By Julia Ahlfeldt
South African retailers haven’t been doing too well. Recent trading updates indicate that, when looking at the major listed companies’ like-for-like turnover for the last reporting cycle, there is a concerning 7.3% contraction across the board for non-food sales.
Reduced access to unsecured credit, less discretionary income, financial issues at Edgars, an explosion of shopping centres, as well as traffic gridlock in urban epicentres, have been cited among key reasons for this downward trend.
While these factors will have had a substantial impact, a slow-but-steady migration to online shopping by younger and/ or time-strapped consumers, as well as poor customer experience on and offline, cannot be ignored.
In today’s digitally-driven world, consumers have plenty of choice and are not limited to the selection of products available on traditional retailers’ shelves, as they used to be.
Independent and international labels are now increasingly accessible both in the real world and online. Much like live streaming and YouTube have given us another option to TV, so too has the internet given shoppers another place to spend.
Eating the elephant bite by bite
Although accounting for around 1% of retail spend – or R9-billion of the total R900-billion retail market – Takealot and other e-tailers are increasingly gobbling up their slice of the retail pie, especially among higher income consumers.
Growing at an annual rate of 20%, Rand by Rand this is slowly but surely taking market share away from retail incumbents who remain largely unconcerned – and even a little ignorant – about the fundamental, and likely irreversible, shift in consumer behaviour.
As bandwidth speeds improve, mobile payment experiences become slicker and consumers’ comfort with spending online improves, expect this number to rise. World Wide Worx‘s Arthur Goldstuck expects it to double within five years.
In developed markets such as the USA and UK where smartphones are ubiquitous, e-commerce accounts for 10% of total retail spend – a sure sign of things to come at home as more South Africans come online via mobile.
Give them what they want
Traditional retailers have also not kept up with the online experience offered by digital market disruptors such as Superbalist and Yuppiechef whose platforms have been set up to serve the consumer.
As recent research by Visa suggests, consumers shop online for the special offers, lower prices, comparisons and reviews, as well as to save time. And they’re doing it from their desktop computer or laptops (59%) and phones (27%). Fewer feet in store also means less impulse buying, a profitable revenue stream for retailers.
Legacy operations that see online and in-store as two completely separate customer touchpoints also need to be challenged. Omichannel experiences – those that allow customers to effortlessly shop across multiple channels – will be the new norm.
Take USA retailer Nordstrom for instance. It seamlessly integrates its digital and in-store experiences through the use of tablet-wielding sales associates who help consumers find and purchase products that aren’t available instore, or process an exchange from anywhere on the sales floor.
Consumers can also use the Nordstrom app to reserve items to try on later, or check stock availability by scanning the tag.
Then there’s the increasing use of social networks as a customer service tool. Research has shown that 46% of online customers expect brands to provide customer service on social media, but only 23% actually do.
Additionally, 70% of companies ignore customer complaints on Twitter. Implications of not engaging with customers when they want answers can be brutal; sharing and retweeting fuels the fire of negative complaints and, among younger consumers who have grown up expecting online engagement, snubbing them will likely see them leave to never return.
The list goes on, and it will continue to do so as we become more digitally sophisticated.
A new normal
While online grocery shopping remains in its infancy, largely due to issues of perishability, solutions are not far away. Uber is already trialling UberFresh and UberEats, which keeps food fresh by making deliveries same-day via a collaboration with a courier service.
There’s no doubt that the battle for the minds-and-wallets of South African consumers is well and truly underway.
While e-commerce will not usurp traditional retailers anytime soon brands need to place the consumer at the heart of their strategy if they want to remain relevant to the next generation of consumers.
To achieve this, online and bricks n mortar need to complement each other. Integration of IT and traditional operations is thus essential, and the development of apps that seamlessly connect the physical with the virtual, providing inventory insight in real-time, will be a necessity.
Leveraging digital data analytics is another golden opportunity for e- and retailers. In it lies deep insight into what shoppers really want, think and expect. E-tailers have long since used insights and predicative analytics to create tailored shopping experiences and personalised product recommendations.
Consumer expectations are evolving with the times, and they may soon demand the same level of customisation from traditional in-store experiences.
A new era of on-demand retail
This shift isn’t small. Taking a giant leap into a new era of commerce, customer engagement and growth will cost money and require major technological overhauls. For those retailers who do it, the returns will be significant: greater market share, higher conversion rates and improved customer retention.
To avoid another quarter of negative contraction in non-food items, retailers would be wise to take their customers’ online behaviours on board.
This article was originally published in the business section of iAfrica: December 2016