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Is Covid-19 speeding up SA’s digital transformation?

‘You will see far more of a mix of shopping, what they call omni-channel, using all channels, physical and digital, using mobile devices and so on,’ predicts Arthur Goldstuck.

NOMPU SIZIBA: Online retail has been a very small player in the bigger retail landscape. But the Covid-19 experience and its associated lockdown has shaken things up in the retail sector, lending itself to social distancing, safer payment mechanisms and general safety. South African retailers have reported a massive spurt in online shopping, and they’ve had to quickly adapt to demand.

More recently, the e-commerce environment has been opened up further, with consumers being able to purchase what they need over the internet. Should this serve as a wake-up call for traditional retailers, who remain behind the curve by only selling their wares in brick and mortar structures? Has this episode permanently changed the face of retail?

Well, to share his perspective on this issue, I’m joined on the line by Arthur Goldstuck, the founder and CEO of World Wide Worx. Thanks very much, Arthur, for joining us. During the Level 5 lockdown phase, have you come across any data that show the kind of growth grocery retailers experience in online shopping?

ARTHUR GOLDSTUCK: Good evening, Nompu. The most significant number that we’ve seen is the one reported by Pick n Pay, where they saw an increase in March and April of around 200% in online grocery sales. And we also are picking up basically a massive increase in the number of people shopping for groceries online for the first time.

So the numbers will shift a little, now that all online retail has been opened up. If you look at the March and April numbers, we are going to see probably that a proportion of the population shopping online regularly for groceries have shot up.

NOMPU SIZIBA: After a mighty uproar that e-commerce was excluded for Level 4 lockdown trading, with many arguing that it’s the best type of retail because of its ability to better observe social distancing and safety, the government finally opened up the e-commerce valves last week – with the exception, of course, of liquor and tobacco sales. Presumably your traditional store owners who have been slow to adapt to e-commerce will now be tempted to gear themselves up for digital trading sooner rather than later, given the current trading constraints.

ARTHUR GOLDSTUCK: They don’t have a choice in the matter. The government regulation prohibiting a total opening up of online retail was quite irrational, and based on a kind of technophobia that has always existed in government.

But retailers cannot afford that kind of technophobia. You’ve seen into an organisation like Checkers, which was notorious for avoiding going digital, or at least online sales, becoming one of the front runners in how quickly they can deliver an order that’s placed though their partners – and that’s the kind of model that the big players are now embracing, partly with small agile players who can deliver very quickly.

Previously there was the situation where, if you ordered from Pick n Pay or Woolworths, you had to book a window of delivery, which could be later that week before lockdown, and then when lockdown came, it soon became [very much later], because there was such massive demand. They are all now partnered with small nimble players, who can deliver the same day – and that has transformed grocery commerce in South Africa.

But, for the rest of the retailers, those who are not selling online, they could actually learn how to plug their systems and their products into the supply chain of online retail, of courier services, of performance, and of giving customers what they want, but delivering it when they want – and that’s going to be a distribution shift which almost every retailer has to make if they want to survive during this period.

NOMPU SIZIBA: So, in order to be adaptable, you’ve touched on a couple of things. What’s involved in making that change to digital? And, particularly for your smaller type of businesses, is it an expensive exercise?

ARTHUR GOLDSTUCK: It can be very expensive, but it’s far less expensive than, for example, setting up a new physical store. So one of the things that you need is a payment gateway, and often you need also a merchant account with a bank to accept credit cards.

But probably payment gateways, or what are called “super merchants”, have the a merchant account with a bank, and they take a percentage from the retailer in order to process that transaction. That is the single most important element.

But then, after that, if you can accept the payment, then you’ve got to make sure you get the product to the people, as well. And in most cases you’re going to have to depend on a courier service, unless you’re able to deliver yourself.

But what some of the newcomers have done, like for example, like Tree Sweets which is a great grocery-delivery service in various suburbs in Johannesburg, initially could only deliver in maybe 10 suburbs in close proximity to the person running the business. Then they partnered with Uber Eats and suddenly they could deliver almost anywhere in Johannesburg, because Uber drivers are operating almost anywhere in Johannesburg. So, as long as they could get their products to the drivers, the drivers could get it to their customers. And that’s why they’ve been able to expand significantly.

So it’s those kind of creative solutions and partnering with existing operators that is allowing e-commerce to expand, and hopefully flourish.

NOMPU SIZIBA: Obviously there’s talk of the vast majority of the economy going to Level 3 by the end of the month, but some areas may not be so lucky if they have too high an infection rate. Regardless of what may happen, and as a sort of fail-safe, would you advise that businesses gear themselves up for digital anyway, because they don’t know what the future holds?

ARTHUR GOLDSTUCK: There is no question. Okay, the two main centres in South Africa, Johannesburg and Cape Town, are likely to remain at a fairly high level of lockdown because they also happen to be the hot spots for infections.

So I think that retailers have to gear themselves up towards supplying people remotely in these two major centres for a good few months to come.

NOMPU SIZIBA: So, Arthur, based on your analysis, just give us some perspective. Typically in recent years what is online retail’s share of total retail been? And, given the Covid-19-related lockdown, and some households having changed the way that they shop, could we see online retail grab much more of a market share in terms of retail as we go forward?

ARTHUR GOLDSTUCK: It’s certainly going to happen. So, to put it into context, in 2018 online retail made up something like 1.4% of total retail. Total retail did just over R1 trillion in South Africa, and online retail came to R14 billion. So this year we are likely to see total retail slumping somewhat, but online retail will probably get a massive boost.

We had originally forecast that it would take until around 2022 before online retail reached even 2% of total retail. But now we are expecting that to happen this year.

NOMPU SIZIBA: Of course, South Africa is a little bit behind the curve in terms of online shopping and all of that, but this is really a global question. Do you think Covid-19 and its impact is going to change the retail landscape globally forever?

ARTHUR GOLDSTUCK: It certainly will. We’ve been analysing the international steps and trends, and we’ve seen significant new trends emerging. So, for example, if you to look at what’s happened in China post lockdown, that will be the first clue of what will happen in other countries post lockdown, and you will see far more of a mix of shopping, what they call omni-channel, which means using all channels, physical and digital, using mobile devices and so on. So omni-channel shopping is going to become a standard approach for many people, especially those who have credit cards and have the means to shop online. Online shopping will become a standard part of their shopping behaviour whereas it might not have been before.

Another phenomenon that they have seen also is in terms of payments. Contactless payments is going to become a norm. We are still now quite shocked that we have to hand over our credit cards in shops. No one wants to do that anymore. Payment systems are going to change in physical retail stores. Physical retail will probably start embracing some of the tools that are used in online retail, to be paying by your phone, for example, using an app as opposed to handing over something to the cashier. So it’ll almost be like online shopping, even when you are in a physical store.

NOMPU SIZIBA: Thanks very much, Arthur, for those insights, and let’s see what the future holds.

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