It was just four years ago during the pandemic – with consumers restricted to their homes and mall doors tightly shut, that online commerce began its unprecedented rise. This phenomenon left retailers thinking about the role of the actual store moving forward.
Today, we can confidently say that physical stores are still, and will continue to be, crucial for the future success and sustainability of the retail industry, writes Lauren Samaai, senior manager within the retail business at Accenture, Africa.
The data shows that today’s consumers are no longer motivated to do their seasonal shopping from the comfort of their own homes. South Africa-based real estate investment company, Redefine Properties (with properties including Centurion Mall and Maponya Mall, to name a few), noted that the 2023 festive period saw a six percent increase in foot traffic compared to the previous year.
Considering the pressure that retailers are under, we also see several retailers – both fashion and grocery – who still have robust strategic plans to open new stores or rationalise and redefine their store formats in the upcoming year.
Therefore, stores are right back at the top of the agenda in post-pandemic retail. But retailers need to be willing to reset their store strategies – and do so as part of a broader reinvention of the business – if they want to truly capitalise on the growth opportunities.
Location, location, location
Consider store locations. Globally, many retailers are rationalising their footprints, but the smart brands are also being more scientific about their store base. These retailers are leveraging data on foot traffic, sales, and customer demographics to gain new insights into where their brand plays within each catchment area.
Retailers are then better placed to optimise the mix of store types and locations. In practice, this will often be about going smaller, more local, and more closely tied to the community.
We see this locally too. The majority of retailers, including Mr Price Group, TFG, Spar and others, are still driving positive net new stores – with closure of under-performers, rationalisation of space, and acquisition or launch of specialty stores. Pick n Pay Group is reviewing 100 under-performing Pick n Pay stores, while opening 50 new Boxer stores.
Considering new store formats, Makro will be piloting “mini Makros” in select shopping malls. Unique to South Africa, however, is the informal market.
An Accenture study values this market at approximately R178-billion – with over 80% of the population spending in this sector, and purchases accounting for 30%-40% of total food spend. It is therefore no surprise that many retailers have set their sights on this market, as highlighted in their annual reports.
Destination shopping
Similarly, with the right data analytics, retailers can better tailor their layouts, in-store services, pricing, and product assortments to cater to, and play across, different customer segments. Key to this is creative and innovative thinking about what the retail store of the future could be, seeing it as not just a place to purchase products, but a multi-purpose destination that offers a range of different experiences.
For example, there is an increase in retailers adding adjacent services to their stores, like cafes. Locally, we see Checkers leading the pack with in-store Kauai and Starbucks, allowing customers to grab a smoothie or Frappuccino while roaming the aisles.
Other specialty services include honey bars, stone baked pizzas, and chocolatier bars – creating an “artisanal market experience” within the supermarket.
The frontline workforce leads the charge
The retail workforce plays a critical role in this agenda. Reinventing physical stores at scale requires a highly skilled and motivated workforce. One that is tech-savvy and able to engage with customers to drive more positive customer experiences. Retailers must therefore invest in their employees, providing training and development opportunities to ensure they have the skills and knowledge to thrive.
In a context like South Africa, where the rate of unemployment is approaching 33% as of the first quarter of 2024, this becomes even more critical. The task of reshaping the retail workforce presents a unique challenge, particularly given that the retail industry is the second-largest employer in the country.
Driving an omni-channel experience
The continued blurring of lines across ‘online’ and ‘offline’ channels requires retailers to be bold about how they reimagine digital elements within the physical store space, as well as the supporting operations which enable a seamless omni-channel experience. Here, the goal is to enable a differentiated customer experience which drives engagement and convenience.
Retailers are proactively merging digital components with their physical store environments to boost customer engagement and operational efficiency. Brands like UNIQ Clothing by Checkers and Yuppiechef are leading the way by incorporating self-service checkouts, smart tags, RFID technology, digital shelf labels, and mobile point-of-sale systems.
This integration not only streamlines transactions, providing seamless transitions between online and offline shopping, but also preserves the brands’ digital identity within the physical store setting.
Additionally, Sportsmans Warehouse enhances the shopping experience by using ‘RUN-id technology’ – a complimentary bio-mechanical gait analysis service – which improves customer satisfaction and gathers crucial data on consumer preferences to better inform product and marketing strategies.
Considering fulfilment, stores require seamless in-store processes enabling click-and-collect and real-time stock visibility.
Furthermore, with the continued growth of on-demand grocery delivery – typically picked from the shop floor – competing needs of in-store versus online customers will continue to clash as demand rises.
Thus, we see the introduction of dark stores (used to fulfil online orders, but inaccessible to customers).
Shoprite opened its first dark store in 2022, in a continued effort to support Sixty60’s explosive growth. Similarly, Woolworths launched its first dark store in 2023, catering to Cape Town CBD via their Dash app. The move was necessitated to reduce in-store picking costs, improve efficiencies, and enable a better customer experience (i.e. more delivery slots and improved availability).
Enhanced sustainability and social responsibility
There is a rising expectation from shareholders and customers for companies to contribute to sustainability. When reconsidering the store strategy, retailers should embed environmental, social, and governance (ESG) principles across end-to-end functions, from sourcing, to experience, to fulfilment.
The Pick n Pay flagship clothing store in Sandton was revamped and recognised by the Green Building Council South Africa (GBCSA) for their sustainable approach to refurbishing stores. The retailer became the first clothing retailer to be awarded a four-star rating for its interior design – with fixtures made from recycled materials sourced locally; tabletops made with local recycled clothing and hangers; and efficient dimmable LED lighting and technology to minimise energy consumption.
From a customer-centric perspective, both Woolworths and Pick n Pay have made sustainability more accessible through reverse vending machines.
Stores as the route to retail growth
Looking across the local landscape, retailers are indeed forging ahead in the store reinvention agenda – but this appears to be happening in pockets of innovation.
The challenge now exists in weaving together a comprehensive customer experience – considering the factors above – while connecting offline and online elements into a true omni-channel experience. Furthermore, much of modern retail is about managing constant change.
But one thing remains the same. The retail store retains a crucial role in building authentic relationships, understanding customer behaviour, and legitimising the brand – Remembering this is a critical factor as retailers reinvent their businesses for future growth.