers humanise their offering and customers pay that back in loyalty.
Of course, as we move towards year end, two significant shopping events – Black Friday and Festive season – are set to take place for retailers, and success here will be driven by an understanding of consumer buying patterns and spend.
Beattie explains that it will be interesting to see how the emergence of hybrid loyalty plays out. “Previously there would be the strictly Woolies shopper and there would also be the Checkers shopper, where the one wouldn’t dare be seen shopping in the other store. We see a shift with Checkers now catering for both shoppers giving rise to a hybrid persona as people buy certain goods at Woolies and some at Checkers.”
Chang agrees and adds that the impact of inflation played a big role where people started trading up or down in their grocery shopping but ironically, it was the online delivery option during lockdown that has introduced people to the hybrid persona.
Williams explains that with Black Friday, a retailer’s best approach will be to aim for either the top end of the market, or for the bottom end. The latter offers them the opportunity to double down on value, while the former means they can provide unique, high-end offers. “I suspect this is what people are looking for right now – either exceptional value, that can give them more bang for their buck, or something more limited edition that will appeal to those of the YOLO persuasion,” says Williams.
She adds that to set your business apart, you need more than a special offer – it’s also about how you’re communicating that offer to customers. It’s about meeting the customer where they are by, for example, sending them messaging on their mobile phones. “You can even take the initiative to bring them in-store – rather than shopping online -through the use of secret lists, or bargains for in-store shoppers only. Such offers can be made available only to customers who are on a specific list, or members of a specific community.”
Beattie adds; “That fits precisely into the L2D narrative where we say that superregional and regional malls are where you can get everything where you’re able to trade up or down based on your shopping needs and you can go from Ackermans to Armani in one mall. Whereas in small convenient centres, you’re in and out for the specific item of shopping you want but you’re missing out on the whole experience on everything you need and more.”
Beattie notes that it is predicted that by 2030, experiences and experiential products will account for more than 50% of discretionary spend, so L2D has certainly recognised the need to enhance the overall customer experience across its portfolio. “For us, this means creating an environment that elevates and enhances our tenant offering, to form collaborative relationships and develop commercial partnerships that bring excitement and magic to our malls. And it certainly means that we must maximise opportunities linked to specific shopping occasions, like back to school, Black Friday, and the Festive Season,” Beattie concludes.