The pandemic has revived e-commerce in South Africa.

One of the biggest winners could be Takealot.com, a local e-commerce website that started almost ten years ago and later became part of Naspers, Africa’s largest company in terms of market capitalization. Takealot’s revenue reached $ 238 million in the six months ended September 30, its most recent period reported. This is an increase of 41% compared to the same period a year earlier.

Developments such as same-day grocery delivery and the ability to collect parcels when and where convenient have paved the way for a growing number of South Africans to continue from the comfort of their homes in the midst of varying levels of a nationwide lockdown designed to slow the spread. of the novel coronavirus.

The acceleration of e-commerce in the country highlights improvements in the way retailers get products to consumers. It is also distinguished by the fact that it is widely cultivated on the spot. US retail giant Amazon does not have e-commerce in Africa, although it serves thousands of cloud computing customers on the continent and recently received local approval to build an African headquarters in Cape Town. Town. Jumia, Africa’s largest e-commerce operator, serves South Africa through its fashion retail site Zando, but has little presence there compared to its local competitors.

Shake up the love for malls

E-commerce in South Africa got off to a slow start, in part because South Africans have long loved their malls. The country ranks among the world leaders in shopping malls per capita, and South Africans flock to them for safe places to shop, relax and be seen.

Consumers around the world shopped more online during the pandemic. And while shopping malls still have their appeal to South Africans – sales of luxury brands at malls such as the upscale Sandton City mall in Johannesburg exploded last year – measures taken by Retailers to improve last mile delivery suggest that online shopping may finally take hold. “We have seen 50-70% growth in e-commerce in South Africa in 2020,” says Arthur Goldstuck, managing director of World Wide Worx, a Johannesburg-based technology market research organization. “We originally predicted that growth would be around 25%.”

Estimates of the number of South Africans who shop online vary by income and location. The lion’s share occurs among consumers who populate cities and major towns such as Johannesburg and Cape Town, compared to those who live in rural areas of the country, notes Goldstuck. He adds that the strong growth in online sales over the past year also reflects a low starting point.

For its part, Takealot sells and delivers a variety of goods directly to manufacturers as well as on behalf of small retailers and other third parties. The platform now accounts for at least a quarter and possibly up to half of South Africa’s online retail, according to Goldstuck. “It’s basically the Amazon of South Africa,” he says.

Analysts credit Takealot’s pre-pandemic investments in warehouses and distribution centers for preparing the retailer to handle the wave of demand triggered by the coronavirus. The company’s initiatives have included the purchase of the Mr. D Food food delivery service in 2014 (think logistics), as well as the launch two years ago of pickup points located next to some of the most popular highways. busiest in South Africa, which allow consumers to collect and return. online orders at their convenience.

“It’s a pretty big change in their model in terms of improving the customer experience and in some ways moving from a pure delivery model to a collection model is also helping to lower their costs,” says Neelash Hansjee, senior portfolio manager at Old Mutual Equities in Cape Town. He adds that Takealot has also expanded the selection of products for sale on its platform, which includes 19 departments including home appliances, computers, electronics, fashion, health, sporting goods, toys and televisions. “It’s now, how are you taking advantage of this post-Covid growth, and where do you go from here?” said Hansjee.

Walmart in the mix

Rivals of Takealot are stepping up efforts to gain some of this market share. Chief among them is Massmart, which operates physical and online retail stores primarily under the Game, Builders and Makro banners in South Africa and 12 other countries in the region. In its latest financial results presentation, Massmart noted that online sales at Game, Builders and Makro grew by 77.5%, 111% and 40.2%, respectively, in the past year. ended December 27, although the company did not report online sales as a percentage of each company’s total sales.

Massmart, which surpasses Takealot in sales thanks to the old brick-and-mortar stores (Game alone recorded nearly $ 1.2 billion in sales last year), is about 18 months of recovery after losing money two years ago for the first time in his day. 29 years of history. It relies heavily on the know-how and experience of its majority shareholder, the American distribution giant Walmart, to turn around its business and strengthen its digital capabilities.

As a result, analysts are not counting Massmart out of upcoming e-commerce battles. Mitchell Slape, CEO of Massmart, led Walmart’s operations and e-commerce in Japan before taking the lead last year in South Africa. In October, a month after Slape arrived, Massmart appointed a new ecommerce manager who previously oversaw last mile delivery for Walmart in North America.

Walmart has fought Amazon for years in the United States, where Walmart dominates physical retail. “Walmart knows how to compete in this world, and that’s something the guys here locally can tap into,” says Hansjee. “They already have large physical distribution in place. Now they need to leverage their online ability to entice people to shop there. “

For its part, Jumia generated roughly 14% of revenue in South Africa and four other East African countries ($ 32.6 million) last year than Takealot, which does not ship. beyond South Africa, has won in its most recent six months. To avoid missing out on the country’s growing appetite for convenience, Uber Eats last year expanded its food delivery service to handle over-the-counter drug, parcel and grocery deliveries in select locations. .

Supermarkets are speeding up

Although Takealot, Game and Makro all sell non-perishable groceries, South African supermarket chains have also doubled their digital purchases and deliveries over the past year as demand for online orders has exploded.

Shoprite Holdings, which operates supermarkets across South Africa under the Checkers, Checkers Hyper and Shoprite banners, has increased its investment in its “Sixty60” service, which delivers groceries in less than an hour from of 150 of its approximately 241 Checkers stores across the country. The chain also offers scheduled deliveries to customers in and around Johannesburg and Cape Town. In April last year, Checkers partnered with Mr. D Food of Takealot to deliver from 55 of the supermarket chain’s 90 pharmacies.

Rival Pick n Pay, which offers online delivery from 140 of its 295 company-owned supermarkets nationwide (the company also franchises stores) as well as so-called click-and-collect online ordering. store, doubled fast delivery too. In October, the chain bought Bottles, an online liquor delivery service that Pick n Pay revamped for same-day grocery delivery to 95 stores. Last April, Pick n Pay opened an online store for its clothing retail business.

While neither Shoprite Holdings nor Pick n Pay breaks online purchases as a percentage of total sales, Pick n Pay recently reported that online sales more than doubled in the year ended the 28th. February. digital technology, starting with a process aimed at unifying its online services under the PicknPay.com banner. “In the future, customers will be able to shop seamlessly with Pick n Pay anytime, anywhere and however they choose,” said Richard Brasher, outgoing CEO of the company, who has agreed last year to stay beyond his tenure to lead the company through the pandemic. .

The financial results of Woolworths Holdings, another competitor, shed additional light on the size of online grocery sales as they fall more or less. Woolworths, which operates approximately 348 grocery stores in South Africa, reported in February that 2.2% of its food sales and 4% of its sales of fashion, beauty and home goods ( the company has approximately 212 such stores) took place online in the six months ended December 27, 2020. The Click-and-Collect service offered by Woolworths in 75 of its stores accounted for at least 25% of online food sales during the period.

To keep pace with its rivals, Woolworths in December launched a trial of same-day delivery it calls Dash at 18 stores in Cape Town, Johannesburg and Durban. The Cape Town-based retailer said the trial had been “operationally difficult” as capacity and on-time delivery fell short of the company’s expectations and demand, but stressed that it planned to ” increase investment in sales through online channels.

Analysts say essays like Dash highlight the importance of distribution networks as differentiators. “Suddenly, we have a new world of e-commerce in South Africa in terms of deliveries,” says Goldstuck. “The old way for retailers to take their time and deliver in a week is a thing of the past.”

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