The agreement by Spar, Pick n Pay and Shoprite to bring an end to long-term exclusive lease agreements is expected to result in greater choice for consumers and increased footfall for shopping malls.
Previously, the exclusive lease agreements excluded specialist or general grocery supermarkets from competing for consumers. With more than 50% of grocery shopping conducted at malls or convenience centres, the exclusive lease agreements meant limited competition when it came to the majority of consumer purchases.
Surine Griffin, Chief Operations Officer at Broll Property Management says the business supports the move to end exclusive lease agreements. “This will promote greater fairness and increased competition for the grocery retail market in South Africa.
“It will impact positively on leasing strategies by opening the field to a greater variety of tenants with different offerings. This will benefit the consumer by providing them with more exciting and diverse options to consider when buying groceries and goods.”
According to the Competition Commission, the exclusivity leases contributed to the exclusion of small and medium enterprises (SMEs) and historically disadvantaged people (HDPs) in the grocery sector, where they are under-represented compared to other countries.
Griffin says the introduction of increased competition and the opening up of opportunities for SMEs and HDPs means tenants will be compelled to start thinking more innovatively.
“The focus will have to be on what the shopper wants and needs, and not just what retailers can offer at the time. In addition to the products on offer, the look and feel of the retail outlets themselves will require attention. Stores will have to be more inviting, with the focus on attracting consumers. Creativity and the use of technology to enhance shopfronts and displays will play a significant role in achieving this.”
While Broll Property Group does not anticipate a major shift in the tenant mix, it believes the new status quo will present opportunities for up-and-coming smaller businesses to offer bespoke services and goods.
“Once again, in addition to boosting the shopping experience for consumers, the more local businesses – in the form of SMEs – that enter the market, the greater the boost to the country’s economy,” notes Griffin.
She says the increased competition should result in more diverse and better priced products for consumers to choose from. “Competition is healthy, an important consideration for consumers who are struggling to negotiate electricity and interest rate hikes, fuel increases and loadshedding woes.”
Ultimately, Griffin says the changing lease scenario will place pressure on tenants to be cognisant of evolving customer trends. “They will be compelled to keep pace with these trends and landlords will be compelled to accommodate tenants that can deliver on these trends. “The end result? Centres and malls with more diverse offerings, happier customers, and better turnovers.”
