'Township malls hurt small shop-owners'

Shopping malls have created competition for small township business, the Bureau of Market Research (BMR) of the University of South Africa (Unisa) has found.

Large shopping malls had been developed, or were under construction or in the planning phase in almost all township areas with sizeable population numbers, the BMR said in a statement on Sunday.

"This development has resulted in heightened competition for small township businesses with a potential risk of considerable consumer expenditure displacement away from them to national chains and franchise businesses in the new shopping complexes," the BMR said.

In a study conducted among a small business sample in Soweto, almost half of these businesses had closed their doors in the past three years, the BER said.

"During the same period, only a limited number of new start-ups were identified implying that the small business stock outside newly-established shopping malls is declining."

The BMR said that until fairly recently, township areas were dominated mainly by small, mostly informal businesses offering basic products and services.

"These businesses were located mainly in small business centres and on residential sites.

"The rapid increase in consumer expenditure by residents in township areas during the past decade, together with the fact that the overwhelming majority of township dwellers expressed no intention of moving out of their townships, created substantial market potential in these areas."

This had resulted in a drastic change in township retail structures and large shopping malls had been introduced.

The BMR's Professor André Ligthelm conducted several studies in Soweto.

A small business panel was selected in 2007 and revisited in 2008 and 2009 to study small business sustainability and mortality among them within an increasingly competitive environment.

Results showed that 38.3 percent of small businesses closed their doors one year after the establishment of the shopping complexes in Soweto.

This percentage stood at 47.6 percent after two years, the BMR said.

According to Ligthelm's study, the highest stability was evident among small businesses operating from "old" business centres where 36.4 percent closed their doors followed by a mortality of 57.5 percent among home-based businesses such as spaza and tuck shops; street vendors were excluded from the study.

Ligthelm identified prominent differences between businesses that survived and those that closed down.

Survey results indicated that successful businesses appeared to be older; established based on a business opportunity (rather than instigated by unemployment); and were characterised by the full-time involvement of the owner.

They were more likely to be incorporated, a franchise or a multi-owned institution; to operate in a permanent brick structure; likely to have access to several municipal amenities; to be larger firms in terms of employment and turnover; and to implement typical entrepreneurial practices.

"This suggests that the impact of shopping mall development on small business survival cannot be explained unidimensionally, purely attributing a decline in small business activity to shopping mall development."

The BMR found it interesting grocery and general dealers, the sector with the highest level of mortality from 2007 to 2009, also remained the most important business sector among the survivalist businesses -- almost half of the businesses were still in operation in 2009.

"The results of the surveys clearly confirm a strong representation of entrepreneurial skills in the businesses still in operation relative to those that closed their doors.

"The examination of entrepreneurial-oriented practices shows that owners of successful businesses implemented substantially more entrepreneurial initiatives than those that ceased to exist," the BMR said.

This was particularly true for businesses established in "old" shopping centres.

"They are more sophisticated and formalised (a sign of entrepreneurial conduct), but also more subject to competition from the new shopping malls than is the case with home-based businesses."

A further aspect of the role of entrepreneurship in business survival emanated from the analysis of the perceived impact of the shopping malls on small businesses.

"The mortality rate among small businesses that failed to discount the heightened level of competition was considerably higher than among businesses that adjusted their business strategies to the changed competitive environment," the BMR said.

Entrepreneurial initiatives such as updating business and operation plans, formulating marketing policies and regularly analysing the competitive environment resulted in the adjustment of strategies such as changing or limiting the product range and reducing employment --ultimately aimed at ensuring business sustainability.

Sapa

Posted at 09:28AM Feb 01, 2010 by Editor in Residential  |