Nic gave our audience a captivating look into the South African retail industry and how it compares to international retail, its fight against the growing e-commerce culture and the struggles of big name brands and department stores. Nic, being a store owner himself and facing the current pitfall of being a store owner, gave first hand experience and troubles about the industry.
Nic began with the statement that would be the topic of the talk, “with e-commerce becoming more and more relevant in South Africa, we need to see a shift in the way people look at retail.” We still have a very old school mindset of large malls and shopping centres. As Nic pointed out, there are over 1900 malls in South Africa, that is almost 100 per province. If we look at Cape Town alone, a town in a large province, we have Canal Walk, V&A Waterfront, Blue Route, Tygervalley, Cavendish and more. We have also have household brands such as Stuttafords, Edgars, CNA and more, closing their doors because they lack the foot traffic and consumer spend in-store to keep going. Yet, we are still building more malls, there is already Fourways, Menlyn Park, Mall of Africa, Gateway, Sandton City and there are more in the pipeline to be built. According to Nic, some of the barriers that retail is facing is due to e-commerce growing at a rapid pace and we see stores closing down, with the United States closing over 1000 stores per year, South Africa need to think ahead and not in current, predict the future and plan for it. So why are South African property developers and Government spending hundreds of millions per year and malls that are currently empty? Where is the logic in building these malls and spending millions on them, when the current malls have shops closing down due to the lack of customers and foot traffic? South African developers need to realise the future before it’s too late.
Why are e-tail stores becoming the next big thing?
Well, a budding entrepreneur does not have the money to spend thousands on rentals per month nor the budget to pay people to stand and run their store. It also cuts out the middleman (the mall) and you can have a more online connection with your customers and it is easy to run once it gets off the ground. Of course, you need a connection with your customers on a personal level, that is why a lot of e-commerce stores will also have pop-ups or rent a small location – because people need that sense of personal touch and experience. But, they do not need to rent a space in every single mall in South Africa in order to be successful, and people are noticing this very quickly. Nic spoke about how at Nic Harry they focus on the customer, making sure the customer is getting a full experience when purchasing the brand online or in-store, which is key to any entrepreneur in the retail space. There are only a handful of brands that have the retail design and customer experience spot on and those brands have become billion dollar companies, online and in-store, purely based on how the customer perceives them.
iStore internationally is the most profitable retailer in the world - yet their stores are the most simplified. iStore's focus on “less is more” and it gives their store the feeling of luxury. According to Nic, Gucci, Louis Vuitton and Prada all carry the same focus as Apple’s retail stores on luxury and elegance. It makes people want to go in-store and buy more products. Amazon on the other hand is getting rid of the human interaction, if you have an Amazon account, you can now walk into selected Amazon stores and when you walk in the store will register that you have arrived. It will register when you pick up an item, replace the item and walk out with the item. Amazon will then bill you later, and they aren’t worried about theft because they have all of your details in their system.
So where is the future of retail heading for South Africa?
With brands such as Takealot, Amazon and Yuppiechef the need to go to a mall is becoming irrelevant. Furthermore, visiting a mall isn’t the most pleasant experience for most of us. Amazon has 43% of America's online shopping, that 43% is worth almost 5x what the whole of South Africa’s retail industry is worth. Companies such as Artisans in Africa, Takealot and Mr Delivery are giving local designers and retailers in South Africa an online presence to sell their products. So, if you want to open an online store in South Africa, you need to work extremely hard and partner with the local delivery and e-commerce platforms. You need to focus on the shift from retail to tech and tech to retail, the three pillars that Nic spoke about were Product, Sales and Cash Flow. If you have a stand or shop in a huge mall and you want to drive customers to your online platform and shop, you need to make the store customer friendly and give them an experience that will drive them back or make them buy online.
Not all is as bad as it seems, South African retailers need to look to the future and plan ahead, we are becoming a digital world and both e-tail and retail can survive, they just need to work hand-in-hand.
Watch Nic Haralambous and his full talk above and subcribe to our YouTube channel.