The impact of online retail grocery shopping on retail space: a Cape Town case study

Abstract:

Purpose – The purpose of this paper is to report on the findings of completed case studies of two major multi-channel grocery retailers in South Africa. The aim of the research was to establish the potential that online grocery retail has to undermine traditional retail by decreasing foot traffic and undermining rental income.

Design/methodology/approach – The growth of online shopping in the retail sector is a matter of concern for those involved in the development and management of shopping centres. Non-probability convenience sampling was employed to interview shoppers in the five largest regional shopping centres in Cape Town tenanted by the two major grocery “e-tailers” in South Africa.

Findings – The findings show that the online grocery market is an expanding market segment. Furthermore, diminished foot traffic is likely to affect the ability of smaller retailers to pay turnover rentals. Miller’s revised rent model is adapted and used to illustrate the potential savings that may be generated by changing the rent models currently in use.

Research limitations/implications – Future research into exactly what consumers buy online from food retailers needs to be undertaken in order to establish the maximum potential reduction in foot traffic attracted by food anchors.

Practical implications – It is concluded that the South African retail industry is heavily reliant on traditional retail centres and although the loss in rentals resulting from online grocery sales is not currently considerable, it does represent a potential future threat.

Originality/value – The paper speculates about the effects of growth in online buying on rental agreements in shopping centres. The paper would appeal to property investors, property developers and facilities managers.

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