In the current economic environment, consumers are reportedly spending more on basic needs and necessities and less on luxury goods and items.
Although the trading density data from Broll SA managed centres revealed that most South Africans continue to spend a lot more in December in comparison to reduced spending in November and January, it would appear the cost of living is forcing many consumers to cut down on luxury purchases.
Jill Turnbull, Divisional Director for Property Management at Broll Property Group says: “Consumers are not spending as much on high priced items as they used to and they are seemingly spending more money on consumables such as groceries and necessary basic clothing items.”
Turnbull explains that consumers are definitely more conscious when spending money and this is reflected in basket spend and trading densities they see in the shopping centres they manage.
“Luxury goods are high on the shopping list during the festive season than in any other time, possible because consumers have extra cash during this time,” says Theresa Terblanche: Broll Property Group Director for Property Management for Coastal Region (SA) and Mauritius.
According to the Retail Snaphot Q1:2017 report launched last week, the best performing tenants in December were those in the Accessories, Jewellery and Watches category, although performance has been declining over the last three years likely due to consumers being under pressure. This was followed by the Food and Electronics categories. Sportswear and Outdoor tenants have been recording notable increasing trading densities in December over the last three years, an indication of fitness becoming more predominant in the market as is evident by the increased number of fitness facilities and events over recent years.
However, in November 2016, categories including Accessories, Jewellery and Watches, Books/Cards/Stationery and Services experienced a decline in trading density figures, which may be an indication of consumers becoming more aware of what they spend on largely due to the financial pressures consumers are under.
In the Eastern Cape, Broll Property Group’s Retail Portfolio Executive Nigel Hale says there is a definite trend towards more cautious spending. There is also an increase in the number of value fashion retailers wanting to enter the market and these appear to be currently performing well since in tough times, consumers seek value for money.
“Retailers, especially national ones who offer lower prices and value for money should be able to maintain sales growth figures despite the fact that consumers are currently under financial pressure,” says Hale.
Broll Retail Executives say the current economic climate has seen a change in tenant mix and many landlords are constantly reviewing their tenants in order to meet consumer demand and achieve trading density growth.
Terblanche points out that in some malls within their portfolios, the focus is on adding more food and apparel tenants (especially those offering value for money), essentially, basic consumer items and less on luxury goods as spend on these increases only during the festive season. As a result, malls who have adjusted their retail offerings to meet consumer demand have very low vacancies of less than 5% in some cases as luxury accounts for a small percentage of their tenant mix.
“Many tenants offer specials and sales more often than usual and consumers tend to spend where they get value for their money and where discounts are offered.”
She adds that retailers who give credit generally trade better compared to those who rely only on cash purchases as cash strapped consumers are likely going to buy on credit than spend cash in the current economy.