In the basket

The boom in e-commerce means no retailer – regardless of size – can afford to be left behind

In the basket

It certainly wasn’t always like this. Rob Noble remembers what the e-commerce scene was like when he launched fashion e-tailer MyRunway in 2012 – just a decade ago in ‘people years’, but an eternity ago in tech terms. ‘In 2012, anyone with a website selling a product was considered to have an “e-commerce channel” or to be “online”,’ he recalls. ‘We’re well beyond that now. In the same way that just renting an empty store in a mall doesn’t qualify you as being a retailer, just existing online doesn’t make you an e-commerce platform.’

The march of time – and, in a big way, the digital revolution sparked by COVID-19 lockdowns – has changed that. Going into 2022’s Black Friday and Cyber Monday year-end sales, every serious retailer had an online shopping option; and just about every consumer was shopping online.

‘In South Africa, online wasn’t taken seriously by most of the established retailers pre-2020,’ says Noble. ‘These retailers have now spent the past two years trying to fast-track their digital transformation, with varying degrees of success despite huge internal investments.’

The latest edition of the annual South African Digital Customer Experience report – published by digital agency Rogerwilco, market research company Ovatoyou, and Julia Ahlfeldt CX Consulting – reflects the extent of the e-commerce explosion. Some 87% of its survey respondents claimed to have made an online purchase in 2022 – significantly up from 2019’s figure of 76%.

‘What makes this growth particularly noteworthy is that over half of our sample have a household income of less than R10 000,’ the report states. ‘So the notion that only the affluent are shopping online is firmly disproven. It was also interesting to note that there was very little deviation in online buying behaviour by gender or regional location – even in the provinces reporting the lowest levels of e-commerce activity (Free State, Mpumulanga and North West), 80% of respondents had made online purchases.’

It’s a world away from those early days that Noble describes. E-commerce has matured to the point that the market now has nuances, niches, sub-segments and hyper-specialisation. Accenture sees global social e-commerce – that is, just the e-commerce that takes place entirely via social media – growing three times as fast as traditional e-commerce, reaching $1.2 trillion by 2025.

Tellingly, those social platforms are primarily mobile. In late 2022 Adoozy Power, a mobile rental network service, surveyed young (aged 18 to 36) South Africans, asking about their Black Friday shopping habits. More than 52% of the respondents said they were ‘definitely planning’ to shop Black Friday deals, with a further 34% ‘considering’ doing so. But the key finding was how many of those young consumers said that they would be shopping via smartphone.

‘What is striking for brands and retailers to note is that 84% of the South Africans we surveyed reported that they will be using their mobile devices for their online Black Friday shopping journeys,’ says Adoozy Power CEO Kegan Peffer. ‘They feel that it’s just more convenient to shop from anywhere at any time.

‘This is testimony to our on-the-go lifestyles, and that being digitally connected and remote-capable is a top priority for modern consumers. When it comes to the convenience and speed that are so important to busy people, mobile has the leading edge.’

That massive growth (and massive volumes) in specialist streams such as social e-commerce and mobile-based m-commerce mirrors the growth of e-commerce in general. And analysts who wondered if online retail levels would return to pre-pandemic levels once lockdown was over are getting an emphatic answer.

‘Customers’ need for convenience has only accelerated in the wake of the pandemic,’ says Shiko Mamotheti, director at Johannesburg-based software and marketing services company Nerdware. ‘Not only are households more comfortable now with online shopping, but our fast-paced lifestyles are also making our time increasingly precious. This means that there is more pressure on businesses than ever before to develop robust e-commerce platforms if they want to remain competitive and maintain a loyal customer base.’

Mamotheti says that some e-tailers are struggling to keep up with the demand – and are increasingly employing automation and AI to handle the bulk of customer enquiries, while sending only the most complex issues to a human operator. ‘Businesses simply cannot appoint enough people to connect with the thousands of customers who will access their website or app at any one time, which threatens their ability to respond to queries timeously,’ she says.

‘Additionally, as companies grow and scale, the repetition of tasks also increases. Incorporating automated processes into a website or mobile app takes many of those monotonous and time-intensive tasks away from employees, freeing them to focus on other important corporate functions.’

Not so fast on the ‘corporate’, though… The e-commerce revolution is by no means limited to big retailers. If anything, it’s creating a marketplace for small businesses and niche services. As in the brick-and-mortar world, the big brands may make the most noise, but the little corner shops often have the most interesting things on their shelves.

Take, for example, SA’s homegrown funeral app, Sendoff, which digitalises (and monetises) the entire process of organising a funeral. ‘From arranging for a loved one to be picked up from a home, hospice or hospital once they have passed on, to choosing a casket or urn, flowers, transport or catering, you can do everything via Sendoff – all from the convenience of your smartphone or computer,’ says CEO Zolani Matebese.

It’s quite the elevator pitch, but Matebese is onto something. The brand has already expanded its product line to include a livestock category (for families who need to perform traditional rituals), and a service that turns the ashes of the deceased into a lab-created memorial diamond (for people who like that sort of thing).

Niche services abound in SA’s growing e-commerce space. Yaga, for example, is a female-founded social e-commerce company that lets consumers buy and sell ‘pre-loved fashion’. Yes, it’s a second-hand clothing store, but it’s a surprisingly big business. Launched in 2019, Yaga claims more than 5 million visits every month, with more than 5 000 new items listed every day. Last year, the business raised €2.2 million in funding to grow its platform in SA and other markets. ‘There is a huge future for pre-loved fashion, especially in emerging markets like Africa and Asia,’ says Yaga CEO Aune Aunapuu. ‘While Yaga has tripled its worldwide sales over the past 18 months, Yaga South Africa has seen local sales increase sevenfold during the same time.’

That’s not to say Yaga – or any e-commerce vendor, for that matter – is awash in cash. Noble has a wry take on the old cliché of ‘overnight successes’ taking a decade to happen. Although MyRunway launched in 2012, Noble says it has been profitable for only ‘about a year-and-a-half’ – adding that it’s one of the few SA e-commerce sites that are.

Why is it so difficult for local e-tailers to turn a profit? ‘It’s not just a challenge for South African e-commerce platforms,’ he says. ‘It’s been a problem for the industry globally. For years companies in the e-commerce and tech space have been all about chasing growth at all costs. That’s how businesses were valued. That’s what was rewarded. This doesn’t result in a strategy or decision-making that’s based on efficiency or a sustainable financial model.

‘The whole point of e-commerce is that it’s supposed to be able to scale with growth while costs increase at a much lower rate. You’ll find that most e-commerce platforms have fuelled their growth with an insane amount spent on marketing or product discounts. What happens when that funding runs out? How do you sustain a loss-making business model?’

MyRunway remains a privately owned business, with the founders and management team still holding a majority share.

‘We haven’t had an endless supply of funding to buy customers and market share,’ says Noble. ‘We’ve had to be smart with every cent we’ve spent, but that’s worked out well for us. It’s allowed us to create a profitable business.’ He pauses, and the adds (without a hint of bitterness), ‘the days of cheap capital and VCs throwing money against the “start-up wall” to see what will stick seem to be over for now’.

Despite the current boom, e-commerce sites need to find ways to make money and stay afloat. That boom is bringing more and more stalls to the digital marketplace, including some very big players.

‘Amazon is planning to start their e-commerce operations in South Africa in 2023,’ says Noble. ‘Not many local companies will have the ability to outspend Amazon to maintain their market share, so e-commerce platforms here will need to work quickly to make sure they are efficient, are offering value, and are dominating their segment.’ Just like a real shop, then.

By Mark van Dijk
Image: Gallo/Getty Images