Mall of Africa rush shows consumer 'delusion'

(iStock)
(iStock)

Cape Town - The hype and rush of tens of thousands of consumers to the opening of the Mall of Africa in Gauteng on Thursday, prompts the question of the extent to which South Africans are actually tightening their belts, Stefan Salzer, partner at the Boston Consulting Group (BCG), told Fin24 on Friday.  

“The enthusiasm around the Mall of Africa opening supports consumer research we conducted recently. SA consumer sentiment remains strong - the same level as a year ago - despite the gloomy outlook for the broader economy," said Salzer.

"Companies that act now, before consumer sentiment comes down, will emerge as winners from the storm ahead of us.”

Regarding the retail landscape in SA - especially regarding the number of shopping malls - he said there are different perspectives at play.

"One could say there is a trend to build super regional malls, but there is also a trend of consumers shopping closer to home. Neighbourhood malls are playing in a different league than the Mall of Africa," explained Salzer.

It is estimated that, whereas consumers would visit a super-regional mall typically every 3 to 4 weeks and stay there for maybe 2 to 3 hours at a time, they would visit their neighbourhood malls on average 4 times per week.

"There is, therefore, a role for super regional malls as well as neighbourhood malls to play," said Salzer.

What he found very surprising from recent BCG research, is that it seems the reality of the gloomy economy has not really reached consumers' hearts and minds yet. Whereas he expects overall consumer demand in SA to come down over the next 12 to 24 months - given the macro economic climate - there are still pockets of retail growth, both from a geographical, retail category and income band point of view.

READ: Tens of thousands of consumers descend on Mall of Africa     

The BCT consumer research in March found that 76% of consumers surveyed are willing to spend more over the next 12 months on education, baby products and clothing, footwear and accessories. The same goes for vehicle related expenses.

On the other hand, he would be cautious about opening a restaurant in the next year, because consumers surveyed indicated that the category of "away from home food" would be where they expect to decrease their spending.

In his view, mega malls might turn out to be one of the pockets of growth as they attract shoppers who will "trade up and spend more money", especially on the variety of international brands on offer - in other words what is called aspirational shopping.

"This trend of consumers trading up in certain categories, while trading down in others, makes it more complicated for retailers to navigate. One would, therefore, really have to watch the trends," said Salzer.

ALSO READ: Beware of retail cannibalisation in SA - CEO

ZAR/USD
17.00
(-0.31)
ZAR/GBP
21.21
(-0.23)
ZAR/EUR
19.12
(-0.20)
ZAR/AUD
11.81
(-0.51)
ZAR/JPY
0.16
(-0.15)
Gold
1774.43
(-0.02)
Silver
18.05
(+0.69)
Platinum
808.00
(+0.19)
Brent Crude
42.92
(+2.64)
Palladium
1915.00
(+1.50)
All Share
54521.90
(-0.17)
Top 40
50179.89
(-0.26)
Financial 15
10150.02
(-0.64)
Industrial 25
76554.73
(+0.52)
Resource 10
50138.02
(-1.24)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1574 votes
I am taking a hit, but should be able to recover in the next year
23% - 2067 votes
My finances have been devastated
34% - 3082 votes
It's still too early to know what the full effect will be
25% - 2237 votes
Vote