Foreign retailers rush into SA

Johannesburg – South African retailers will have to pull up their socks to compete with the international retailers streaming into shopping centres.

With European retail markets looking less attractive because of the financial crisis, emerging markets’ retail sectors are in the sights of foreign retailers who want to expand their turnover and improve sales.

These retailers will compete directly, which means that local retailers will have to be innovative to protect their market share.

Global retailers who have already spread their wings into South Africa have meanwhile been surprised by the healthy trade density (turnover per square metre) that their stores achieve here. In most cases this leads to aggressive expansion plans.

Australian fashion retailer Cotton On’s top global store is its huge 1 000m² concept store in Johannesburg’s Sandton City. Over the past year Cotton On has opened several stores in South African centres.

That’s not bad if one takes into account that the group has 1 000 stores and five brands. It started out with a single store in Geelong, near Melbourne in Australia, in 1991.

Before Christmas, Cotton On will open another 30 shops in South Africa, including its Factorie and Typo brands, according to the company’s Robert Kenny. He was talking at the annual conference held by the South African Council of Shopping Centres (SACSC) in Durban last week.

He says the Cotton On brand comfortably occupies its own niche market – somewhere between Mr Price [JSE:MPC] and Woolworths [JSE:WHL].

Pieter Prinsloo, chief executive of Hyprop, the biggest shopping centre proprietor in the country, says Cotton On, which a year ago took occupation in the Canal Walk shopping centre in Cape Town, will now move to a 1 000m² shop.
The current store will be converted into a Factorie outlet.

He said his company is in discussion with various foreign retailers wanting to take up space in Hyprop centres, and specifically in the Rosebank Mall.

They include British retailer H&M, Spanish fashion house Zara and the British Topshop, which will be brought to South Africa by Edgars.

Last month Zara, which is already in Sandton City, opened an 1 500m² store in Growthpoint’s Victoria Wharf mall in Cape Town’s V&A Waterfront. This is the group’s first store in the Western Cape.

Topshop will open its first store there early next year.

Stephan le Roux, Growthpoint’s retail director, says the increased presence of foreign retailers will result in a shift in market share. “It will squeeze retailers’ margins and they will either have to offer a better product or reduce prices.”

He says the other side of the coin is that shopping centres will for the first time in a long time get the opportunity to differentiate their centres, giving shoppers more choice.

Prinsloo says if foreign retailers can establish a good base in South Africa this will serve as a platform for expansion into the rest of the continent.

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