Lockdown forces a fundamental shift to online
ý 2020 may be the year in which technology and the internet fundamentally change the way South Africans shop.
For years, reports have predicted that online retail was on the cusp of claiming the traditional retail sector’s lunch.
The rise of e-commerce players, including Amazon in the US and Naspers-backed Takealot in the local market, fed this narrative. Doomsayers said the days of brick and mortar stores were numbered.
But even though Takealot alone topped R196m in sales on Black Friday in 2018, the sector was still in its infancy. It accounted for a mere 1.4% of total retail spending in 2019, according to Visa. Data from World Wide Worx suggests this small slice of the retail pie was worth about R14bn.
Lockdowns, which have eroded so much value in the business sector and economy, may be the lifeor-death push that retailers need to force them to expand their online presence. At the least, this could push online sales out of infancy into its toddler years.
Travel restrictions and bans on the sale of certain goods and services have already forced many businesses, large and small, to embrace technology and increase their presence online.
Martin Pienaar, co-owner of
Dry Dock, a boutique liquor store, says when the lockdown was announced, the decision was made to focus on the online store. At the time sales were low and the store lacked the range of products offered in the physical store.
By using its website to host virtual wine-tastings, the business was able to increase interest in the online store.
Now that alcohol can be delivered, customers are buying the same wines that were advertised ahead of the tastings.
Pienaar says orders off its e-commerce platform increased as the lockdown continued, so much so that by the first week of lockdown level 3, “we had a record week that far exceeded any week since our opening three years ago”.
“Our online business has been so successful that we have delayed the opening of our physical store,” says Pienaar. “In future, online will be our primary offering, with the physical store playing a support role. Using e-hailing motorcycle couriers ensures fast delivery of orders. Our customer base has grown from a small radius around our Parkhurst store to a national one as a result of e-commerce.”
Even traditional players with a pre-lockdown online presence report greater use of their websites. Woolworths says it has had triple-digit growth in online sales during the lockdown.
Because of social distancing, Woolworths’ “click and collect” has become popular. Unlike the traditional system where people pay online and collect from a designated store, the company introduced a new “curbside” version at 60 of its locations around SA in April. Customers order and pay online, drive to the store and are directed to designated parking bays where staff bring the shopping to the car in a contactless process.
Other firms have also looked for opportunities. Ride-hailing firm
Bolt (formerly Taxify) expanded to offer deliveries for businesses that need to deliver directly to customers but lack drivers. Businesses pay about R30 for a delivery in an 8km radius, Bolt SA’S country manager Gareth Taylor says.
Until last week, restaurants weren’t able to open for sit-in patrons, while work-from-home policies have forced companies to use services like Bolt.
Bolt, itself affected by a reduction in e-hailing customers, used its network of drivers to move beyond driving passengers in order to keep revenues coming in.
In Cape Town the company has also introduced an online food delivery unit, Bolt Food, with plans to expand in Joburg soon.
Online retail could account for up to 5% of retail sales this year, says Derek Cikes, commercial director at Payflex, an online payments platform used by companies such as Superbalist, Incredible Connection, Hifi Corp, Essops Home and Dry Dock.
He says Payflex has had a 500% increase in grocery sales on its
platform, month-on-month, since the lockdown started, and now a four-fold increase in liquor sales.
Despite this apparent growth, Cikes says with an estimated 40-million South Africans participating in the largely cash-driven informal sector, there is still some way to go before e-commerce becomes a greater part of the economy.
Others have a more optimistic outlook. Karen Nadasen, country manager of Payu SA, a Prosusbacked fintech company that provides payment technology to online merchants, expects e-commerce to reach 10% of total retail by the end of the year.
Nadasen, who was recently appointed chair of the Ecommerce Forum SA, says more research needs to be done into the size of the market, because online retail figures often do not account for activities and businesses such as booking air travel and hotels.
A contrarian view says the growth is simply a response to a crisis and that South Africans, who have traditionally loved going to malls, will switch to their old habits once restrictions have lifted.
While mall shoppers are already returning to physical stores, Nadasen and Cikes believe the lockdown has fostered a fundamental shift in behaviour for SA consumers and companies towards greater digital business.