Advice and Opinion

Pareto forecasts a tough festive season for consumers

South African consumers are in a tougher position than a year ago and retail will be under pressure to perform this festive season. So foresees Marius Muller, CEO of major national retail real estate owner Pareto Limited. He anticipates this year’s festive retail trade to be up from 2013 levels on a nominal basis, but not in real terms.

In the current market, Muller 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,” says Muller.

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 – poor retail turnovers place pressure on rentals and increase arrears.

Muller believes that retailers in the electronics, jewellery and 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.”

He adds there’ll be little cheer for furniture retailers this festive season, and they are most likely to struggle.

Preparation is the key to outperforming, notes Muller, and it’s 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 don’t automatically lead to increased sales. In fact, on occasion they can actually inhibit trade.”

While cash is king this festive season, Muller 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.”

Muller 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.”

He believes that electronic gadgets will be on top of festive wish lists this year. “Technology has now become an extension of our bodies and how we operate. While highly desirable, many also consider these items a necessity,” says Muller. A perennial favourite, jewellery – both fine and fashion accessories – will again be a welcome gift this Christmas.

Gift cards are likely to be popular too, especially ones which can be used at multiple stores and locations. “Gift cards, although considered impersonal by some, gives the receiver a choice to get exactly what the need, as opposed to getting something they may not want,” points out Muller.
Working with the retailers at their malls, Pareto takes a steady-as-you-go approach to retail, rather than a 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,” says Muller. “Our business model is one of long-term, sustainable development, to nurture competitiveness now and for the future.”

Pareto owns an unmatched 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 the East of Pretoria. It also wholly owns The Pavilion in Durban and Mimosa Mall in Bloemfontein. In Cape Town it co-owns Tyger Valley Shopping Centre as well as a 50% stake in Cavendish Square.

Pareto also 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.