Grocery delivery services are killing in-store visits to malls in South Africa

The 2024 festive season proved to be a merry time for retailers and shopping malls in South Africa, with Flanagan & Gerard Property Group reporting a noticeable uptick in retail activity.

The developer and owner of a portfolio of shopping malls across the country revealed that festive season retail trade exceeded expectations, indicating a positive shift in consumer sentiment and spending.

Notable malls in its collection include Morningside Shopping Centre and The Neighbourhood Square in Gauteng, Mall of the North and Thavhani Mall in Limpopo, Ballito Junction in KwaZulu-Natal, Boardwalk Mall in Gqeberha, and Mall of Mthatha in the Eastern Cape.

Several prominent malls within the Flanagan & Gerard portfolio saw impressive growth in retail sales and consumer foot traffic over the December festive period, particularly driven by the surge in consumer activity spurred by the Black Friday shopping frenzy in late November.

Inflation-Defying Growth

Retail trading activity across Flanagan & Gerard’s portfolio during November and December grew by an average of 6% compared to the same period in 2023.

This growth outpaced the consumer inflation rate for 2024, which averaged 4.4%. Retail activity is measured through trading density, which calculates sales per square metre at shopping malls.

The success of this period is particularly evident when examining the performance of individual malls, such as Johannesburg’s The Neighbourhood Square, which achieved a remarkable 17.7% growth in trading activity.

Larger coastal malls also saw strong performance: Ballito Junction grew nearly 7%, Boardwalk Mall saw a 9% increase, and Mall of Mthatha experienced a nearly 10% rise in retail sales.

Supermarkets have traditionally been the largest contributors to festive season sales, with grocery items being a priority for consumers.

Flanagan & Gerard’s top-performing tenant across its portfolio in terms of retail sales was Checkers FreshX at Ballito Junction.

Retail categories experiencing the most positive growth during the festive season included clothing (particularly men’s, kids’, and unisex wear), fast food, health and beauty, gifting, and liquor.

A Cinema Comeback?

One of the more surprising growth areas was cinemas, which defied expectations that streaming services would dampen cinema attendance in the post-Covid era. Although cinemas are recovering from pandemic-related shutdowns, the growth of cinemas at Flanagan & Gerard malls nearly doubled in 2024 compared to 2023.

“We suspect that, in addition to the return of some much-anticipated content, the growth of cinemas can be attributed to seasonal weather, with parts of the country experiencing heavy summer rains,” said Paul Gerard, MD of Flanagan & Gerard.

Adapting to New Consumer Behaviour

In November and December, 16.7 million customer visits were recorded across the Flanagan & Gerard shopping mall portfolio, compared to 16.5 million in 2023, reflecting a modest 1.1% increase. This aligns with the growing trend where spending and basket sizes have risen faster than foot traffic.

Convenience-driven delivery services like Checkers Sixty60, Woolies Dash, and Pick n Pay ASAP contribute to fewer in-store visits.

Mall owners and managers now face the challenge of finding innovative ways to keep malls relevant amidst changing consumer behaviour.

Future-Focused Expansions and Innovations

Flanagan & Gerard is committed to enhancing tenant mixes and delivering exceptional consumer experiences. For 2025, the group aims to continue its expansion efforts with new projects and the introduction of exciting new tenants.

Renovations at the Mall of Mthatha, co-owned with Vukile Property Fund, began in 2024 and will continue into 2025, it said. The upgrades include new escalators, a new supermarket, a Dis-Chem store, restaurants like Spur and News Café, and additional fashion and service stores.

Boardwalk Mall will undergo a mini expansion, with new developments in collaboration with various stakeholders. The Capital Hotel has started construction, while new retail and leisure amenities, including padel courts and a drive-thru, will enhance the overall precinct, the group said.

The added amenities at Boardwalk Mall will drive foot traffic and contribute to its growth.

While a well-curated tenant mix will always be crucial, the retail experience is evolving rapidly. Technological advancements are transforming the shopping journey, improving customer engagement, and creating memorable experiences.

“Our strategy is focused on working closely with our incredible partners to ensure our malls remain dominant in their respective trade areas while continuously improving the shopping experience,” said Gerard. “Great leasing is the foundation of a successful mall.”

Pick n Pay reveals 32 store closures

Retailer Pick n Pay Stores has reported a mixed trading performance for the 45-week period ending 5 January 2025, as it navigates the challenging retail landscape with a focus on improving operations.

While the company saw overall sales growth of 3.6%, a significant component of its strategy – the planned store closures and conversions under the “Store Estate Reset” plan – has impacted total sales figures, leading to a net closure of 32 supermarkets across South Africa.

The group’s SA operations closed 24 company-owned stores and 8 franchise stores, including the conversion of five company-owned supermarkets to franchise operations. This move is part of a broader effort to streamline operations and reposition stores for long-term sustainability, despite the natural consequences of reduced overall sales during the transition period.

Despite the closures, Pick n Pay’s like-for-like sales in its core supermarket segment showed improvement, rising 1.6% for the period. Pick n Pay South Africa, in particular, demonstrated solid growth momentum, with a 3.0% increase in like-for-like sales during the final 19 weeks of the period.

The Group remains optimistic, with the performance of Boxer Retail Limited standing out as a bright spot. Boxer, which operates in the lower-income segment, saw an 11.4% sales growth, including a 6.7% increase in like-for-like sales, reflecting strong demand for affordable groceries in both local and regional markets.

In the clothing sector, standalone Pick n Pay clothing stores experienced a 10% sales increase, with momentum accelerating to 10.3% during the final 19 weeks of the period.

Online sales also showed robust growth, rising by 42.5% as consumers increasingly turned to Pick n Pay’s e-commerce offerings, including the popular Pick n Pay asap! service and groceries through the Mr D app.

While store closures have impacted overall performance, the company is confident that its continued focus on improving retail disciplines, enhancing customer value, and refining its store estate will set the stage for further growth in the years ahead.

The group’s efforts to modernize its operations, combined with the strong performance from Boxer and online sales, reflect a balanced approach to navigating industry challenges while positioning for long-term success.

Shares in Pick n Pay have recovered remarkably over the past year, up more than 40%.