How can Malls in Africa attract more Shoppers

In East Africa, if I wanted a beautiful urban location to take my family for a happy day out, one option could be that we go to the mall. Dressed in our Sunday best, we will picnic in the beautifully manicured lawns. Kids play in the activity park and luna park. Maybe dine in the food courts. At the end of the day, maybe window shop around the mall and finally pass by the mall supermarket for some light grocery, before strolling home.

It's beautiful "weekend only" traffic that seems to give mall management the impression that they are doing well, but serves little financial benefit to the majority mall retailers.

The majority consumers in African malls simply enjoy walking into the attractive furniture, clothing, jewelers, accessory and other shops, then walk out without buying anything. Maybe leaving a false promise that "we are coming back". The shop attendants rush to demo the same products hundreds of times, with little to no conversion – it’s frustrating!

 That is the experience most malls in East Africa face. They are a new, but extremely fast growing part of Africa’s urban landscape. Across Sub Saharan Africa modern retail may only contribute about 10% of the retail market share, but they are rising incredibly fast. The best example being Kenya that has now reached 391,000 square metres of mall shopping space in a very short space of time and still incredible new malls are opening, or are in construction (Kenya is hoping to reach 470,000 square metres of retail space). There is a whole 90% growth potential! Who wouldn’t want to be in that space?

The Challenge

The challenge though is that most of these malls and their retail tenants are not receiving a sustainable amount of purchasing traffic flow. Why are mall management and retailers seemingly not reacting to this situation and testing new potential solutions? Are they not concerned? I identified a few challenges that I believe they face that need to be tackled:

1.      Rental pressure

Landlords seem to love constructing mega-malls at mega-cost. That, plus the fact that most construction costs end up being over-budget by 50% or more because of corruption, inconsistent state regulations and construction inefficiencies. This leave a very deep financial hole to be covered by the developer. The normal instinct is therefore, for the Landlord to charge astronomical rent charges per square meter at launch

 Any tenant that moves into the mall will automatically have a massive fixed rental cost to recover first before considering profit. Tenants likewise now have no alternative than to charge astronomical mark-ups of 50% and over for their products. This markup puts their pricing versus competition outside the mall (sometimes directly outside the gates of the mall), at a significant premium.

 With this premium pricing, the natural shoppers in these malls become the affluent middle to upper income consumers who do not mind the premium in exchange for the convenience, cleanliness and ambience.

What the malls miss though is that the same affluent consumers have a variety of alternative mall options, entertainment areas and events that they can choose from across the region, country or world. Remember, travel is not an expensive option for them

 To solve this silly cycle, landlords and mall management must play for a longer game. They must not aim to recover all development costs within 3-5 years (sometimes less). That pressure ruins the entire mall in the short and medium term. Rentals of USD48 per meter square are not sustainable. A recovery return of 10-15 years is normal in western countries – why can’t they consider the same? The net impact will be that the net rentals per square metre will fall, mall prices will be more competitive and consumers will flock into the mall to buy, than simply window-shop.

 2.      Captive audience focus

As I mentioned earlier, current majority shoppers in malls are the affluent consumers who, again, have a variety of alternative malls, entertainment areas and events that they can choose from. Travel is not a challenge for them

 The real potential captive audience however, is in the consumer surrounding the mall. They have limited options to travel elsewhere to shop, but they feel relegated from the mall by pricing. They already have kiosks, bars, restaurants and other markets around the mall and within their residential areas. But for several reason, malls ward them away.

Just like the rebellious vote that caused Donald Trump to win in America, or the Brexit vote, the local community will reinvigorate their local market. They will create exciting offers in the traditional trade around the mall. They will open stalls right outside mall gates if you are not careful. Bus stages will stop right outside your gate causing heavy congestion.

This sounds all bad, but it’s an opportunity. You have a captive audience right around you. Developers and mall management must develop African led and ambiance enhancing marketing initiatives to allow traditional trade markets into the mall space; to seamlessly blend low-end with high-end shopping. Drawing the traffic from the local community and mixing it with visiting consumers, coupled with fair pricing will mean a constant flow of trading traffic for all retailers within the mall

 3.      Location of outlets within the mall

The draw card is almost always the hypermarket. Every mall has one, usually at one end of the mall. Every other outlet suddenly wants to be surrounding that superstore. No business wants to be anywhere else and certainly not at the opposite end of the mall, where you find open ghost-town shops.

African mall management rarely seem to exert much focus on positioning high traffic (appealing) outlets and activities on opposite ends to balance the traffic flow. Focus is only on if you can pay the rent. This sometimes leads to the wrong store type (for attracting traffic) leasing a crucial wing and causing imbalance to traffic flow and influencing the wrong pricing perception for the overall mall.

 4.      Cheap does not mean poor quality

The psychology of high-end vs low-end merchandising is very important to understand in retail. A high-end store desires to attract its consumers with top end décor, prices and services worthy of a king. Some of those outlets may be closed door and appointment only.

 On the lowest end, common table-top markets in Africa throw wares on tables and you shift through to find what you want. Visual appeal is not a thought. It works because it says "no added costs". Do a price comparison though, and the difference is so small (almost none) between mall prices and these table-top traders. This is especially so if you cannot haggle (negotiate).

 Malls that sell value products in malls need to change their tact. There need to be more attraction stores. Encouraged by the mall management. They need to position themselves opposite ends to the hypermarkets, or on different floors. They need to maintain quality merchandising standards, security and product quality standards. They must offer loud exciting promotional offers across the floor space, offer bulk offers (wholesale) and compete directly with markets outside the mall. This draw card, if balanced opposite ends to a mall, will drive real consumption traffic to flow continuously throughout the mall

  5.      Categorize & Re-target the Mall for Consumer Tastes

I love shopping in Dubai malls. A lesson you immediately pick from their malls, is that most of the larger malls can blend top-end outlets with lower-end outlets within the same building very seamlessly. It is all because the mall management think through the categorization of the mall layout; pre-defining the store types per region (including their product and price offerings), numerous exits and entrances (including VIP), parking spaces, access from public transport, shopper traffic flow, inside and outside communication, rest points, smells, lighting and the overall décor or ambiance in relation to category areas. All this makes a difference to the people who finally visit and shop in your malls whether they are affluent or bottom of the pyramid.

Conclusion

All-in-all, mall management across Africa must stop looking at their surrounding Traditional Trade market and isolating them from the opportunity of converting their standards from traditional to modern trading. Or improving their merchandising displays and clientele reach. They must stop treating those markets as a nuisance or the consumer as as non-occasional and non-paying visitors - relegated to potential evacuation by security because of the "right-of-admission" clause.

Someone in an earlier commentary on an article I wrote (please forgive me sir) said, “There is no consumer density to warrant such gigantic Malls in Nairobi and Mall shops are suffering because of lack of consumers”. He was right on the Mall shops suffering; however, I would argue that the consumer density is there in abundance. Malls must turn their heads to notice those people, swallow their pre-conceived negative notions about those consumers and redefine their mall setups to invite that population; and their traders, to enter the malls and trade.

There is a "Zen-opportunity", where the low income consumers, the middle income consumers and the high end can all gel in one place and trade. It needs initiative. It needs trial. It needs today's malls to take the risk and the initiative

Farayi Ziswa is a specialist consultant on modern and traditional retail selling as well as developing route-to-market strategies within Eastern and Southern Africa. Get in touch...