Research

SAPOA Retail Trends Report 2016

Key research findings:

– Retail trading performance as measured by the IPD Trading Density Index continues to hold relatively firm for the year ended June 2016. The index quantifies sales performance as well as other key retail performance metrics across 24 merchandise categories in more than 100 retail centres, covering in excess of 4 million square meters.
– Trading density (sales per square meter: annualized) increased by 7.9% y/y in current price terms for the quarter ending June 2016 – up from a revised 6.9% y/y recorded for the quarter prior. The 7.9% increase in trading density was driven by a sales growth of 3.8% and a trading density area growth of -3.9%.
– The current level of sales growth is similar to that recorded by StatsSA which increased by 8.0% y/y for the year ending June, implying that mall-based retailers grew at a similar rate to the larger retail market for the period. In saying this, it must be taken into account that the ‘average’ mall is very diversified in terms of its exposure to the different merchandise categories whilst the StatsSA number is heavily weighted towards general dealers and retailers of textiles, clothing, leather and footwear (a combined 60 %).
– In the second quarter of 2016, South Africa saw its real economy expand by 0.6% y/y (3.3% quarter on quarter, seasonally adjusted, annualized) following -0.1% y/y (-1.2% qqsaa) in the first quarter. The economy has avoided recession in the first half of this year, but it is still likely to record a weak 0.2% y/y for the year as a whole.
– Consumer confidence is depressed as consumers’ ability to spend is constrained by higher interest rates and taxes, falling real incomes per capita and rising unemployment, as well as high indebtedness and modest credit extension to the household sector.
– However, to date, these exogenous variables haven’t had a dramatic impact on aggregate trading performance.
– For the year ending June 2016, annualized trading density grew in excess of inflation for all retail formats, barring regional centres. The trading density growth in regional centres have been moderating somewhat after a strong period since mid 2015. Neighbourhood centres recorded a 8.8% y/y growth compared to the 11.9% recorded by community shopping centres – the top performing segment for the period under review.
– Within the community segment, there was a fair amount of dispersion in the performance of individual centres with many centres of this size recording negative real ATD growth. This highlights the importance of correct positioning and being relevant especially in the case of centres that dominate their node from a floor area point of view.
– It has to be added that the trading density growth recorded by community centres was aided by a 4% improvement in vacancy rate over the past year.
– Super regional centres recorded a year on year growth of 6.4%, an uptick from the 12 months before but still a notable moderation from the trend of the last three years. Regional and small regional centres meanwhile bot recorded growths in excess of inflation at of 7.4% and 6.7% respectively.
– On an indexed basis since 2011, super regional centres have outperformed other retail formats in terms of the annualized trading density growth although community centres are fast catching up.
– Retail vacancy rates remain low on aggregate but there continues to be divergence in the trends of the smaller and larger retail formats.
– Some merchandise categories have been performing better relative to others – thereby gaining market share within these segments. The largest market share movements were seen in the department store category with lost market share across all segments.
– Interesting cases in point are the Food, Food Services and Apparel categories. All three of these categories have been gaining market share relative to other merchandise categories for the three year period ended June 2016.

Read more here: SAPOA Retail Trends Report August 2016