JOHANNESBURG – The past two years has seen the transformation of South Africa’s retail sector, with more international fashion brands entering the local market.
The latest venturer is Swedish based Hennes & Mauritz (H&M) – and speculation is rife as to where the retailer will set up shop.
It’s already in the open that H&M will open its flagship store in Cape Town at the Victoria & Alfred Waterfront.
“We have confirmed V&A Waterfront in Cape Town for our first store in South Africa during 2015,” H&M press officer Håcan Andersson told Moneyweb.
This has also been confirmed by the largest JSE-listed property company Growthpoint, which co-owns the V&A Waterfront with the Public Investment Corporation.
At the company’s full year results in August, Growthpoint CEO Norbert Sasse said H&M would take up two floors totalling 4 700 square metres at the Waterfront.
But H&M is tight-lipped on its Johannesburg interests.
“Apart from this information, it is too early for us to talk about our opening, but [we] look forward to giving more information closer to the opening,” Anderson added.
Consensus from retail analysts is that Atterbury Property’s R3.5 billion shopping centre development north of Sandton, called Mall of Africa, will be home to H&M.
The area has been a prime node for mixed use development, making a strong case for the retailer to choose Waterfall City, dubbed the “next Sandton.”
Atterbury did not confirm H&M developments with Moneyweb.
“South Africa is an untapped market for them (H&M) and they see South Africa as having an attractive consumer market,” said Theresa Heath, retail analyst at Stanlib.
Growing international brands
“Each of the new entrants to the markets believes its brands offer something different, providing consumers with more choice,” added Heath.
Behind the scenes, mall owners and developers have been scrambling to house international fashion brands such as Zara, Banana Republic, Topshop and Cotton On.
Zara has about ten local stores and Cotton On over 100 stores. Heath contends H&M is likely to follow the Zara route with larger flagship stores.
“It’s possible that once it establishes itself as a credible fashion brand in South Africa, H&M could spread itself more widely and open more stores than Zara has achieved to date,” she added.
But there are more fashion brands on the way.
At its results presentation, Hyprop CEO Pieter Prinsloo said the company is in discussions with international fashion brands for its Cape Town-based Canal Walk. Hyprop has prime shopping centres in Gauteng such as Rosebank Mall, Clearwater Mall and Hyde Park Corner, as well as in the Western Cape.
“That fashion space, it’s quite competitive for name brands coming out. H&M wants to come to South Africa, River Island (a UK brand) are rolling [out] stores, Cotton On is doing really well,” Prinsloo said.
The newly refurbished Rosebank Mall has become home to South Africa’s first River Island.
From a macroeconomic perspective, South Africa is expected to grow less than 2% in 2014, high debt levels and a rising inflationary environment are set to put consumers under pressure.
But is there a case for investment from international retail investors such as H&M, which are relatively expensive? Independent retail analyst Roger Tejwani reckons so.
“It is quite difficult to get traction – individual brands will not get traction – but collectively such fashion brands will be a problem for local retailers. There is an appetite from consumers,” Tejwani explained, adding that despite consumers being under pressure, clothing has been resilient.
Together with this, retail trade sales indicate a buoyant market, despite external headwinds. Statistics South Africa in its latest retail trade sales (June 2014) indicated an increase of 1.5% in the second quarter of 2014 compared with the second quarter of 2013.
Heath added that local economic growth has not proven to be a hindrance to sales growth for the successful international entrants, such as Zara and Cotton On. “They have shown that if you have the right product South African consumers will spend in your store,” she said.