Retail networks in South Africa will continue to decline without scientific geospatial approaches

Statistics South Africa has shown that profit margins in the fast food and take away retail sector have continued to decline. In 2007 this sector was generating a profit of 7.8%. This declined to 1.5% in 2015 and it was projected that it would continue to decline to 0.5% in 2018. Now in 2020, with the COVID-19 pandemic and the economic recession that South Africa is facing, it is highly likely that their profit margins will continue to decline.

A review of Stats SA’s Income figures for the fast food and takeaway market from 2015 to 2018 showed a growth rate of 1.25%. This increase in income in this retail sector is attributed to increases in size of the industry. Further pressure will be placed on income growth rates in 2020 as a consequence of COVID-19 and the economic recession. Concern must be voiced that if the retail sector is not able to fully open during the December holidays, which is where the industry generates a large percentage of their income, this will not bode well for the sustainability of the retail sector in 2021.

Add it to this is the negative growth experienced by many retail outlets over recent years. What our research has shown is that retail outlets located in optimal sites generally recover within six months of another retail outlet opening in close proximity to it. However, retail outlets that are not well located generally do not recover when other retail outlets open close by.

A further contributor to the pressure being experienced in the retail sector is the continued building of new malls and retail outlets in close proximity to existing ones. This results in cannibalization and a decline in profits and revenue for those outlets. A major reason for this is the continued use of site feasibility studies and profiling in making decisions about the location of new retail outlets. These methods do not take into consideration the entire network of retail outlets in making decisions about locating new ones.

To overcome these declines in the retail industry requires the use of more holistic geospatial and scientific methods in South Africa.

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