e-Commerce South Africa: There's more to e-commerce than meets the eye in South Africa
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When setting up a brick & mortar retail store, a business will take into consideration the size of the space, the location, foot traffic, the design, interior fittings and displays. After months to years of careful consideration, they’ll sink major investment into creating the space that speaks perfectly to their brand and what will serve their customers’ needs best.
That investment is made with the understanding that it will take a few years to show a return – if indeed it does. It’s a patient, considered and well-researched approach to building something sustainable and with growth potential. An e-commerce store front deserves the same attention – careful consideration of the complexities involved in setting up a new kind of store front, the right investment at the right time and thorough strategic planning in order to have the best possible chance of success.
The digital space is fundamentally different to physical retail - it’s a new landscape with different behaviours, customers that have diverse needs and one that depends on the establishment of an entirely new supply chain and fulfilment mechanisms.
An online customer for your brand has a different mindset from one who walks into your store to make a purchase. Product representation needs to be deeply considered, multiple audiences should be built and tested through careful, strategic targeting and communication, and the varying customer sets need to be nurtured throughout the stages of the purchase differently.
e-Commerce really took off in South Africa as the first of the lockdowns started in March 2020, growing by 66% to more than R30 billion for the year. Prior to that, there were a few companies doing e-commerce well, another group largely unconcerned with it and a prospective business base that largely saw it as a luxury rather than a necessity.
Despite a more subdued growth rate due to economic pressures in 2021, the value of online retail is still expected to top R40 billion and account for 4% of all retail in South Africa.
It shouldn’t come as a surprise that the losses incurred by traditional retailers, which recorded consecutive lows for nine months in 2020, correlate with gains made by South African online retailers. South Africa’s largest online retailer, Takealot, grew its revenue by 41% to more than R3.3 billion.
Online retail has become an essential part of life overnight, forcing companies to switch to – or switch on – these channels. The problem? That the rapid about-turn or amplified focus wasn't a strategic play in-line with the development of the business, but rather an emergency leap into the void created by a market shift.
That means, for many businesses, the focus is currently on short-term sales spikes rather than developing their online brand and e-commerce operation for the long haul. That short-term mindset is understandable in a tough economic climate where digital channels have been a lifeline for many businesses – but the ultimate aim of e-commerce shouldn’t be survival. It should be building sustainable growth and ensuring competitive market penetration.
Fundamental to customers purchasing online is not only the ability to ‘add-to-cart’ but also the credibility of the brand and the trust that it inspires in these customers to commit to your business through the binary veil – so building a brand in this space is as vital as it is in the physical one.
There’s a heavy strategic component to building your digital shop, which requires the skills, expertise and investment you’d otherwise supplement for your brick and mortar. It also requires a skilled partner to help navigate this complex technological world. That strategy is then developed and tested together – being constantly monitored and tweaked towards the optic of success.
Working together on a realistic (albeit ambitious) strategy that is based on an understanding of holistic strengths, weaknesses, opportunities, and threats is important to achieving success. At each phase of growth, there comes a time when the chosen platform or mechanism reaches the peak of its potential – and at that saturation point, the strategy must evolve, marketing must pivot, and things need to realign to business objectives to help the business continue to grow.
As of 2020, South Africa is the 37th largest market for e-commerce, placing it ahead of Portugal and behind Nigeria, and 68% of South Africans are spending more time shopping online than prior to the pandemic. It’s a market that can’t be neglected any longer.
Properly investing (time and money) on the back of global e-commerce growth is as essential as looking to expand your physical presence, but the potential of e-commerce goes beyond the people who walk past your store front every day: You open up the business to a national and international customer base. You’re investing in the potential and vision of the business. And therefore, it's vital to have a partner who can help you scale digitally to maximise this potential offered by an entire world of prospective new customers.
Alex Wright, co-founder of Correlate Digital