As I have mentioned before, South Africa was lucky by not feeling the full blow of the global recession. However one needs only take a walk around any mall to notice how retail has been affected more than other industry’s have. Many small retailers have closed up shop, doors no doubt as a combined result of lower turnover and the massive rentals that retail malls command.
Compare this to North America where the recession has hit harder – retail malls are actually offering reduced, and in some cases free rental to ensure that shops have tenants and continue to trade. Not because they are charities, but because they know that an empty mall won’t pull customers, and in the long-term this is bad for the mall as pedestrian throughput is a lead indicator of their financial success.
Not so in South Africa. The mall owners, usually South African pension funds and some smaller investors, prefer to go for the short-term rip-off. Maximise rentals now and hope to hell another tenant comes along when this one goes into liquidation.
And then we have the tenants, which are my real ‘bone of contention’. Recently I was in a music store which I won’t name (okay it was Look & Listen) searching for a couple of obscure CDs. The sales consultant pulled up a list on his computer to let me browse. For my convenience, I could see the cost price as well as the margin on all these CDs. Margins ranged between 50 and 100% – not too bad for a commodity such as a CD.
What really gets my goat though are these music retailers, complaining about low margins because the ‘record companies’ get all the profit. While their industry is under such threat from sources such as digital downloads, online retailers, and music piracy, they insist on these high margins which drive consumers to utilise alternate sources. Then of course the industry cries foul because of the high prevalence of piracy. Do me a favour!
From these two examples (there are others), the synopsis appears to be one of greed. Sacrifice long-term sustainability for short-term profit. Live for today, screw tomorrow – it’s the third-world way!