Retail market reaches saturation

Brian Benza | Friday September 19, 2014 15:33

 

According to the 2014 edition of the authoritative AT Kearney Global Retail Development Index (GRDI), Botswana slipped by a single notch to 26th position in the ranking.

“Botswana ranked for the third straight year, with retail contributing 30 percent of the country’s GDP as well as many jobs. “However, the market is nearing maturity, with growth slowing despite the increased presence and entry of regional retailers who seek to exploit Botswana’s retail opportunities,” said AT Kearney. The annual GRDI ranks 30 developing countries on a 0-to-100-point scale and four variables, which include, country risk, business risk, market attractiveness, market saturation and time pressure.

Due to the mushrooming of many malls in a short space of time, the Botswana market is getting saturated with the score under that category falling to 34.8 percent from 42 percent two year ago. Under the country risk category, Botswana’s score fell to 60.7 percent from 88 percent two years ago while market attractiveness also took a tumble to 26.1 percent from 44.4 percent in 2012.

In the past three years, three malls - Sebele, Rail Park and Airport Junction have opened shop in Gaborone with most tenants being South African retailers. Reflecting the trend towards saturation, retail sector rentals have also softened in the past two years with International Property Database (IPD) estimating returns on the retail space to have declined from 20.1 percent to 16.6 percent last year largely on the back of tenants’ inability to negotiate for better rates due to the massive supply mostly in the Gaborone area. According to the AT Kearney report, annual consumer spending is now more than $3,500 per capita, and the total market is now worth $5.6 billion.

“Food and apparel are the most attractive segments, with recent growth coming in furniture and hardware. Gaborone, the capital, has most of Botswana’s formal retail, and new shopping centers are springing up, fuelled by aggressive expansion plans by current local, regional, and international players,” added the report.

For example, last year Massmart opened its second Builders Warehouse store on the outskirts of Gaborone. South Africa’s Woolworths returned to neighbouring Botswana through a takeover of its franchises as part of future expansion plans, while Shoprite also announced plans to expand.