Physical retail outlets, online channels needed to serve evolving retail client needs, says Redefine

30th September 2021 By: Schalk Burger - Creamer Media Senior Deputy Editor

Although transactions are increasingly moving online, physical outlets remain crucial to effectively serve retail customers, real estate investment trust Redefine Properties national retail asset manager Nashil Chotoki said this week.

He told investors during a briefing on September 29 that, to ensure the sustainability of retail properties, there was a need to balance the capacity to serve customers at physical locations against the convenience and choice afforded by online commerce channels and platforms.

Redefine managed the impact of the Covid-19 pandemic on its tenants well, managed to contain vacancy rates to 6.8% and retain most of its tenants across its properties portfolio. The company was closely monitoring tenants in sectors that continue to struggle, including health and beauty and restaurant businesses, with an eye to retain them as tenants while protecting its own key performance metrics.

However, the growth of online sales does not represent a threat to the sustainability of malls and retail outlets in general, if these malls and tenant businesses can adapt to meeting the growing demands from clients and remain relevant.

"Redefine expects the market to remain competitive and will ensure it is flexible to tenant retention, as many retail businesses rebounded quickly once restrictions on them were loosened. Malls must become more client-centric and an omnichannel strategy presents an opportunity for us, and Redefine has to quicken its pace despite the volatility in a difficult market," said Chotoki.

Technology market research firm World Wide Worx CEO Arthur Goldstuck detailed the trends in online commerce, noting that online commerce represents a risk to about 5% of retail products that will move to online channels out of physical outlets.

"Digital channels are good for malls, as shown by the success of online grocery shopping and delivery or click-and-collect platforms, notably supermarket chain Checkers, as well as Pick n Pay and Woolworths. Owing to the success of Checkers' Sixty60 online shopping platform, the retailer gained new customers and was able to better serve its existing customer base owing to having a vast presence in the physical retail space," said Goldstuck.

"Further, Pick n Pay, for example, has embraced the idea of allowing customers to order their groceries for delivery using any communications channel, and has also moved to deliver large volume sales baskets to customers, as some of the delivery services used allowed only a limited number of items to be delivered."

Malls and retail outlets underpin the online retail foundation and, at the same time, online retail can save the mall. The two depend on one another, said Goldstuck.

Redefine CEO Leon Kok illustrated the importance of physical retail outlets by referring to building blocks multinational Lego's statement that it saw a massive surge in online sales during the height of pandemic-related lockdowns in 2020, but reiterated that it would continue to support and develop physical stores as an important means to attract new customers, and further saw an increase in foot traffic in its physical outlets and the revenue from these businesses increase.

"Redefine has observed a similar trend in some of our tenants, especially essential services tenants, such as grocery stores and pharmacies," he said.

To accommodate these trends and changes in customer behaviour, Redefine is developing an independent retailer online platform that will be free to use for its tenants, said Chotoki.

"The platform will enable shoppers to do one transaction to buy items from different businesses within any Redefine retail centre. The main focus of the company is to ensure critical mass of users and securing tenant buy-in and use of the platform to improve logistics to get goods to customers."

The company plans to launch the first phase of the online sales platform in December and assess the integration and service standards and its uptake among customers.

"The pocket mall model needs to get critical mass around the platform to serve as a differentiator compared with having one online platform for each shopping centre. We do not see online as taking away shoppers from shopping centres, but rather as a mainstay to support retailers."

Redefine has an opportunity to add more convenience for shoppers and, in time, a click-and-collect function will also be built. The aim of the online platform is to drive loyalty of customers by providing them with the ability to easily shop across multiple stores and improve their shopping experience, said Kok.