The retail industry in South Africa remains a major contributor to the economy, employing more than a million people, which makes it the second largest employer after the government.
It is also the third biggest industry sector and contributes some 20% of the country’s gross domestic product.
Based on the recent surge in e-Commerce activity, it would be easy to assume that South Africa is headed towards a fully connected retail landscape, but yet there are factors inherent to the local consumer demographic that may dictate and restrict the extent to which a connected retail strategy can be rolled out.
Brick-and-mortar outlets still dominate the landscape, despite local retailers doing much to boost their online shopping capabilities during the COVID-19 pandemic, which saw a 66% growth in eCommerce as many accelerated their digital transformation strategies. A study released by Deloitte earlier this year found that more than 70% of South Africans are now shopping online.
Even with the easing of pandemic restrictions and a return of foot traffic volumes to almost pre-pandemic levels at physical retail outlets, online shopping activity remains robust and is projected to follow an upward trajectory in the coming years.
With online and offline shopping now evidently combining in South Africa, retailers are no doubt looking towards connected retail strategies to deliver omnichannel experiences for their customers – connected retail being services such as Click & Collect, Ship from Store, and Endless Aisle. However, unlike other markets, South Africa has one big hurdle to overcome in this space – the disparity between servicing urban and rural communities with retail offerings.
An uneven playing field
To a large extent, the South African retail market is a tale of two worlds, sitting on either side of the country’s so-called digital divide. Each of these consumer segments has its own unique needs, challenges, and expectations, meaning that there is essentially no one-size-fits-all approach to growing Connected Retailing across the country’s entire consumer base.
Consumers who are driving the uptake of online shopping are predominantly based in densely populated urban areas as they typically have access to more reliable internet connectivity and at least one or more smart devices.
These customers want instant gratification and are largely motivated to shop online for convenience, being happy to pay for their shopping delivered to their doorstep or to pick up their goods in-store.
They are also more conditioned to expect personalized shopping experiences via an omnichannel communication platform, so that they can engage with their preferred brands on their own terms, via their preferred channels.
At the other end of the spectrum is the consumer segment spread across South Africa’s remote rural areas, whose experiences and spending habits are distinctly different to those of the other urban-based consumer segments.
These customers often have limited access to resources and reside in areas with little or no network coverage, and sporadic power. Considering that the cost of data remains relatively high in South Africa, it is unlikely that these customers would buy data for the purposes of online shopping.
Instead of focusing on providing a fully connected retail experience, rural outlets should rather look at enhancing their customers’ in-store experience by looking to solutions such as smart point-of-sale (POS) and mobile retail solutions. These are designed to boost in-store performance, reduce operating costs, and enable quick and efficient services for both single and multi-location operations.
From a logistical perspective, even if consumers in these remote areas were to look to online shopping as a means to access the type of items that high-end stores provide in urban areas, the sheer distance and low population density in these areas would make delivery unfeasibly expensive.
So, the service offerings in these areas remain quite limited, even for large retailers, who normally offer a very limited assortment of basic products to far-flung outlets. Unlike the stores in urban centres, these outlets receive stock deliveries once a week, or even once every two weeks.
One way to address the issue of online shopping in remote areas – albeit to a limited extent – is to offer a click-and-collect option, where a customer can order an item online that is not usually stocked in the local outlet and collect it from the store once it arrives with the store’s regular stock shipment. However, delivery would take a long time and the experience would be vastly different to that of a consumer based in an urban setting.
Nonetheless, when aligned with measures to manage consumer expectations, traditional brick-and-mortar outlets can be used to enhance the online experience by providing a venue from which online customers can collect or return goods, which could speed up the process and reduce some of the retailer’s costs.
Thus, the brick-and-mortar store can act as a fulfilment centre for the online customer, as well as a way of strengthening the brand by making it concrete. How far eCommerce ultimately penetrates across South Africa’s retail landscape will depend on how aggressively retailers push these offerings into remote areas, but a fully connected retail experience seems unlikely in the foreseeable future.
Instead, a better fit for rural retail outlets would be a hybrid in-store and connected retail experience that would improve the customer experience, even if to a limited extent.
Arguably, one of the best ways for retailers to start thinking about the role their brick-and-mortar stores can play is to view them holistically as an ecosystem that includes the logistics/fulfilment side of operations.
By Adrian Smith, Senior Managing Consultant, at Retail Directions.