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 Opportunity Alert- Growth of online retail is shaking up SA logistics

 

 When bricks and mortar business owners start thinking about ecommerce - as virtually all of them did when the lockdown and Covid-19 restrictions hit the economy this year - their first thoughts go to the IT infrastructure required. They think about the shiny new website functionalities and mobile apps that will allow their customers to buy online.

​Somewhat less thought is spent on the not-so-shiny bakkie, the physical logistics required to get the goods to customers who no longer come in to the store, even though it can be argued that the delivery infrastructure is the most profound, most expensive and most challenging change that business owners will have to make when they implement ecommerce. 

Is South Africa’s transport system and logistics industry ready for the real-world impact of the impending ecommerce revolution? Many customers who tried shopping online for the first time during the worst of the Covid-19 restrictions found out that we are not quite there yet. Late deliveries, unpredictable arrival times and wrong items were the basis of many complaints. 

This should not be surprising. The Covid-19 lockdown, while certainly boosting online shopping, overwhelmed many of South Africa’s ecommerce websites and they struggled to keep up with orders. 
Dr Wilna Bean, transport expert at the University of Pretoria’s engineering faculty, agrees that South African logistics are still some way off from the precise delivery-within-the-hour level of service that Amazon Prime members in the United States experience. 

For Wilna the issue is not so much the speed of delivery in South Africa. From personal experience she finds the unpredictability of the exact arrival time of a package ordered online more problematic. Customers have to wait a whole morning or an entire day at the delivery address because they are not sure exactly when the package will arrive.

A recent Urban Studies survey of South African online shoppers found that delivery problems were identified as the second biggest disadvantage of online shopping, surpassed only by the concern that items could not be touched and felt before they were bought. Concerns about delivery included wrong items, as well as the delivery fee.

However, Wilna believes that South African logistics, a relatively well developed sector, will grow in tandem with online retail. This means extensive growth in the years ahead for especially courier companies, if the predictions about online shopping are anything to go by.

According to the latest report by World Wide Worx on online retail in South Africa, compiled last year before the Covid-19 pandemic, “online retail is projected to reach 1.4 percent of total retail in South Africa, based on an estimated R1-trillion to be spent via traditional channels in 2018. The 2 percent mark is likely to be reached by 2022”. That is a projected increase of more than 40 percent.

A look at international figures shows how far behind South Africa is on the online-retail curve. In the US, online sales makes up 16 percent of all retail, and in May this year online sales in the UK shot up to a full third of all retail, before dropping back slightly to 27 percent.

Wilna believes that being behind other parts of the world might hold some advantages for South Africa, because it allows us to learn from the mistakes of the pioneering countries, and to see what the likely impact of the shift to ecommerce will be on South Africa, and particularly on South African logistics. 
In a paper co-authored with Elizna Cilliers, Wilna has taken a wide look at how ecommerce has impacted freight movement in other countries, and how it is likely to change logistics in South Africa.

One of the main findings is that ecommerce increases traffic, so South African cities are likely to experience increased congestion. The reason is that ecommerce is not a simple reversal of the traditional movement so that the retailer now comes to the customer instead of the customer going to the shop. Traditional shopping trips are usually made on the way to and from work, or to and from picking up the kids at school, says Wilna. These movements still happen, and ecommerce deliveries just add to the traffic on the road.
  
Also, traditional shopping trips tend to be efficient to the extent that consumers visit more than one shop during an outing, often at the same centre, while ecommerce deliveries to the customer are often for one small item only. 

The impact of these increases are mitigated somewhat by the fact that deliveries directly to the homes and workplaces of consumers are not the only way in which online orders are fulfilled. Click-and-collect services, where the customer orders goods online and collect them at the store, are well developed overseas. This method, which holds the advantage that the shop can try to sell more to the consumer when they come to collect their orders, is not well developed in South Africa. 

The Urban Studies survey estimated that only 2 percent of local online orders were fulfilled through click-and-collect. A major proponent of the method is Pick n Pay, at least until they bought the ecommerce delivery app Bottles through which they do home deliveries.

Bottles seems to find itself on the forefront of ecommerce logistics in South Africa, and if what they say is true, South Africa is closer to the US ecommerce efficiency than is generally assumed. In a press statement following the announcement of Pick n Pay’s acquisition of Bottles, the company claims to have achieved an average delivery time of 90 minutes.

Bottles developed as an independent app for online liquor orders, and worked in partnership with Pick n Pay liquor until their very existence was threatened by the alcohol ban and the lockdown earlier this year. In an interview with the technology news site Tech Central, founders Enrico Ferigolli and Vincent Viviers explained that they had to expand their services to include groceries in collaboration with Pick n Pay. This they managed to do in a matter of days.

Then followed an eye-popping expansion of the delivery service from 50 stores to 150, including to completely new centres such as Port Elizabeth in order to keep up with the lockdown-induced demand for home deliveries.

Vincent said they were lucky that the government had shut down restaurant deliveries at the same time, so that they had enough drivers that they could take on as contractors.

Alternative ways of fulfilling online orders are through pick-up points and automated parcel stations, which are lockers placed at central public points where customers, armed with a code, can open to retrieve their online order.

In their paper, Wilna and Elizna sites research as far back as 2014 which showed that Demark, Finland, Norway and Sweden had 5 000 such points, France 18 000 and Germany alone had 36 000, placing 90 percent of Germans within 10 minutes of a pick-up point.

In South Africa, Makro has pick-up points at various petrol stations and McDonald’s restaurants, while Takealot is rolling out a network of pick-up points. Yuppiechef uses the Postnet outlets as pick-up points.
Wilna says there is lots of room to expand pick-up point networks in South Africa. 

Most business owners who are looking to integrate nationwide ecommerce into their bricks-and-mortar store would have to make a deal with a courier company to fulfil their deliveries. Only at very high volumes does it become even remotely viable to set up an inhouse delivery system, unless the business only does local deliveries.

An alternative is to trade on the emerging behemoth Takealot, which is trying to establish a universal marketplace along the lines of Amazon. The drawback is various subscription fees, “success fees”, storage fees and delivery fees that Takealot charges to fulfil orders, depending on the number of orders.
When contracting a courier service, business owners should pay close attention not only to the delivery fee, but to the sophistication of the courier’s tracking system, their delivery speed and the accuracy of their arrival time estimates. 

With ecommerce, the customer’s interaction with the delivery of their parcel is at least as important as their experience on the website. ​


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