By Renee Fortune, Copywriter & Social Media Manager, World Wide Creative, @reneejoyfortune
Behind The Scenes With South Africa's E-Commerce Leaders: An Industry Overview
When Yuppiechef; one of South Africa’s most ubiquitous e-commerce stores, was launched, the industry was a barren landscape according to co-founder Andrew Smith. That was 2006. A mere nine years later and the e-commerce landscape has changed indelibly. A number of specialist e-commerce stores and niche players are vying for attention with traditional retailers who have expanded into the online space. For aspiring e-commerce entrepreneurs and established players alike, the industry holds exciting prospects. As Smith claims, “if South Africans have good stores to shop at, the growth will continue.”
The Heavy Chef team got three of South Africa’s e-commerce experts together to gauge their opinions on the industry – Andrew Smith, the MD of Yuppiechef, Luke Jedeikin, the MD of Superbalist and Gary Hadfield, the CEO of Loot.co.za. For those holding onto the image of an archetypal online store starting out in a garage and flourishing into a multi-billion rand empire, don’t hold your breath. While many local e-commerce start-ups have indeed built their ventures from the ground up, Luke Jedeikin paints a different picture of what today’s e-commerce start-up environment is like: “The Citymob/Yuppiechef/Wantitall story of friends hacking and bootstrapping an idea from the lounge to greatness, is no longer. It’s closer to the US scenario where Techcrunch breaks the story of a ‘start-up’ led by the ex VP of Ebay and its $10,000,000.00 of seed capital. The next era is about real scale, is capital intensive and requires more science than hustle.
For Loot’s Gary Hadfield, the growth of the industry can be attributed to the contributions of “major market investment powerhouses” as well as a few fundamental changes. For example, as Gary claims “the last five years has seen the e-commerce sector rapidly evolve from a media product centric offering e.g. books, DVD’s and games, to more broad based general merchandise. The electronics/computer, kitchen/home and fashion categories have become major contributors to the revenue mixes of the key players.” In turn, “these category shifts have been a catalyst in changing the demographic and psychographic profile of online shoppers in South Africa. The higher participating level of millennials in online shopping and their sphere of influence has already got our full attention.”
The Three Hottest Trends In E-Commerce
1) Omni-Channel Shopping
According to Andrew Smith, the industry has grown passed the era of believing that “physical retail is dead,” and is moving towards the realisation that “online and physical retail can play together very nicely.” Omni-channel shopping could entail “browsing in-store and having the item shipped to your home, or browsing online and collecting in store, or any number of permutations of that.” Retailers are beginning to understand that customers want flexibility and that through omni-channel retail, they get the best of both worlds.
2) UX Obsession
Superbalist’s MD, Luke Jedeikin envisions a shift from the obsession with inventing entirely new 0-1 distruptive technologies and platforms, to an emphasis on creating UX efficiencies around the things the world already does at scale. He references Uber as an example: “Uber is not a 0-1 concept. They did not invent a new means to travel. They just created an app that made calling a cab way easier. E-commerce will follow that trend. We don’t need new gimmicky ways to shop. We just need it to get easier and simpler.”
3) Taking The Three C’s To The Next Level
For Loot’s Gary Hadfield, online retailers are under pressure to take the blend of the three C’s (Content, Community, Commerce) to the next level. How will this manifest? According to Gary, the evidence lies in the “rapidly increasing influence of social networks and video-based content on purchase decisions and conversion rates. The need to have video more deeply integrated into the online shopping experience will be essential for any player wanting to make in-roads in the e-commerce sphere.”
The Most Useful Tools For E-Commerce Start-Ups In SA
1) Payment Tools
New mobile payment solutions like SnapScan are what Yuppiechef’s Andrew Smith is most excited about. According to Smith: “They have made it very easy for new merchants to accept credit cards. Once a customer is comfortable with the mobile app it makes checkout really quick and easy.”
Gary Hadfield suggests using services like those offered by Parcel Ninja, Pargo, Efinity and Fedex.
Google Analytics and Alexa are two of the most useful tools for web analytics according to Hadfield.
Shopify is at the top of Gary Hadfield’s list of useful shopfront tools, or a marketplace like Bidorbuy.co.za
The Biggest Challenges For SA’s E-Commerce Players
1) 3D Secure
Smith argues that the enforcement of 3D Secure for payments despite resistance from the majority of local e-commerce stores, is “an example of how we are fighting an uphill battle to grow a fledgling industry.”
2) Spreading The Word
Yuppiechef’s Andrew Smith suggests that banks should assist in the promotion of online shopping store because they are the trusted institutions whose assurances would hold the most weight with customers.
For Luke Jedeikin, e-commerce players in the South African market have overcome challenges around trust, fraud, bandwidth, access and market adoption. Now, e-tailers are faced with the same universal challenges as their global counterparts: growing traffic, increasing conversion rates and generating more revenue.
4) Keeping Last Mile Costs Down
For Gary Hadfield, the main challenge transcends geographical borders: “The local e-commerce players face more competition than ever from global competitors due to a number of disruptive and reduced distribution cost solutions. The answer is to have a mix of the traditional Fedex type services and more disruptive crowd sourcing solutions like picup.co.za or collection points like those offered by Pargo. The science will be to execute this in a cost effective manner but still deliver a ‘WOW’ customer experience.”
How Does The Rest Of Africa Shape Up?
All three e-commerce experts agree that two other African countries are experiencing a significant upsurge in their e-commerce industries: Nigeria and Kenya. Hadfield identifies the major players in these markets as being Konga, Kaymu, Jumia, Hellofood and Dealdey. Delivery infrastructure and mature banking are however, two of the biggest ‘leg-ups’ South Africa has had into the industry, according to Andrew Smith. These infrastructure hurdles are yet to be overcome by some of the emerging African markets but rapid developments are being driven by investment. So as for e-commerce in Nigeria and Kenya – watch this space.
Technological breakthroughs, digital innovation and the internet of people is changing the way Africa communicates and trades inside and outside of its borders. With a number of thriving, trend-setting, e-commerce sites are making their mark on the industry, South Africa is raising the bar high. Luke Jedeikin has this advice for South Africa’s aspiring e-commerce entrepreneurs:
“In the US, your business plan starts with ‘what do you sell that Amazon can't.’ The same is true here: don't offer the same product from the same brands as players that are clearly far more dominant than you. They will out buy, out ship, out rank and outbid you. Pick a defensible category. Then it’s about the operational stuff. E-commerce is not simply selling a product via a website. It’s getting the product to the customer on the date you promised. If you can’t offer reliable fulfilment, you don't have a business. Finally, you need funding – these businesses aren’t cheap.”
This article was featured in the Development Edition of the Heavy Chef Review magazine - it is available for download here.