Online commerce in South Africa has seen double-digit percentage growth for almost 20 years now, according to tech research agency World Wide Worx. The local e-commerce industry will reach R14 billion by the end of 2018 and is forecast to nearly double by 2022. Online sales for the 2018 version of the now cult-like shopping frenzy, Black Friday, have increased by 55% from the previous year. Research company GfK has found that online retailers of technical consumer goods, such as smartphones and appliances, have also seen their market share double since 2017.
Edcon, the company that runs one of the country's largest retailers, released a 2018 financial report that it was facing an uncertain future, and this seemed to fit forebodingly well into the narrative of online taking a wrecking ball to brick-and-mortar stores. Stuttafords has also found itself drowned out by the changing tides when it had to shut all but two of its stores. Famous Brands, which operates restaurants Debonair's Pizza, Mugg & Bean, Tasha’s and Wimpy, has had to close 96 stores in the past year. During that same period, Naspers’ food delivery service, Mr D Food, saw a 210% increase in food order volumes.
Yet the year-on-year double-digit growth of online sales only accounts for a 1.2% share of the retail industry. It is projected to reach 2% by 2022. “E-commerce in South Africa is still in its infancy compared to European markets, where a quarter of technical goods spending goes through digital channels,” says Cherelle Laubscher, senior retail manager at GfK South Africa. China, the world leader in e-commerce, has 19% penetration, with the USA hovering at around 11%. Most of the retail companies that are closing their doors are doing so not as a direct result of online sales but more to do with struggling with changing markets and poor business decisions, as is the case with Edcon’s failed buy-out.
The relationship between brick-and-mortar and online business is not as much a battle between the new and the old but more about the trusted, or the "tactility" of nostalgia versus the thrill of technological convenience. Karabo Ngoatle, executive design lead at Nedbank, reasons that part of the challenge that online faces in South Africa is that “we travel to malls all the time. People like to do that.” Going to the mall with a friend or partner, touching and feeling clothes, catching a bite or drink afterwards as well as just being out the house are part of what makes physical shopping a satisfying experience for many people. It is also a sense of trust in the process that has been built up over generations.
People are looking at the convenience of not going anywhere.
While the convenience of online cannot be denied, a more fundamental question is: what kind of human experience can it offer? This comes down to how intuitive the technology can be and how seamless the engagement is between the physical store and online. This is an experience that Jack Ma, the co-founder of China’s largest online retailer, Alibaba, calls the “New Retail”. In a 2017 letter to shareholders, Ma describes “New Retail” as a phenomenon where “the boundary between offline and online commerce disappears as we focus on fulfilling the personalised needs of each customer”.
The local e-commerce industry will reach R14 billion by the end of 2018 and is forecast to nearly double by 2022.
One of the ways of achieving this is by understanding where and how people are shopping online. Research has shown that mobile Internet usage exceeds browsing done through desktop computers. Retailers such as Woolworths have seen the potential that online retail has, following a 64% increase in mobile transactions. It also found that 60% of traffic to its website is via cellphones. “We see mobile as the customer’s channel of choice and there is no doubt that mobile will lead the way towards an omnichannel retail experience,” says Liz Hillock, Woolworths head of online, in a press statement when the retailer launched its new app in 2018 that allows for in-app purchasing. This feature, according to Hillock, makes the Woolies app “the most comprehensive retail app in the country”.
There are industries for which having a smaller physical footprint could work better for both business and consumers, provided the technology has a low barrier to entry in terms of cost and usability. One of these is the banking sector. Financial products, unlike retail products, do not need a physical presence in order to be accessed and, according to Ngoatle, the cost of maintaining physical branches will inevitably be passed on to the client. But using online to access financial services is daunting for many, a challenge that some banks have been gradually gaining ground on.
“People are looking at the convenience of not going anywhere and when you look at our banking platforms they’ve allowed people to trust that 'whatever happens I can always be taken care of’,” says Ngoatle. This has required a lot of investment in online security infrastructure, such as two-factor authentication systems that work via cellphone and desktop computers. In fact, the trust in phone banking and the subsequent reluctance to visit branches has spawned a breed of banks. Business mogul Patrice Motsepe’s TymeBank and former banking maverick Michael Jordaan’s Bank Zero have entered the finance sector with banks that have no bricks-and-mortar branches at all.
There are industries for which having a smaller physical footprint could work better for both business and consumers, provided the technology has a low barrier to entry in terms of cost and usability. One of these is the banking sector.