SA retailers likely to lose out if they avoid e-commerce
Local retailers exhaust a lot of their efforts on bricks-and-mortar stores at the expense of the online side of the business
Traditional retail businesses in SA could stand to lose out on the value of e-commerce due to their reluctance to embrace online business, according to a report by global management consultancy Accenture.
Accenture says local retailers exhaust a lot of their efforts on their bricks-and-mortar stores at the expense of the online side of the business. This means that they stand to lose out on potential profit that the online business can generate in the $3.5-trillion retail industry.
The study reveals that SA retailers particularly find online operations unprofitable, too costly to maintain and also find “it difficult to measure the return on investment of their online offerings”.
Local retailers still find physical stores to be less risky compared to their online counterparts. In addition, one Visa survey found that 63% of South Africans prefer to go to physical stores, while Urban Studies found that 76% of consumers visit a mall once a week. This makes it challenging for both retailers and consumers to fully embrace the benefits of e-commerce.
Trend translator and future finance specialist for Flux Trends Bronwyn Williams suggests that local retailers have more than enough reason to be wary of fully embracing e-commerce.
“The e-commerce game globally has really evolved into quite a homogenous sector whereby your biggest e-commerce retailers are eating up all the smaller ones. We’ve seen it in the SA market how Takealot has really absorbed most of that online commerce space”, she said.
Williams says chain stores such as Mr Price and Truworths stand a higher chance of succeeding in e-commerce because they have their own brands and products, which play a role in allowing them to manage their own online presence.
Small stores, on the other hand, stand a smaller chance of making it.
“The other reality is that smaller retail stores will have higher delivery costs and those costs will be higher to purchase from a small e-commerce store [compared to] an aggregator such as Takealot … and that means even if you do list the stuff online, the risk is that some other bigger store can cannibalise your sales.”
Given the shift towards the fourth industrial revolution (4IR), retailers find themselves under increasing pressure to keep up with the times for the survival of their businesses. With the 4IR disruptive technologies and trends, such as robotics, virtual reality (VR) and artificial intelligence (AI), are changing the way people live and work.
Some international online retail giants, such as Amazon, Walmart and eBay have had a lot of success in the online market and are indicative of the benefits of e-commerce.
Since 2010, Amazon quintupled its sales, while in 2019 “half of all US households were subscribed to Amazon Prime”, according to Accenture.
MD for Accenture Retail in Africa John Watling believes that there is potential for local retailers to “unlock value trapped in their core business”. “If local retailers can follow suit by offering experiences such as those of Amazon, eBay, Zappos and others, customers will be more trusting of online shopping and less reluctant to use it.”
According to Accenture, the opportunity “is there for the taking” if they embrace e-commerce in the near future.