E-commerce is ‘the great equaliser’ needed to jump-start SA’s economy

How do we create more employment, while growing an inclusive and transformed South African economy? This is a perennial challenge faced by the public and private sector. The answer lies with e-commerce and digital markets.

In the standard retail model, a business opens more stores when it’s successful. This requires great capital investment, which works for established or well-funded players, but what about entrepreneurs and small and medium enterprises (SMEs) without access to funding and expertise?

For them, simply having a product or service is not enough. These smaller enterprises face various barriers to entry — including access to customers, set-up costs, production and overall skills and experience — that limit their scale potential. 

In turn, only one in 10 South African start-ups make it past year three. So how do we improve those odds and the power to generate jobs to jump-start the economy?

Digital economy: the great equaliser

E-commerce is unlocking the power of SMEs to contribute to a vibrant economy by leveraging technology and innovation. Entrepreneurs and small businesses now have access to platforms, such as Takealot and others, that provide instant access to a receptive customer base, storage, order fulfilment such as packing and dispatch, and delivery right to their customers’ door. 

So what would have taken decades before, now happens far quicker, allowing SMEs to enter the formal economy and have an instant national footprint by listing their products online.

And while access to capital was once a hurdle for SMEs, e-commerce platforms like Takealot now offer the infrastructure to help level the playing field against larger enterprises by reducing costs, while also granting access to a broad client base — arguably one of the most pivotal elements to a business’s success and undoubtedly the most transformative aspect of any digital market.

The potential of e-commerce is reflected in the diversity of the businesses starting to emerge online: from start-ups offering beauty products and sports apparel and equipment to augmented reality products and handcrafted toys.

Indeed, thousands of new entrepreneurs have started to enter the digital market fuelled by the growing adoption of smartphones and decreasing data costs, and encouraged by the undeniable success of their peers on e-commerce platforms where they have the opportunity to compete head to head with global and local brands.

The power of this business model is evidenced by the fact that since the Takealot Group started 11 years ago, it has grown from 20 people to a business that’s created over 33,000 jobs. It’s also seen a growth of 120 to 8,000 SMEs trading on Takealot, its general merchandise platform; 110 local brands on sale at Superbalist, Takealot’s fashion and apparel platform; and over 10,000 restaurant partners on its on-demand food delivery platform, Mr D. That translates to over R9bn generated towards SA’s GDP and an estimated R2m of tax revenue contributed in 2021 alone. 

The beauty of the Takealot Group’s model is that it’s only successful if the SMEs it works with on its various platforms are too. And so, these platforms and the various SMEs that trade on them grow together, representing a symbiotic relationship that unlocks entrepreneurial talent and enables a pathway to equitable economic participation that helps transform SA’s economy and distribute wealth among a wider group of people.

The future of SA’s digital economy

The market penetration for SA’s digital economy is now about 4%. This reflects a huge growth potential when you consider similar emerging markets such as Brazil, India and China, who are sitting at about 8% to 14% and beyond. The 8,000 listed SMEs on Takelot could feasibly multiply to up to 25,000, helping create in excess of 90,000 jobs.

So how do we maximise the future growth of this important sector?

For starters, we need to create the right conditions that allow for different business models to evolve and become profitable. This is a delicate balancing act between regulating to encourage investment and digital market development, and regulating to pre-empt potential competitive concerns that may or may not materialise.

It is equally important to increase access to affordable data, electricity and logistics infrastructure to enable adoption of e-commerce platforms and support the viability of these enabling businesses by reducing the cost of doing business in SA

The evidence is clear that digital markets are the great equaliser. The opportunity is vast. Digital markets are the answer to questions of job creation, economic development, transformation and modernisation.

The sector is still at nascent stage; let us proceed with caution especially on regulation, but let us proceed with vigour on the enabling factors. Failure to do so will be a sad case of failing to realise a potential opportunity to transform and accelerate our economy.

SA deserves business models that deliver — and e-commerce and digital markets do just that.

This article was paid for by Takealot.