There will be no ‘retail apocalypse’ – the mall is here to stay, says Vukile CEO

It has been a tough year for the retail sector, and at some point, people were talking about a “retail apocalypse”. But the owner of Mdantsane City Shopping Centre says negativity around retail was misplaced. If anything, there are “exciting” times ahead.

During the presentation of the company’s annual results for the year ended on 31 March, Vukile Property Fund CEO Laurence Rapp said the upheavals that malls faced since the pandemic hit SA shores have brought a sense of “renaissance” to retailing. Instead of bringing malls to their knees, the pandemic ushered the industry into a new era with even greater possibilities.

Rapp said while many took a negative view predicting the end of brick-and-mortar shopping as people move online and mass tenant failures last year, tenants are still running their shops. Vukile’s vacancies have held steady, and shoppers are flocking back to brick-and-mortar stores.

“Every time a shopping centre has opened, every time restrictions were lifted the customers flocked back. Are we seeing a situation where shoppers are not going to come back? Where they’ll spend their lives sitting at home shopping online? I think we can say comfortably that hypothesis has been proved incorrect,” said Rapp.

Vukile has R33 billion worth of assets, of which 49% is in South Africa, and 51% is in Spain held through its Madrid listed subsidiary Castellana Property Socimi.  

In SA, it predominantly owns rural centres, high street retail buildings and township shopping malls whose customer footfall held steady throughout the pandemic because of their exposure to essential retailers like grocery supermarkets.

But Rapp said retail shopping data from across the globe shows that customers are flocking back to brick-and-mortar shopping regardless of where the malls are located.

“The general trend is that all shoppers are coming back to all shopping centres at different paces. The higher the pace, they’re coming back is probably a function of the nature of the shopping centre, where more convenience and localised centres are getting a higher footfall, whereas your bigger destination malls will take a bit more time to get feet coming back,” he said.


It’s not doom and gloom; it’s exciting

Rapp said while rapid changes are going on in the retail sector, no one knows the extent to which retail will return to its “old” normal. He thinks the new normal will retail a lot of the old normal.

What Vukile has observed in its local and Spanish operations is that while online shopping has grown, that did not happen at the exclusion of visiting physical stores.

“It’s online and offline. It’s the omnichannel world. That is a trend that’s now firmly established, and that is what the future of retail is going to look like,” he added.

Rapp said while generic data coming out shows that 91% of customers favour both online and in-store shopping, only 9% of consumers say that they’re only going to do online shopping in the future. He said even though more people dabbled in online retail for the first time, there has not been a fundamental structural shift in shopping patterns.

He pointed out estimates show an increased number of online shoppers during the lockdowns; online sales still make up only 2% of total retail sales in SA compared with 16% in the rest of the world. But even in Spain, where online shopping is more advanced than in SA, online sales penetration increased to only 8.7% from 6%, and data predicts that it will still be below 10% by 2025.

The company’s retail tenants also want shoppers back in the stores, indicating that online shopping has not been profitable. They’ve missed out on high-margin impulse purchases, and the delivery costs are eating into their bottom lines. So, Vukile is now investing heavily in technology to “digitally transform” its shopping centres.


“It does mean that we may come up with clever solutions in terms of maybe one delivery vehicle or delivery service from a shopping centre. Maybe there’ll be storage facilities in a shopping centre,” said Rapp.

He said the company is looking at how it can start using space available at malls for online fulfilment so that tenants won’t need separate warehouses and separate delivery infrastructure.