Preference for In-person Shopping Poses Challenge Despite E-commerce Growth
As Amazon gears up for its debut in South Africa's bustling retail scene, the e-commerce giant faces more than just traditional competitors like Takealot. Despite the significant growth of e-commerce platforms, a recent study reveals that South Africans still predominantly favor in-person shopping experiences, setting the stage for an uphill battle for Amazon's market share.
The revelation comes from Redefine Properties' 2023 results, shedding light on the ongoing preference for brick-and-mortar retail among South African consumers. The JSE-listed Real Estate Investment Trust (Reit) reported encouraging operating metrics across its South African retail portfolio, indicating a sustained affinity for physical shopping destinations.
Redefine's 2023 performance showcased robust letting activity and high tenant retention rates of 92.1%. Additionally, active occupancies stood at 93.6%, marking a notable improvement, while rental reversions improved from -8.6% in 2022 to -4.1% in 2023.
Nashil Chotoki, Redefine's National Asset Manager for Retail, highlighted the resurgence of foot traffic in larger-format retail centers, attributing it to the convenience they offer as one-stop shopping destinations. Despite the meteoric rise of e-commerce during the pandemic, Chotoki emphasized a notable shift back to shopping centers over the past three years.
He explained, "South Africans have returned to shopping centers, leading to increased foot traffic, reduced vacant spaces, and heightened retailer turnover nationwide."
According to Redefine's 2023 festive trading update, foot traffic at large-format malls surpassed that of smaller convenience stores during November and December 2023, witnessing a 6.3% increase compared to the previous year. Overall, foot traffic across Redefine's retail portfolio during this period exceeded pre-pandemic levels, underlining the enduring allure of physical shopping experiences.
Chotoki emphasized South Africans' inclination towards one-stop centers, particularly amidst an inflationary environment where consumer disposable income remains under pressure. Essential pharmacies, supermarkets, and value fashion retailers have emerged as focal points for consumer spending.
Looking ahead, Chotoki predicts sustained growth in the retail sector as interest rates in the country are expected to decline, potentially freeing up more disposable income for consumers. However, he cautioned that entrenched purchasing habits might persist despite favorable economic shifts.
"Retailers offering compelling value propositions are poised to thrive," Chotoki noted. "While interest rates may decrease, consumer spending habits may not instantaneously adapt, as frugality has become ingrained for many."
As Amazon prepares to navigate South Africa's dynamic retail landscape, the company faces the formidable challenge of wooing consumers entrenched in traditional shopping behaviors. With the preference for in-person shopping still strong, Amazon's success in the region will hinge on its ability to adapt and innovate to meet the evolving demands of South African consumers.
Comments