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The right ‘fit’ for SA retail

by Yaron Assabi. The truth is that the downturn in the local retail sector began before lockdowns.

by Yaron Assabi. The local retail industry faced many challenges and we have seen many large brands shut their doors over the past few years. COVID-19 seemed to be the ‘nail in the coffin’ for many, but the truth is that the downturn began before lockdowns. South Africa was arguably too slow to adopt ecommerce in the past as the appeal was focused on the upper end of the market, so may retailers did not see it as a necessity or allocated enough budget to do it right because it represented a small percentage of overall sales.

Last year, in 2020 was the year of redressing for the industry. Black Friday last year amounted to the second-largest online spending day in global history. In SA, Black Friday online transactions grew by 50% compared to 2019; and visits to shopping malls were 13% lower than on Black Friday in 2019 which shows a transition. Every retailer is far more focused on online shopping and in fact are looking at rationalising their physical footprint. This transformation is not just about moving aisles to the cloud. It is about building an online business that needs to replace the decreasing turnover in the physical stores. An online business is very different to physical retail and requires understanding of technology, logistics, digital and mobile marketing, and online customer experience.

The overwhelmed logistics infrastructure needs to be re-invented to cater for the increase in demand and customer service is a critical success factor and requires attention to detail on every step on the customer journey as opposed to customers just walking into a Retail store. There are new KPI’s, like conversion of browse to buy ratio’s; and customer retention is more important than ever before. There are many gaps that exist in the industry that need addressing to ensure sustainable development of ecommerce in the coming year/s.

Laying the foundation

Today the leading reason for a shift to ecommerce is Covid, but as consumers experience the convenience and personalisation of shopping online, a lot more people will adopt online shopping as their first choice and will look  for their deals online even beyond the pandemic. So, this is actually a long term strategy and not a quick fix. The challenge for businesses now is to enhance the entire value chain to meet the changing and rising demands of consumers in a personalised way.

If we take, for example, the number of people who now work from home, or children who are online schooling – for many this is a new experience, which stands to reason that buying books and stationery online in an easy way; or prepared meals for the parents that are constantly in online meetings and do not have the time to cook, has become essential. Exceptional customer service, with a focus on convenience, i.e., making this transition easier for customers, will go a long way in gaining the hearts and minds of consumers, which will result in increased frequency in choosing the brand; bigger wallet share; and therefore, lifetime value of customers.

Cross industry partnerships

Many industries have been hard hit by the pandemic and the subsequent lockdown. We have seen recently many cross-industry partnerships aimed at keeping businesses afloat – which is important for sustainability and to ensure a competitive business environment is maintained. We have seen many logistics companies emerge focusing on last mile delivery; and these companies assisted large retailers which were not well prepared for the increase in demand for online sales. We hope to see many large businesses partnering with SME’s for agility and for a sustainable future.

Omnichannel approach

The omnichannel approach is a very important element of establishing access for consumers, especially in Africa where there is still a large digital divide. Consumers may browse the internet looking for deals, but actually pick up the phone to place an order or use the app to complete the purchase. Today, consumers are spoilt for choice of channels and retailers understand that they need to meet their customers at their preferred channels. This means that retailers need to make as many channels as possible available to make the shopping experience more customer centric, and convenient.

Inclusion

The sad reality is that in South Africa, digital adoption is still in the early stages for many due to a high barrier to entry and lack of technology skills. In rural areas, many small businesses will miss out on the potential revenue from online shopping. There is a great need for digital enablement platforms and support services for the small and medium enterprises. According to BankServ Africa, in 2019 South Africa raked R6 billion in online shopping, doubling the R3 billion that was spent in 2018. A large group of under established retailers may miss out on the opportunity to cash in if inclusion is not addressed.

The value of ecommerce in South Africa is said to reach around R225 billion – driven by changing consumer behaviour. Small businesses are the largest contributor to employment and GDP. Therefore, we need to find ways to use technology as an enabler of their growth by providing support and technology offerings that make sense for the continued growth of entrepreneurship in this space. It is safe to say that consumer behaviours have changed significantly where technology and ecommerce will continue to play a key role in developing the retail segment.

It will be critical to create strategic partnerships based on shared risk and success to ensure that businesses can quickly mobilise their online retail without a big barrier to entry. In South Africa we  lack skills and  experience, but there are enablement companies that started early with ecommerce and paid the required ‘school fees’ and are able to mitigate the risk and provide all of the critical support services to ensure success.

 

Main image credit: Photo by Karolina Grabowska from Pexels.

 

Yaron Assabi is CEO and founder of DSG and digitalmall.com.

 

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