By Quinton de Villiers
South Africa may have lagged behind other countries in adopting e-commerce platforms; however, it is inevitable that the concept will eventually gain wide local acceptance.
It will also have a similar impact here as it has had on traditional retail in developed countries, and South African third-party logistics providers (3PLs) will have to completely overhaul their business models to remain relevant.
The competitive edge of these platforms is their ability to efficiently match users. Unlike the traditional retail model, they do not own inventory and a means of manufacturing. They generate revenue from connecting people and facilitating the exchange. For example, Alibaba charges a commission to sellers when the deal has been finalised.
The strength of this Chinese digital e-commerce platform is its ability to add multiple monetised offerings to the original trading concept.
While these platforms have severely disrupted conventional retail abroad, they have also had a profound impact on the industry’s traditional supply-chain infrastructure and support services.
Decentralisation of inventory ownership by facilitating multiple transactions between smaller suppliers and buyers has replaced large warehouses and eliminated the need for complex bulk distribution networks.
Essentially, supply chain efficiencies – the very value that reputable 3PLs bring to business – is no longer the main selling point in this digital era. Instead, this business model relies heavily on “last mile” services to a multitude of merchants operating from a single platform. This is opposed to high-value, large volume with a handful of clients, requiring a significant shift in mind-set.
Fortunately, we do have time to adapt, considering the unique nature of the South African market that has stalled the accelerated adoption of e-commerce platforms. At present, online shopping only accounts for just more than a per cent of total retail turnover, compared to 8% in the United States.
This can mainly be attributed to the country being a cash-based economy at this point in time, while most South Africans are still very wary of conducting transactions over the internet.
However, there are already signs of the impact that the Internet of Things has had on certain retail models in the country, albeit very limited at this point in time. Much of the recent shrinkage in the sector can be attributed to the recessionary economic environment.
Efi Dahan, general manager of Paypal in Israel and Africa was quoted in a leading financial journal that e-commerce was starting to gain traction in the country. A major driver at this point in time is cross-border shopping as consumers search for a wider variety of products at better prices and reduced shipping costs.
PayPal and Ipsos’ third annual cross-border commerce report forecasts that South Africa’s online cross-border spend will grow to more than R53-billion by 2018.
In 2016, 43% of South African adults shopped cross-border, with the United States the most popular online market for local digital citizens. This is followed by China and the United Kingdom.
Moreover, the research indicates that 58% of South African adults shopped online during 2016 and spent just more than R37-billion transacting in this manner. It was expected that this trend would continue throughout 2017.
Convenience is cited as one of the main drivers of this trend.
According to Hugo Machin, co-chief-executive officer of global real estate securities at Schroders, e-commerce growth in South Africa can also be attributed to improved familiarity with the concept among consumers. Importantly, they are also becoming more trusting of the security that surrounds online payments.
In the interim, Atterbury, chief operating officer, Stoffel van Beek, says the highest growth sector in online shopping is clothing. The number of shoppers who buy clothing both online and in-store has climbed from 20% to 57% from 2013 to 2016.
Other products that are mainly being bought in this manner include downloadable digital entertainment, educational items and event tickets.
Online purchases are increasingly being done on mobile devices, contributing towards the more than 60% growth in online spend between 2015 and 2016.
South Africa’s internet penetration reached 40% in 2017. South Africans may still be buying conventionally, but they are using this infrastructure to research ahead of purchasing. This has had a profound impact on the traditional mall model in the country in that it has reduced browsing and incidental shopping trends.
Unlike other digital trends, there are not that many hurdles facing quicker adoption in the country. Pushback from labour is likely to be low considering that these platforms create job opportunities.
For example, Jack Ma, founder of Alibaba, promises to create as many as a million jobs in the United States by including suppliers based in that country to its existing database.
In addition, there are no or limited legislative concerns in place in South Africa that would hinder wider adoption of trading in this manner.
Clearly, more “disruption” is looming. However, change drives innovation which, in turn, provides a competitive edge!
Quinton de Villiers is the founder and managing director of Bridgewater Logistics with a long and impressive track-record in African logistics and security. Follow Quinton at #InTheFastLane for more insights and expert commentary on African transport and logistics.