Ricochet News

Retailers seek growth outside saturated cities

JUNE 6, 2017
Retailers seek growth outside saturated cities

As the urban retail space reaches saturation point, South African developers are benefiting from rural and peri-urban markets as the new areas for growth.

One of the earliest and most successful adopters of this new approach has been Billion Group, the developer behind 60 000m2 regional mall BT Ngebs City, which opened doors in Mthatha, Eastern Cape, two years ago.

Serving a 99% Xhosa-speaking market of 478 000 households in the former Transkei hub and surrounding rural areas, the mall has carved out a niche for itself by bringing the kind of high-end national and international brands to this rural centre that were traditionally reserved for big cities like Johannesburg and Cape Town.

As developer, Billion Group invested in the growth of Mthatha by spending R1.4 billion on the mega mall’s construction and a further R60 million on surrounding roads and infrastructure. The mall is the catalyst for a business and lifestyle precinct along the N2, which enters its second phase later this year with the opening of a four-star hotel adjoining the mall.

Similarly, the R2-billion Billion Group-built Baywest Mall in Port Elizabeth – opened a few months before BT Ngebs in 2015 – has also attracted a greater peri-urban market, according to Baywest management.

According to BT Ngebs City general manager Lolo Sabisa, the spend and brand consciousness of the peri-urban consumer and those in smaller urban settlements is often underestimated.

“The population of Mthatha is becoming more upwardly mobile and retail sales are correspondingly increasing. Even lower-income consumers are willing to spend a little more on major brands if they believe they are getting quality and value for money in return for their hard-earned cash.”

Sabisa said many major retailers had grasped this fact and were aggressively looking for expansion opportunities outside of big cities. Mega malls in smaller centres offered them this opportunity, he said, adding that clothing brands like Timberland, Spitz and Forever New had been extremely well received by shoppers and were trading strongly.

The local market has rewarded investor confidence and BT Ngebs City has charted consistent growth since opening its doors in 2015, with a 17.9% year-on-year increase in total turnover. Despite increasingly difficult national economic conditions, spend per head also increased by 5% year-on-year.

Sabisa said BT Ngebs City currently offered Mthatha residents 105 big-brand clothing, grocery, homeware and other retail stores, plus 10 restaurants and food outlets – including the high-end Melissa’s The Food Shop – as well as banking and other services.

“The launch of Motion Fitness Health Club earlier this year has rounded out our complete lifestyle offering. Our aim is to make BT Ngebs City the destination of choice in Mthatha, and the 12.2% year-on-year growth in footfall indicates that we are on our way to achieving this,” he said.

Image: CENTRE OF GROWTH:Regional malls like BT Ngebs City in Mthatha are making inroads into the previously neglected markets outside the saturated big city retail space. (Image: Supplied)