BUYING TIME - JSE MAGAZINE

BUYING TIME

There’s a huge opportunity for SA companies to grow operations by embracing the possibilities of mobile e-commerce

BUYING TIME

Takealot CEO Kim Reid calls it ‘exam time’. Every year, on the last Friday of November, the SA e-commerce behemoth runs its much-anticipated, much-hyped Black Friday sales. Since starting #BlackFriday in 2012 (having imported the idea from the US), Takealot has seen the event grow into a significant revenue driver, and an annual test of its behind-the-scenes e-commerce infrastructure. With shoppers going online to avoid long queues in physical stores, traffic to the site increases five-fold. Stock volumes must be just right. Payment mechanisms have to be absolutely stable.

Speaking to Fin24 ahead of the 2017 sales, Reid summed up the challenges. ‘We have gone down every Black Friday, without fail,’ he said. ‘Things go wrong. Last year we had a payments issue where Bankserv went down. Every year is a test.’ In 2017, it failed that test. Just minutes after midnight on the morning of Black Friday 2017, Takealot went down, and stayed down for most of the day as millions of shoppers (some 2.2 million, by one estimate) tried to access the site. ‘We’ve had a service failure with a critical piece of code which communicates with much of the site,’ Reid said, as Takealot’s techies scrambled to fix the problem. ‘It took us a little while to figure this out. Our priority right now is to get that up and running.’

Yet while Takealot may have failed the infrastructure test, it comfortably passed Black Friday’s 2017 e-commerce exam. After generating revenues of R17 million in 2015 and R56 million in 2016, the site claimed that – despite those technical issues – it still managed to generate R87 million in gross merchandising value on the day.

‘Black Friday was one heck of a day,’ Reid later told MyBroadband. ‘We are fully aware that the day was far from ideal for our customers and are incredibly humbled that people continued to support us throughout the day.’ That customer loyalty speaks volumes about how South Africans have changed their shopping habits in the age of e-commerce. In 2016, South Africans spent R37.1 billion shopping online, up nearly 30% on the previous year. Over the same period, online spend via mobile device grew by 65%.

Looking to explore these numbers, global online payment system PayPal conducted a survey of SA consumers. The results demonstrated the extent to which mobile e-commerce continues to transform the national retail sector. ‘Our survey has shown that South Africans want to shop online via their mobile devices,’ says Efi Dahan, GM of PayPal for Russia, Middle East and Africa. ‘We found that many are already using their phone as a digital wallet, going so far as leaving their wallets behind to do all their transactions with their phone.’

PayPal’s survey found that 85% of respondents have used their mobile phone to make a purchase in the past year, while 46% said that being able to shop on their mobile phone has made them buy more. Some 52%, meanwhile, said that they had left the house without their wallet at least once in the past month, preferring to do their payments with their mobile device. ‘E-commerce has the potential to connect consumers to the digital global economy,’ says Dahan. ‘The data showcases a huge opportunity for South African businesses to reap rewards and grow their businesses if they embrace mobile e-commerce and provide the convenience consumers all over the world crave.’

In March, news broke that SA online sales had grown to 1% of total retail sales. That’s a significant milestone, but it’s far behind the proportions reported in countries such as the US (9%), UK (19%) and China (23.1%). While SA’s e-commerce industry is growing, it still has some catching up to do. ‘The 1% problem is as much an intriguing opportunity as it is a daunting task,’ Terry Southam, MD of conference and exhibition company Kinetic, said ahead of the e-commerce MoneyAfrica conference. ‘The potential for growth and rapid acceleration is real. Understanding where the acceleration opportunities lie not only from an online retail perspective, but in the payments, funding and fulfilment space, is what MoneyAfrica 2018 is all about.’

Some of that growth potential may well lie in online classifieds. ‘Online trading, both for new and second-hand goods, is on a constant up curve,’ Claire Cobbledick, head of core business at online classifieds service Gumtree South Africa, writes in a recent blog post. ‘Gumtree has seen great growth in the past year and now carries 1 004 516 listings. And, when South Africa finally sheds itself of the data cost choke chain, the growth in online trading will become explosive across the board.’

Cobbledick adds that the already massive online trading economy is both important and underestimated. ‘The thriving trade in second-hand goods demonstrates the smart search for value by consumers in the tough economic climate and, in many instances, it displaces retail sales. The money that some retailers are losing is not vanishing, it’s being spent in other ways,’ she writes.

‘Last year, we estimate that previously owned cars outsold new ones in SA by two to one, yet almost all the sales data, awards shows and industry analysis focuses on the new metal on the showroom floors. To their credit, car dealers have adjusted to this shift and most now operate cleverly and flexibly in the previously owned online space.’

Alongside Takealot and Gumtree, online retailer Yuppiechef must be counted among the pioneers of e-commerce in SA. Yuppiechef is a true e-commerce success story, having grown from office space in the front lounge of co-founder Andrew Smith’s Cape Town home (selling a product range of just 12 items) to where they are now: more than 6 000 kitchen and home products from at least 400 brands, and shipping to five countries. Last October, Yuppiechef opened its first physical store, in Cape Town’s Willowbridge Shopping Centre.

It seemed a strange move (as the store designer put it, ‘Most brands undertake this process in the opposite direction), yet Smith insisted that the expansion from a purely online space to a brick and mortar store was in keeping with a changing global dynamic in retail. ‘Consumers increasingly expect cross-channel capability from brands, and while the assumption is that traditional stores should be moving online, so too is there pressure on online brands to have a physical presence,’ he said.

Smith later expanded on that vision. ‘We’re very excited that consumers all over South Africa are beginning to embrace the 360º buying experience, or the “omnichannel” experience, as we like to call it,’ he said. ‘We are proud as a retail brand to be early pioneers, having launched our first physical store in Cape Town in October 2017, having traded exclusively online ’til that date. We realised some time ago that our customers were wanting to get more out of the Yuppiechef brand and to engage with us on their terms, not ours; to be able to browse online but then go into a store to see the product and buy, or to experience our brand in a store, chat to our team, touch and feel products to purchase, but then have that order delivered directly home or to a gift recipient, the next day.’

That, then, is the next step in e-commerce – a holistic customer experience, where e-commerce is simply another aspect of retail, and the lines between the online and offline worlds are blurred to the point of non-existence. Global e-commerce giant Amazon offered a taste of this recently, when it opened its first Amazon Go physical store in Seattle. Ironically – as Yuppiechef found on a far smaller scale – the interest was so great that shoppers stood in long queues to experience the store. Online shopping has come full circle.

By Mark van Dijk
Image: Gallo/Getty Images