ASSESSMENT OF ECONOMIC IMPACT OF THE DEVELOPMENT OF SHOPPING MALL BUSINESS

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

Retail in Nigeria was once confined to traditional open markets and small local storekeepers loosely referred to as the informal retail sector of the Nigerian economy which serviced communities. Between 1960 and the early 1980s, there were standard retail malls which operated chain stores across the country; their number reduced because of the harsh business environment and the decline in business in that era, leaving the country without standard malls for retail business.

This gap led to the growth of the informal or traditional retail market, which traditionally constitutes a formidable part of the retail structure in Nigeria.

Today, Nigeria is experiencing a tremendous shift to a more sophisticated structure as formal or organizedretail continues to gain ascendency. The distribution chain and the organization of outlets continue to reflect those of a rapidly evolving economy as standards of living improve and as the population continues to snowball. In the past eight years, Nigeria’s population has grown from 150 million, as established by the population census conducted in 2006, to a country with an estimated population of 171 million people by 2013. In the midst of this, the middle class continues to expand even as 51 percent of the country’s population now lives in cities.

The rise of organized retail has been rapid in Nigeria in the last two decades. NBS data shows that between 2001 and 2004, the wholesale and retail sector grew by 10 percent per annum. By 2006, its contribution was 16 percent. In the first halves of 2011, 2012 and 2013, it contributed 15.58 percent, 17.05 percent and 18.44 percent of GDP respectively. The old or traditional retail system which is adjudged to account for almost 90 percent of retail activity in Nigeria has continued to decline because of government’s policy, changes in the composition of Nigeria’s population, rising income level and increasing sophistication of the Nigerian consumer. In the last decade, the stable political environment, consistently high oil prices, and rise in GDP have had positive impact on per capita income, which has in turn moved more Nigerians into the middle class. Today, more families shop together and organized facilities which meet their need are attracting more shoppers. Therefore, the old or traditional structure of retail continues to give way to the new.

More than ever, the Nigerian consumer is interested in a decent shopping environment, neatly-arranged and labeled commodities and the experience that goes with buying at an organized outlet.

Opportunities in wholesale and retail stem from the fact that demand has continued to rise. NBS data shows that based on the structure and level of development of the economy, the average Nigerian household spends as much as 80 percent of its income on consumables like food and drinks, clothing, transportation, shelter, education, electronics and power supply. The average amount devoted to consumption has played a major role in elevating Nigeria to the status of a 171 million-populated retail powerhouse on the African continent.

Nigeria has evolved from being a country with 150 million population with no real mega retail store in 2006 to one with 171 million people who have about 20 mega retail stores in less than 10 years. The country has the capacity to support even more malls across its major cities.

1.2 STATEMENT OF PROBLEM

In shopping centers for instance, the rent paid by a tenant bears relation to the ability of that tenant to trade profitably from that location. This has always been a salient criterion but as competition has forced retailers to accept lower margins for their profit levels, the impact of ‘cost’ on the profit equation has become more important. Retailers of Shopping Centers havebeen forced to look at the cost equation in terms of their space requirement. They are therefore less willing to accept the level of rents in the market and may consider relocating if they feel that current rentals are too high for their cost requirement. This should mean that the market will adjust to ensure that value in exchange (rental value) and value in use (worth to the retailer) converge (French, 2000). Hence Sirmans and Guidry (1992) noted that understanding the determinants of shopping center rents is important to the Estate Surveyors and Valuers who are involved in market analysis and site selection of such properties.

Nevertheless valuers fail to account for variation between retail function and the impact of individual property factors on rental value. This potentially leads to misguided valuations. In determining the rental value of a subject property, inappropriate evidence may be undervalued to determine a unit value even though in the market place the subject and comparableproperties belong to distinct tiers (that is the occupier of the subject property would not be expected to make a bid for the comparable property). Also, valuersinterpretations of evidence may lead to over or under estimations of rents as the perceived impact of a factormay have a positive impact on trade and hence rental bid for one type of retailer and a negative impact for another. Hence Hager and Lord (1985) stated that “the success of a valuation relies extensively on personal knowledge, expertise and interpretation of manyvariables which exist”.

However, the complexity of the property price formation process requires an analytical approach which makes it possible to settle the cross-influences between the numerous dimensions affecting property values (for shopping centers) and to assess the marginal contribution of each attribute underlying property buying decisions (Des Rosier et al., 1996).Much work has been done in the determination of property values (residential and shopping centers) in the United Kingdom, United States and Australia (Trott, 1980; Fraser, 1988; Kihore, 1996). In Nigeria, very little effort has been made. The few that exist only looked at the determinants of residential and office property values (Bello, 2000; Oladapo, 2000).

1.3​Objectives of the Study

As a central objective, this study seeks to assess the economic impact of the development of shopping mall on the existing retail business in Enugu metropolis. The specific objectives are to:

1. To determine if increase in the development of shopping mall will lead to extinction of retail business in Enugu metropolis.

2. To examine the correlation between the development of shopping mall and performance of retail businesses in Enugu metropolis.

3. To assess the economic contribution of the development of shopping mall on the retail prices.

1.4​Research Questions

From the aforementioned research objectives, the following research questions were formulated

1. To what extent will the development of shopping mall leads to extinction of retail business in Enugu metropolis?

2. What is the correlation between the development of shopping mall and performance of retail business in Enugu metropolis?

3. What is the economic contribution of the development of shopping mall on the retail prices?

1.5​Research Hypotheses

Based on the above research questions, the following hypothesis were formulated

Ho: Shoprite has no significant impact on specific dimension of the local retailers   business in Enugu state.

H1: Shoprite has no significant impact on specific dimension of the local retailers   business in Enugu state.

1.6​Significance of the Study

This study is significant in that it attempts to pinpoint some of challenges facing owners of retail business because of the increase in the development of shopping mall in Enugu metropolis. It has both theoretical and practical significance. Theoretically, the finding of the study will be useful to both students and scholars who wish to advance their knowledge on economic impact of the development of shopping mall on the existing retail business in Enugu. On the other hand, the findings will be of practical significance to the management of retail business operators and other medium scale business organizations, employees and the government, as it will help them to improve the challenges facing retail business operators in Enugu metropolis.

Significantly, the findings are expected to make the sole proprietor to see the need to improve staff strength through employment and development of skilled manpower. This will help them to plan adequately and suggest the need to organize seminars to the general public on the danger of the aforementioned challenges, adding to the above, it will specifically create awareness on how the challenges facing retail business operators can be managed.

1.7​Scope of the Study

The research work covered the assessment of the economic impact of the development of shopping mall on the existing retail business in Enugu metropolisNevertheless; it focused generally on enumerating the challenges and tested ways of averting/managing it.

1.8​Limitations of the Study

The study was limited by the fact that it relied solely on one enterprise and some of the personnel did not volunteer the necessary information. Finally, time available for me was limited when compared to other activities I need to engage myself in the school.

1.9​Definition of operational terms

Shopping Centre/Mall: ICSC (1999) defined a shopping centre as a group of commercial establishment, planned, developed, owned and managed as a unit related in location, size and types of shops to the trade area the unit serves. It provides on-site parking in a definite relationship to the types andsizes of shops.

Real estate: According to Wikipedia definition, real estate refers to land plus anything permanently fixed to it, including buildings, sheds and other items attached to the structure. Real estate can also refer to the rights and interest inherent in ownership of real property.

Residential property: Realtors Commercial Alliance(2005) defines Single- or multifamily housing units that are used, serve, or are designed as a place ofresidence

Real estate or property market: CEM (2006) defined real property market as the interaction of individuals who exchange real property rights or interests for other assets such as money. The function of the real estate property market is to establish a pattern of price so that given sufficient time, land resources are allocated according to their most profitable (highest and best use) relative to other land resources.