Online retailer Amazon has made its first commercial drone delivery as it seeks to revolutionise the supply chain aspect of online shopping. The delivery was made in the English city of Cambridge and took 13 minutes “from click to delivery” the company says.
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Wednesday, 07 December 2016 08:55

Grocery store with no queues and checkouts

It sound too good to be true: a bricks-and-mortar grocery store without checkout tills or queues of customers. Yet that’s what online retailer Amazon has done in its home city of Seattle in the US. Called Amazon Go, it uses sensors to detect what shoppers have taken from the shelves and then sends a bill to their Amazon account. The store is currently only open to employees as it is in the trial phase, but the company intends to open several similar stores for public use next year and, if successful, could open as many as 2 000 grocery outlets across the US. Items on offer to customers include bread, milk, and ready-to-eat meals that are made on-site. While Amazon is primarily an e-commerce business, it does operate a bricks-and-mortar book shop in Seattle and often has pop-up stores at malls to sell items such as the Kindle e-reader. It also has an online grocery offering called AmazonFresh, and the intention is that the physical stores will complement this service. A report by Reuters news agency quotes retail research expert Neil Saunders as saying: “The checkout lines are always the most inefficient parts of the store experience. Not only would you save a lot on labour costs, you actually make the process much quicker for consumers and much more satisfying.” He added that the grab-and-go approach would take getting used to, as some people might feel like they were ‘stealing’ items from the store.
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While online retailing in South Africa is growing and attracting increasing attention from marketers and consumers, it still accounts for only a tiny percentage of overall retail spending in the country. This is one of the most notable findings of a study released yesterday (Wednesday). According to the Online Retail in South Africa 2016 report by Johannesburg-based technology consultancy World Wide Worx, e-commerce spending will total around R9-billion. However, this is still only 1% of total retail spending. “While 1% represents a very small proportion of overall retail, it is also a psychological barrier for investment in e-commerce initiatives by physical retailers,” said Arthur Goldstuck, MD of World Wide Worx and principal analyst of the survey. “The number also masks the extent to which a number of major retailers have exceeded the 1% online mark by a substantial margin, compared to the vast majority that are not yet close to this mark – if they have an e-commerce presence at all.” Goldstuck noted that online retail in the country is often viewed as being undeveloped and lagging behind the major international markets. “Even retailers themselves use this kind of terminology; however, this often also results in an underestimation of the healthy growth rate of online retail in this country.” He said it should be borne in mind that much of this growth has come as a result of an increase in the number of experienced Internet users in South Africa who are ready to transact online, rather than the retailers themselves getting it right and convincing shoppers to spend more on e-commerce. The study forecasts that by 2020 local online retail sales will double
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While sales in South Africa’s online retail market will hit a predicted R9-billion in 2016, double the level of only three years earlier, it is a boom that rests heavily on optimising retailer-to-consumer logistics and efficient, on-time delivery. Online retailers, many of whom are still unprofitable despite the increase in business, are competing in a market where the bar is being lifted constantly and new players continue to enter the market. An effective supply chain strategy is therefore vital to keep costs down and provide a point of competitive advantage. “Consumers are demanding faster and cheaper delivery,” Jaco Jonker, CEO of local Internet auction and online marketplace BidorBuy, tells the ‘IMM Journal of Strategic Marketing’ in its February-March 2016 issue. The magazine says it is a reality that is also being taken seriously by The Foschini Group (TFG), which is now in the midst of a R100-million online retail rollout that begun in 2014. “I believe innovation in online retail will revolve around logistics,” says Robyn Cooke, TFG’s head of e-commerce. A crucial decision for retailers is whether to retain logistics in-house or to go the outsourcing route. TFG chose the latter, outsourcing to Naspers’ On The Dot unit, which claims to be South Africa’s largest multichannel media logistics company. Outsourcing is working well for TFG. “Over 98% of orders are reaching customers in the time promised,” Cooke says. When it comes to standard deliveries, these are typically made within three to five working days, although in Johannesburg and Cape Town – which account for 80% of orders – delivery is usually achieved in one or two days. TFG is targeting huge scale and expects online sales to comprise 5% of its total SA sales within five years – in monetary terms at least R1,3-billion annually. “We expect to grow online sales at 40% a year,” says Cooke. The ‘IMM Journal of Strategic Marketing’ explores this and other marketing-related topics in the February-March 2016 issue. The magazine is published five times a year by the Institute of Marketing Management (IMM).
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South African e-commerce shoppers are snapping up shoes, electronics and homeware gifts, according to The Foschini Group (TFG), which has named these as the best sellers among its seven online stores. ‘Business Day’ newspaper quotes TFG executive Brent Curry as saying: “Footwear and electronics tend to be easy online purchases because people trust and know the brand and they don’t really have to touch and feel the product. Gifting, because it can be placed online and delivered the next day, is excelling as a category.” The group launched online stores late last year for @Home, Hi Online, Duesouth, Totalsports, Sportscene and Anatomy. According to ‘Business Day’, it plans to have online selling platforms for all of its 18 retail brands by 2018. Curry said e-commerce sales were currently running ahead of expectations and online was already making a 2.5% contribution to overall sales in less than a year. The original expectation was for a 5% sales contribution by 2018. The 2014 MasterCard ‘Online Shopping Behaviour Study’, published in conjunction with SA-based research organisation World Wide Worx, noted that South African online shoppers were becoming more diversified in their shopping choices. “The products that consumers are buying suggest that online shopping is becoming increasingly mainstream, which also bodes well for local retailers,” Arthur Goldstuck, MD of World Wide Worx, said at the time. “No longer is online shopping confined to books and DVDs, plane tickets and apps.” A survey published last year indicated that local Internet users increasingly want to shop online, with 22% of people saying they have already made online purchases and a further 48% saying they expect to do so in future. Among the biggest barriers, though, was concern about whether the items ordered would be ‘as described’ and the security of online payments.
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Thursday, 12 November 2015 07:45

World’s biggest online shopping day

Online shopping recorded its biggest-ever sales day yesterday (11 November) as Chinese consumers spent US$14,3-billion in 24 hours during an event known as Singles Day. Of that total, US$9,8-billion in purchases were made via mobile devices. Singles Day is a celebration for single people and is held on the 11th day of the 11th month because the number ‘1’ indicates a single person. To mark the day, young single Chinese will hold parties and gatherings designed to help them meet new friends or romantic partners. It has now become highly commercialised, with e-commerce retail giants such as Alibaba and JD.com competing to sell a wide range of goods to the country’s estimated 668-million Internet users. The sales figures achieved yesterday were “very solid evidence for the power of Chinese consumers”, Alibaba CEO Daniel Zhang is quoted as saying by news agency Reuters. He added that when the company started the event, “we never dreamed that it could be such a huge shopping day”. According to the news agency, “Singles' Day is the biggest shopping event in the world, larger than the United States' Black Friday and Cyber Monday combined. Many Chinese e-commerce firms offer steep discounts to attract consumption on a massive scale”. Retailers now face a huge logistical challenge to get the Singles Day online orders delivered to customers. Alibaba said the company and its partners would be using 200 aircraft, 400 000 vehicles and 1,7-million personnel to handle the deliveries.
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South African Internet users increasingly want to shop online, with 22% of people saying they have already made online purchases and a further 48% saying they expect to do so in future. Among the biggest barriers, though, is concern about whether the items ordered will be ‘as described’ and the security of online payments. These concerns are particularly relevant to online consumers considering doing cross-border shopping. This is according to a recent study conducted by research company Ipsos on behalf of banking giant FNB and international online payments system PayPal. Among those South Africans who already shop online, going cross-border is a growing trend and the study estimates that almost 80% of online shoppers could eventually be buying cross-border items on the Internet. Currently most international goods are sourced from North America (51%), Europe (39%) and Asia (24%). A study conducted among Nigerian online consumers shows similar trends, with 47% of the West African nation’s online shoppers saying they already shop cross-border and a further 37% indicating they intend to do so in future. South African ecommerce sites are popular with Nigerians and the Ipsos study shows that 30% of people have bought from SA sites. Europe (mainly the UK and Italy) is the most popular source of online goods for Nigerians (41% of shoppers), followed by North American websites (38%). “Advancement of technology is helping to open up commerce opportunities for everyone - across borders, anywhere, anytime and via any device” says Efi Dahan, Regional Director for Africa and Israel at PayPal.
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Retail giant Makro has unveiled its first ‘pick-up locker’ concept in South Africa, enabling items ordered by customers online to be collected out-of-hours at selected McDonald’s fast food outlets and Sasol petrol stations. The strategy, which is already being used in some international markets, aims to assist clients who can’t get to stores during normal operating hours and are also unavailable to accept home deliveries.

Makro’s new service is currently in the test phase and has been rolled out at five Gauteng locations thus far, with several more to follow in the next few weeks. Orders are available in the lockers within 48 hours of online purchase and customers open their specific locker by entering an SMS code on a touch screen interface on the front of the locker.

McDonald’s and Sasol, both of which offer relatively safe locations operating at nights and weekends, are partners in the project. It’s also likely that some pick-up lockers will be located in office parks. According to a press statement by the Makro, this supplements the home delivery and in-store click-and-collect solutions already on offer. The latter enables customers to select and pay for their goods online, then pick them up at a nominated store. 

“The added option of collecting your online purchase from a secure locker at a location close to you, or on your way during daily travels, has amplified the convenience of online shopping,” Makro CEO Doug Jones says in a statement. “We continue to expand our online range and hope that the combination of convenience and additional variety will make our customers’ lives easier. We are not limited to what our store can hold – [our website] now boasts 20 000 products that can be purchased online, with a high percentage of products eligible for delivery to a locker – and customers are no longer limited to two [delivery mechanisms].”

He adds: “We have seen steady growth in our online retail figures and while we continue to leverage our strengths as a traditional retailer, we are also constantly thinking of innovative ways in which to enhance and simplify the online shopping experience so that our customers can engage with us at the time and in the channel of their choice.” 

The lockers can accommodate products as big as a microwave, but alcohol is excluded from the service. “The law requires that you ensure that the person who places the order, as well as the person who receives the order, is of legal drinking age. And until we are able to solve that we won’t be allowing customers to buy and receive alcohol in this way,” Jones is reported as saying by ‘Business Day’ newspaper.

As online shopping slowly gains ground in South Africa, local retailers are now moving towards delivery options already available in markets such as Europe and North America. In the UK, for example, the giant Waitrose supermarket chain has a drive-thru service where customers can collect their online grocery orders without ever having to leave their vehicle. The chain has also been experimenting with GPS tracking technology to recognise when customers are close to a particular store – so that staff can prepare their shopping orders and have them ready when they arrive. 

 

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Thursday, 18 June 2015 22:00

African e-commerce scene looks promising

A growing African middle class and young population are creating a demand for products that store-based retail cannot meet due to a lack of shopping malls and gridlocked cities. As a result, e-commerce is on the rise on the continent and its future looks promising.

This is according to Bernadette Kissane, a London-based analyst at international market intelligence firm Euromonitor. She says development has been most notable in Nigeria, where a surge in telecommunications investment and smartphone purchases has fuelled the growth of the Internet.

“Furthermore, Nigeria boasts the largest online market for apparel and footwear in the region, which is expected to grow from US$104-million in 2014 to US$1,08-billion in 2019, mainly due to the dynamic development of trusted [online retailers] Jumia and Konga,” Kissane notes.

She adds that Jumia and Konga are leading the way for Internet retailing in Nigeria, with 36% and 23% market share respectively. Both businesses offer a range of products, from books to beauty, and include a number of local and international fashion brands such as Topshop, H&M and Vero Moda. Jumia, which now operates in eight African countries, found success in offering fast delivery services and establishing trust with consumers by allowing payment on delivery.

“A number of start-up [online] retailers have emerged in response to the growth witnessed in Nigeria,” Kissane says. “For example, ‘Webmallng.com’ and ‘Buyam.com.ng’, act as online malls, allowing merchants to set up shop in one place. Although this creates a vast product offering for consumers, it appears to cause confusion regarding the management of the site, as ‘Buyam.com.ng’ continued to display Christmas promotions on its homepage in February.”

Meanwhile, South Africa, the region’s largest apparel market overall, is expected to record a much slower pace of growth in Internet retailing, rising from US$50-million in 2014 to US$73-million in 2019. This highlights that the consumer preference in SA is to use the Internet as a research tool, but purchase items in store as a result of the mature formal retail environment.

“E-tailing in sub-Saharan African is currently dominated by local businesses.” Kissane observes. ‘Spree.co.za’ is South Africa’s primary online player with a 10% market share. The website has a similar aesthetic to ASOS (a successful British online fashion and beauty store), providing editorial content and offering an array of brands including Levi’s, Guess and Nike. Mr Price, the leading South African retail chain, has also acknowledged e-commerce as an essential distribution channel, having launched its transactional website in 2012.”

Looking at online retailing in general in sub-Saharan Africa, Euromonitor expects that it will follow the same pattern as in other markets. As more consumers gain access to the Internet and become comfortable shopping online, growth will be driven by competitive pricing, providing opportunities for fast-fashion brands appealing to the younger demographic.

“Clearly, e-tailing is still in its infancy. The weak transport infrastructure and lack of consumer confidence will continue to restrain growth,” Kissane says. “Further still, in a region where many consumers do not have a credit card and in some cases no formal address, retailers are faced with a magnitude of logistical problems they need to overcome.”

She continues: “Although forecast growth is promising, in order to see a return on investment, strategy will need to be long term and platforms such as Spree, Konga and Jumia, provide a route to market that minimises risks and allows brands to build customer relationships.”

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South Africa's burgeoning e-commerce era means that consumers are no longer shopping entirely online or offline. Rather, they taking a blended approach and using whatever channel best suits their needs.

This is one of the key findings released last week as part of the Nielsen Future of Grocery Report. It is based on research that polled 30 000 online respondents in 60 countries to understand how digital technology will shape the retail landscape of the future.

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