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30 March 2021
This article first appeared on Fin24 on New24.com
Coming e-commerce democratic revolution in SA means smaller business can compete with giants
By Arun Varughese
Click, click. That’s all it takes these days to access the majority of our lives.
Online entertainment and social media exist in the unseen ether of the internet, where many of us find ourselves comfortable to interact virtually.
The COVID-19 pandemic has only accelerated the shift towards transacting and connecting online, and a large part of the revolution has been driven by the new ease of e-commerce.
But unlike our compatriots in the developed world, South Africans remain cautious in embracing online shopping as our status quo. A mere 2.7% of South African retail sales was online in 2020, compared to between 13% - 20% in more developed markets. This despite online retail growing by over 36% last year.
It speaks to a vastly under-penetrated market.
But a sea of change is underway which will democratise the retails space and allow even the smallest of retailers to compete with the giant, established brands.
With the total online sales forecast to be c.R60 billion in 2025, which is double the c.R31 billion spent in 2020, we expect 5 - 10% of total retail sales by 2025 to be online. This will fundamentally change the shopping landscape by providing a greater choice of where we shop for all consumers.
The rise of cheap, easy to use, cloud-based platforms such as Shopify (which offers online retailers a suite of services including payments, marketing, shipping and customer engagement tools) and Etsy (an e-commerce website focused on handmade, vintage and craft supplies) alongside existing retail giants such as Amazon, Alibaba and e-Bay allow people across the globe, including South Africans, to easily sell their products in large marketplaces.
These days anyone with a decent internet connection can become an online retailer. All the elements in the value chain have been catered for by third parties in a scalable, efficient and easily accessible manner.
Setting up a business can be done swiftly through the Companies and Intellectual Properties Commission (CIPC) or any one of the 3rd party providers such as FNB. To import a product, we can access suppliers in other countries by simply searching the internet and making direct contact with them.
Logistics operators like Santova, that cater to SMEs, can do door to door delivery from across the globe, including the handling of customs and clearing.
For the all-important front-end (what the customer sees when shopping online), there are many options. Online website creation and hosting platforms such as WordPress and Squarespace provide relatively simple and affordable options for budding entrepreneurs.
E-commerce platforms such as Shopify and Magenta make the process even easier as they are pre-built to host e-commerce websites for small businesses. For example, a Shopify store costs USD29 a month and includes all the backend solutions such as accepting payments, hosting, and ready-made website templates; which makes it a highly affordable option.
Once setup has been completed on any of these platforms, vendors such as Parcel Ninja in Johannesburg can assist with warehouse solutions and delivery. These vendors, together with online accounting software such as Xero, are designed to automatically sync with the e-commerce platforms, significantly lowering the complexity of operating an online business.
Marketing a product could not be easier with the likes of Google Adwords, Facebook and Instagram Ads - all providing low cost, highly targeted advertising to potential customers. With the ability to narrow down the targeting to highly detailed levels such as profession, demographics, interests and financial means, this results in very focused - and effective - marketing spend.
While all of this can be done via your “own” website channel, in South Africa utilising platforms such as Takealot can be another effective method to leverage the benefits of e-commerce.
With third party sales growing rapidly, products are listed on websites like Takealot and the entire sale, including fulfillment, is handled by them. Given that Takealot has an estimated market share of 20% - 30% of online sales in South Africa, it is an excellent option to reach online shoppers without having to recreate the supply chain and front end.
With all the tools and benefits of the internet at our fingertips, small businesses across South Africa can thrive and effectively compete against the giants in the space.
Democratisation of the retail space, may help break the hegemony of the established retail giants and help put the smaller businesses in South Africa on an even footing.
Varughese is Head of TMT (Technology, Media & Telecoms) Advisory at RMB
