Is the era of the mall over? In the United States, the country responsible for making shopping malls so ubiquitous, these megastructures are increasingly coming under pressure.
A 2015 report by Green Street Advisors, a real estate and real estate investments trust analytics firm in the US, stated that about 25 malls had closed in the last four years. It also said that 60 malls were on the verge of closing.
What’s causing this? A big problem is the fact that once-dominant stores such as Sears, Macy’s and JC Penney are closing down. These anchor stores are disappearing, and malls are struggling to find replacements that can drive traffic and occupy gigantic retail spaces.
The birth of the outlet mall
Another concern is the rise of the outlet mall. What is an outlet mall, you ask? Two things define an outlet mall. Firstly, these malls tend to look very different from traditional malls.
Instead of large and expensive structures situated in the heart of cities, outlet malls are more basic open-air centres that can be found in the outskirts of cities. This means, quite obviously, that rent is much lower, which is what attracts retailers.
And what attracts shoppers? Cheap products. Outlet malls deal exclusively in affordably-priced fare. Importantly, though, we’re not talking about cheap knockoffs of big brands. No, outlet malls sell cheaper versions of goods from established and respected brands. Gucci, Prada, Hilfiger — these are the kinds of brands you can find at an outlet mall.
These shops might sometimes sell end-of-range or rejected goods, but this isn’t what they focus on.
They sell products that have been made cheaper specifically to be sold in an outlet mall — not massively cheaper, just slightly less ornate. A shirt, for example, might not boast as much embroidering as one found in a regular store.
The state of the economy
It isn’t difficult to understand why outlet malls are becoming so popular: Both companies and consumers are under economic pressure, so cheaper ways of buying and selling goods seem increasingly attractive.
Since the global economy in general (and the US economy in particular) took a nosedive in 2008, outlet malls have been springing up like mushrooms. While traditional malls are struggling, the number of outlet malls is growing, and not only in the United States, but in other countries as well.
China in particular has embraced outlet malls. Up until a few years ago, luxury brands were enjoying tremendous sales growth (about 20% to 30% year on year) in the country.
That growth has now plateaued completely, at least as far as traditional channels are concerned. Luxury brands are seeing great success in outlet malls, though. The majority of brands are reporting same-store sales increases of 30% – 40%.
Since it’s unlikely that the economy will return to pre-2008 levels anytime soon, the popularity of outlet malls is sure to grow.
Speaking at the FNB Franchising Leadership Summit towards the end of 2015, Pareto Limited CEO Marius Muller stated that he believed outlet malls will make their way to South African shores as well. In fact, we’re already seeing small-scale outlet malls being established locally.
Food, friends and fun
As people spend less time at shopping malls, restaurants are becoming crucial to increasing the time shoppers spend hanging around. More than ever, people love spending time at trendy restaurants, eating delicious food.
One need only examine the popularity of a restaurant franchise such as Tasha’s and a casual-dining operation such as RocoMama’s.
In order to capitalise on this, malls are being forced to rethink their food courts. Cheap and quick food is no longer good enough. While fast-food businesses remain important within the mall context, sit-down restaurants that offer a relaxing environment are equally important. Shoppers no longer simply want to eat on the run – they want a place where they can meet up with friends, have fun and eat good food.
Redesigning the shopping mall
And what about traditional shopping malls? Muller, whose Pareto Limited is responsible for large and successful local malls such as Cresta, Sandton City, Menlyn Park and The Pavilion, sees the food court as crucial to the long-term survival of the traditional mall.
“People aren’t really spending less money at malls,” said Muller at the summit. “But they are spending less time there, and they are visiting less frequently.
“In order to ensure that people spend more time in malls, we need to focus on the food areas. Food has become a huge focus for many people. People socialise by eating out at restaurants. Malls need to position themselves as great places to meet up with friends and enjoy a good meal.”
With this in mind, Pareto is currently busy upgrading the food courts of both Menlyn Park and Cresta.
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Muller also believes that the overall design of malls need to be simplified and toned down. For a while, just about every new mall was themed by giving it a Tuscan or other similar design. Now malls are being built (or refurbished) to look clean, open and very minimalist in nature.
“The design of the mall should not take attention away from the stores. The aim, ultimately, is to allow stores to attract customers, which is why malls should be simple in look and feel. The focus should always be on the stores and what they’re selling,” said Muller.
The 7th Annual FNB Franchise Leadership Summit
FNB Business remain committed to helping grow this very important sector and are well positioned to provide solutions supporting franchising as it evolves with these themes.
The franchising sector has shown steady growth over the past four years, in a tough economy from contributing an estimated 9.7% to the country’s GDP in 2014 to its recent figure of more than 15%, according to the Franchising Association South Africa (“FASA”) 2018 survey. This trend is expected to continue.
The survey further highlights that 78% of franchisors are optimistic about future growth in their businesses. Around 30% of franchises are now owned by previously disadvantaged South Africans, with one in three franchises turning over more than R20m per annum. This together with the fact that on average a franchise employs 18 staff members (the sector employs more than 370 000 people), makes it clear that as a business model, franchising remains critical to the future of South Africa.
Given the FNB Franchise Leadership Summit theme this year – “the future of the franchising sector”- I thought it would be good to reflect on some of the key trends we are noticing in this very dynamic space…
1. More Multi-Unit Owners, and franchisees owning multiple concepts
What happens once you have mastered the tried and true formula franchises have designed for their franchisees? If you’re like many franchise owners, you start opening another location. And then another. By recreating your success in multiple locations, you can quickly grow your revenues and increase your business’ sustainability.
Many franchisee owners are also opening other, non-competing franchise offerings as they grow their businesses in an effort to diversify earnings.
2. Smaller, more cost-effective franchise models
Among the new frontiers in franchising is the food court losing its legacy as the preferred setting for food franchises, as service stations increase in popularity in the industry. Many brands – including Steers, Debonairs and Mugg & Bean On-the-Go outlets – are co-locating with major fuel retailers to create fully-integrated accessible centres. Looking at new, less expensive alternate locations beyond the shopping malls and strip malls to expand into stand-alone kiosks, food trucks, corporate catering, campuses, sporting events, craft markets, is a major trend.
3. Niche markets
Consumers increasingly prefer local businesses over national brands. Some of the bigger brands are looking for creative ways to tackle this situation by tagging with local businesses and this trend is on the rise. Niche markets are gaining traction. Whether it’s in offering a unique ‘gourmet’ food experience, craft beer or whether it’s in the environmental space of energy saving technology or recycling, these are where many new opportunities are to be found. With the increase in social awareness, social responsibility is a part of any business, small or big.
The current generation of consumer is challenging the role that business plays in society and franchises have wonderful platforms to play a positive role and in so doing win customers.
4. Increased customisation/ personalisation
In a world of increased consumer choice, it is no longer about what you have on the menu, it is now about how your product or service can be tailor-made to what a customer really wants. The success of RocoMamas speaks to this – with 61 franchise outlets their business model clearly responds to the essence of this trend by allowing consumers to create their own burgers, and increasingly consumers want the ability to create their own dining experience.
5. On-demand products/ services
Amazon is a great example of this – same day delivery is becoming the norm in the age of instant gratification – I want it now! Differentiation through delivery remains a big opportunity.
6. The significance of online and social media
Social media is how your customers chose to interact with brands, whether to express anger, inquire or to show appreciation. It is no longer about the question of should a business use social media or not, it is now more about how a business uses social media. Today’s digital-savvy customers are highly choosy about online buying. Some key points to consider:
- You need A Responsive, Interactive and up to date Website
- Customers should be able to view your website perfectly on any device
- Data Analytics is Important – Like it or not, your data is what drives your business
- Seemless and Safe digital payments are critical.
There is no doubt that franchising not only offers viable business opportunities, but also ensures that franchisees are better equipped to weather the tough economic environment. We at FNB Business remain committed to helping grow this very important sector and are well positioned to provide solutions supporting franchising as it evolves with these themes.
Be Your Neighbourhood’s Best Buddy
Ubuntu is a treasured part of South Africa’s heritage – but it could be better applied in parts of the country’s business sector, believes Richard Mukheibir, CEO of Cash Converters.
“Businesses operate most sustainably when they are entrenched in and care about the community that surrounds them,” he says.
“Ubuntu means we are people through our interactions with each other and I firmly believe that a people-centred approach like that should be a strong thread in sound business development.”
Embedding yourself in the community is also good for business – as long as you authentically and truly work at being your neighbourhood’s best buddy, he says.
“Be about helping people get on with life, about making their lives easier,” he advises. “We always encourage new franchisees to take a fresh look at the neighbourhood where they are setting up so that they can be active participants and not just providers or suppliers.”
Corporate social responsibility applies some of this thinking but, says Mukheibir, if it is a “parachute drop”, one-off activation in a community, this is far less convincing than sustained communication and cooperation.
Cash Converters places such emphasis on this that it is a major focus of the strategies implemented by the company’s Local Area Marketing Manager Juan Botha. This approach enables each franchise in the group to be in touch with its neighbourhood through social and other local media challenges, giving them added strengths locally while being supported by the advantages and professionalism of national and international 21st-century business systems.
“All franchises and chains are aware that branches represent the company on the ground,” says Mukheibir. “But Juan opened our eyes to the importance of being good neighbours and not just another store along the street.”
If you are a neighbour buddy by acting as a central, participating and unifying figure in the community, your neighbourhood will in turn work for you. You can build awareness by sponsoring local events such as food festivals, cycling races or trail runs, especially if you can offer part of your own site as a venue, for example.
Related: Cash Converters Franchise Listing
You will establish real, long-term partnerships, though, by working consistently with community gatekeepers, from schools and welfare groups to gyms and conservancies. Adopt a community project and encourage staff to give their time and effort and this will generate goodwill that will be reflected back at you.
Such activities are about a lot more than column inches in community media, says Mukheibir. Building good relationships with communities can enhance your brand’s reputation, he believes. But being your neighbourhood’s best buddy can also make an important contribution to social cohesion.
“Plenty of people hark back to the good old days of mom-and-pop stores when everybody in the neighbourhood looked out for each other,” he says. “It’s not just nostalgia to want to rebuild that in our society – it makes sense.
“We all need to contribute to the safety and stability of our neighbourhoods, whether we are individuals or businesses. The season of goodwill is fast approaching – why not see what difference your business can make in your neighbourhood by then?”
Clean Out, Clean Up – And Win Big With Cash Converters!
Spring is on the way and Cash Converters is celebrating the season of renewal with a bigger than ever Spring Clean Sale – and this year it gives you two very different opportunities to cash in.
From 24 August to 2 September, you can help Cash Converters spring clean all its stores nationally by snapping up discounted items across all their different product categories. Then in the second phase starting on 3 September, Cash Converters returns the favour by giving away R200 000 over 20 days! A total of 100 customers will win cash prizes in this Spring Clean Special Draw of R10 000 per day from 6 to 25 September. To enter, all you need to do is sell Cash Converters an unwanted item that you have decided to spring clean.
Sorting through your cupboards for items that are in good condition but rarely used and that you are ready to sell could put you in line to be one of the lucky winners of a fistful of cash that will make your budget stretch further or give you a head start for early Christmas gift buys. If you have not yet managed to act on this year’s resolution to declutter your space, here is an excellent incentive to make good on that goal.
Many of us have items crowding our homes that turned out to be bad buys, were unwanted presents or are outdated for our needs. Trading in these items can help you trade up to something that suits you better – as well as giving you the chance to be one of the lucky cash winners!
Get ready to cash in on:
- Spare phones, computers or cameras
- Unused power tools or exercise equipment
- Unwanted jewellery and watches
- Unnecessary kitchen appliances and electronic goods
- Surplus gifts or inherited items
“Essentially, we are paying you to spring clean!” says Richard Mukheibir, CEO of Cash Converters. “Even if you are not fortunate enough to be one of our daily cash-prize winners, you will be cashing in on items you do not need. That is a welcome boost to anybody’s wallet with petrol prices and the VAT increase still eating away at our income.”
Apart from all the excitement around the opportunity to win big, the outcome is win-win for everybody, says Mukheibir. Whatever you choose to trade in for cash in hand could well become the treasure that somebody else has been looking for. He believes the Spring Clean process also has an important message for South Africans.
“We are specifically running this promotion during Heritage Month because it helps enable a key change in mind-set that we need to entrench if we are to live sustainably on our beautiful planet,” he says.
“It has been estimated that the City of Johannesburg’s landfills will be full in just six years’ time, for instance. But enabling items you do not need to have a second, useful life, or astutely buying quality second-hand items you do need, is taking action on the reuse, recycle, repurpose message of our times. That makes you one of the savvy consumers who are doing what they can to save our planet for future generations.”
Related: Cash Converters Franchise Listing
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