Galeries Lafayette Left Africa: What’s In It For Consumers

Posted by Patrick Gaincko | October 16, 2016
african galeries lafayette

In my ongoing European conference tour, lots of good questions come up when I speak about the rise of the African mall, such as the sudden departure of the world-renowned, high-end department store Galeries Lafayette from the Morocco Mall, North Africa’s #1 shopping centre. What does this mean in the current context of a shopping mall proliferation all across the Continent?

As I am writing this, the website of Galeries Lafayette, a Paris France headquartered retail giant, still mentions “2011: Opening of a Galeries Lafayette store in Casablanca” and omits its March 2016 Moroccan exit. Understand: it was not a pretty affair.

The Casablanca store was their first-ever and sole presence in Africa and only their fourth overseas launch. It had around 320 brands, including ready-to-wear, cosmetics and accessories. Sitting on 10,000 sqm, the three-storey store was not only the mall’s largest anchor tenant, it was also its centrepiece, designed as a ‘building within a building’ with its own recognizable façade.

The departure of an anchor tenant is an extraordinary situation for a mall, let alone after only four years of operation like in the Galeries Lafayette case. In general, it is the direct consequence of huge financial losses. It has led to the agony, and ultimately the closing of numerous malls across the world. So Aksal, the company owning Morocco Mall, has speedily announced that Galeries Lafayette will be replaced by “a famous international brand, known for its low prices with its fashion, decoration, house and garden sections”.

What’s in it for consumers?

Two Galeries Lafayette staff. Among the 320 brands that the department store offered were Burberry, Michael Kors, Giorgio Armani, Calvin Klein, Dolce & Gabbana.
Two Galeries Lafayette staff. Among the 320 brands that the department store offered were Burberry, Michael Kors, Giorgio Armani, Calvin Klein, Dolce & Gabbana.

As part of my research in Casablanca last year, I interviewed a sizeable panel of affluent consumers about their shopping habits. They all reached a clear consensus: they had long divorced mass shopping. For various reasons, they look at a variety of alternatives – among which shopping tourism – to fulfil their great thirst for luxury and elitism. As a result, this consumer group may be looking at the Galeries Lafayette story with a mix of indifference and curiosity.

On the other end of the spectrum, middle class consumers, who form the vast majority of the mall’s clientele, are craving for cheap, low range, yet modern and foreign, brands. This is precisely the category to which around 70 percent of the Morocco Mall offering already belong to, notably in food, clothing and accessories.

During my several mall visits, I had noticed that the luxury stores including Galeries Lafayette, Dior, Louis Vuitton, Gucci and Prada (who exited the mall in 2015) were almost desert, whereas low-end ready-to-wear stores such as Orchestra, Okaidi and Next were relatively busy. It was also evident that, while average Moroccans were visiting the mall in massive numbers, particularly on weekends, they were relatively frugal in spending (the Morocco Mall does not provide information on its sales performances), preferring to splurge on fast- and casual food and children’s entertainment. Therefore, they will read the arrival of a mega clothing- and homeware discounter as an incentive to visit and spend more.

What’s next for Morocco Mall is an open question: with both a new positioning as a low budget mall and a greater embrace by the middle-class, will it make sense for the handful of remaining luxury stores to continue their presence?

In the broader context of the accelerated development of modern retail across Africa – in 2016 DR Congo and Côte d’Ivoire have seen the opening of their first malls, in 2017-18 Kenya, Angola and Mozambique will see the opening of their largest malls ever – the Galeries Lafayette case will likely be seen as an isolated episode by a number of African retail industry insiders. For one, Morocco is very different from Eastern and Southern Africa, particularly in terms of shopping culture. Rich Moroccans find it natural to catch a two-three-hour flight for shopping sprees in Barcelona or Paris. Affluent Eastern Africans do not have that habit and therefore will have different expectations vis-à-vis local retailers.

However, one of the most important factors for success in the mall industry, regardless of markets and cultures, is the tenant mix. The tenant mix must meet the customer demand which is driven by demographics, trade area, shopping behaviours and cultural influences. It is therefore expected that some of the future malls will focus on thoroughly understanding consumers as to perfectly align themselves with the needs and expectations of a specific consumer segment. If there were one lesson to be learned from the Galeries Lafayette debacle, is that trying to cater simultaneously to multiple consumer groups is a recipe for failure in today’s Africa. The successful malls will be those who will have clearly defined targets and uncompromising positioning.

MOROCCO, THE RISE OF THE AFRICAN MALL, WHAT'S IN IT FOR CONSUMERS

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Starbucks Enters South Africa: What’s In It For Consumers

Posted by Patrick Gaincko | June 13, 2016
tume coffee 1-1

End February, Starbucks announced that it will open its first-ever store in Italy early 2017. In the birthplace of espresso and cappuccino, where coffee is at the intersection of culture, heritage and community; the news that an American retail chain would come and sell coffee had the potential to cause derision and criticisms. So Mr Schultz, the Chairman and CEO of Starbucks, travelled to Milan to bolster the announcement with some compelling context: “we are going to come here with great humility” he said.

Similarly, when mid 2015 Starbucks announced the 2016 opening of its first store in South Africa (and first-ever in sub-Saharan Africa), the news was put against the ongoing narrative about the shape of the South African economy – the shrinking growth, the weak rand,  the high unemployment. So Taste Holdings, Starbucks chosen partner in South Africa, not only repeatedly offered reassuring arguments report after report but also opened the first store in the trendy suburb of Rosebank, Johannesburg, with grand fanfare end April 2016.

Early press reviews have been relatively positive, with commentators stressing the long queues of coffee aficionados in front of the store despite chilly temperatures, the wide online circulation of customers’ enthusiastic impressions, the pride collectively shared among South Africans that yet another international brand entered the country, seeing a sign that it is still relevant on the global stage.

But at the same time a fair number of reviewers were perplex, bringing back the struggling SA economy argument and pointing out that consumers lining up en masse on day one doesn’t necessarily mean that success is guaranteed for Starbucks, particularly in a market considered well packed with coffee shops.

So what are the key success factors for Starbucks in South Africa?

  • The competition in the trendy neighbourhood of Rosebank, Johannesburg: here, a menu display at the coffee shop Vida e Caffé.

 

Price: various reviewers have noted that Starbucks prices are the highest in the Johannesburg market. 27 rand for a latte is still cheaper than prices elsewhere in the world, but it could prove problematic compared to what South Africans usually pay. At this price point, the obvious target is the upper-middle and affluent classes. But even with these targets, attracting them will not suffice. Starbucks will need to earn see their strong, sustained loyalty in the form of both a critical number of visits and critical level of spending.

Product: At most coffee shops across Johannesburg, there are latte’s, cappuccino’s, espresso’s, herbal tea’s, and a few other things. The menus are relatively conservative in terms of ingredients, flavours and recipes. Noticeably, specific consumer groups – students, young professionals  – have showed a great receptiveness to change in their preferences and attitudes towards coffee. There is subsequently a huge opportunity for Starbucks to win a sizeable market share if it can bring in the elements forming the pillars of its valued reputation: the variety of its product offering and the innovation in the flavours, recipes and labels.

Customer Experience: “Our brand equity is built on our customers’ experience and that depends on the quality of our people” Mr Schultz said to the New York Times in March. In South Africa, where poor customer service is notoriously rife, Starbucks has a serious chance to make a difference as it is expected that Taste be the recipient of a skills transfer and invest heavily in employee development programmes.

I enjoyed a latte at two different stores in Casablanca, the Morocco Mall on one hand, the Franklin Roosevelt Villa on the other: the latter – thanks to its emblematic location, its modernist design combining Moroccan identity and European influences, its luscious landscaping – seriously edged up my experience. Iconic store locations, generous rewards schemes, innovative payment solutions have proved to be game changers or competitive advantages for Starbucks in competitive markets. While it is too soon to say whether Taste will develop these initiatives in South Africa, for the company to carry out its ambitious rollout – opening twelve to fifteen Starbucks outlets in two years, it would need to leverage the diverse range of Starbucks customer experience management tactics.

 

In the trendy district of Rosebank, where Starbucks has opened one its Johannesburg stores, Motherland Coffee Company, a local coffee shop chain, is a well established rendez-vous for grab-and-go, business meetings and co-working sessions.
In the trendy district of Rosebank, where Starbucks has opened one of its two Johannesburg stores, Motherland Coffee Company, a local coffee shop chain, has established itself as a rendez-vous for business meetings and co-working sessions.
FOOD & DRINKS, SOUTH AFRICA, WHAT'S IN IT FOR CONSUMERS

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The Mall Of Africa Opens: What’s In It For Consumers

Posted by Patrick Gaincko | April 23, 2016
Mall of Africa - Overall Day

On April 28, midway between Johannesburg and Pretoria, the Mall of Africa opens.

From the beginning, the developers promoted the MOA as an international magnet that will capture shoppers in a five-hour radius from Lagos and Kinshasa to Luanda and Lusaka. On a national scale, MOA defines itself as a new mega destination for shopping, working and living set to attract around 6.7 million people living within an hour drive. In particular MOA targets what it calls “top earners” (senior decision makers, diplomats, business owners), “superior earners” (mid-level execs), and “rising stars” (entrepreneurs, young professionals).

It enters the much coveted category of super regional centres, that’s very large retail facilities offering the widest possible range of stores, products and services. They exceed 100.000 sqm in size (gross leasable area (GLA)) and 250 in the number of stores. They have at least six anchor tenants including clothing, groceries, household goods and entertainment. They also distinguish themselves by new retail concepts and latest advancements in design and architecture. There is only a handful of super regional centres in South Africa, including Sandton City, Centurion Mall and Fourways Mall. MOA sees Sandton City as its main competitor.

By all measures, Sandton City in Johannesburg is the most successful mall in South Africa. It has become so expansive in its offerings over the years that it is now a world-class tourist destination, beyond being Africa’s number one shopping destination.

Here is a quick look at some of the key ingredients of Sandton City success.

  • A key strength of Sandton is its proximity with the Gautrain Station (five minute walk) and Johannesburg's main arteries.

 

 

 

 

 

SOUTH AFRICA, THE RISE OF THE AFRICAN MALL, WHAT'S IN IT FOR CONSUMERS

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