On April 27, South Africa celebrated its greatest accomplishment. Traditionally, Freedom Day is a time of reflection and taking stock of what the country has accomplished in 27 years. It is time spent with families listening to elder’s recount stories about the struggle for liberation and remembering family members who could not be with us to mark this occasion.
This year was a bit different. While there were celebrations on 27 April, there was a period of reflection on 26 March which marked the one-year anniversary of the government-imposed lockdown in response to the Covid-19 Pandemic. It is a period of reflection because our lives have undeniably changed during this period. While a lot of us yearn for the day when we can go back to our normal lives, will we ever achieve this?
From a business perspective, a lot of lessons can be learned from the Pandemic. Consumers were forced to change their behaviours in response to the Pandemic and it will be hard for them to return to their old ways. Consumers are now prioritising their health and safety over their need to purchase something. It is safe to say that this need has changed to a perceived need.
What does this mean for shopping malls? Malls are increasingly empty and have been branded super spreader epicentres where your chances of catching Covid-19 increases exponentially no matter how cautious you are. Consumers are currently avoiding these centres preferring smaller neighbourhood centres or grocery stores that are not attached to large malls. There is also an exponential increase in consumer preference to shop online.
I recently read an article on the Gordon Brothers website which examined the impact of the Pandemic on the retail space from a US perspective. There a lot of these articles going around. However, this one provides key insights.
Shift to the left
While the pandemic has had some negative impact on shopping centres, and the landlords that own/manage them, many malls have adapted well to the Covid challenge.
With a consumer preference for online shopping, many stores have transformed themselves into mini distribution centres where orders are filled and either delivered or held aside for in-store or curb side pick-up.
Malls in the US have also become less picky about the stores that they allow in their malls. While large stores dominated malls in the past, smaller stores (that were traditionally overlooked by malls owners) are now being welcomed with open arms.
With a visible shift in consumer behaviour, business owners will have to look at their business models and make necessary changes. Change is the only thing that is constant.
Start by answering these questions:
- How am I adapting to the world of growing e-commerce?
- Do I have an online presence?
- How do I fit into this world?
- How will an e-commerce driven model impact my profit margin?
- What kind of investments do I need to make to adopt an e-commerce model?
- What happens to the retail space if I do shift to an e-commerce driven model? How can I repurpose my space?
- What happens to my staff if I adopt an e-commerce driven model? My employees may be skilled in very specific areas. However, different skills are needed for an e-commerce model;
- How will a hybrid model of e-commerce and traditional brick-and-mortar trading benefit me? How will my profit margin increase or decrease if I adopt this approach?
Sometimes the very thing that has led to your distress is right under your nose. While Edgars has been under financial pressure for several years, Covid was the proverbial straw that finally broke its back. One of the major issues of contention at the beginning of the lockdown was that stores were not allowed to trade, yet landlords were demanding rent because stock was occupying space at these stores.
Now imagine if Edgars saw the gap in the market and focused on online retail long in advance? There are positive examples of how companies made key decisions at opportune moments to increase their profitability.
Previously, Nike was a serious manufacturer of golf equipment. And they had some high-profile product ambassadors including Tiger Woods and Rory McIlroy both of whom won multiple majors using Nike golf clubs. About five years ago, Nike took the decision to stop manufacturing golf equipment and concentrate on its roots of clothing manufacturing. That may not seem like a defining moment, but it took the decision to cut an underperforming product line at the appropriate time. The company then made history by investing heavily into its e-commerce model. The result of this is that the company reached its five-year sales target in 2020 alone.
Charles Phiri is an Associate at Indalo Business Consulting