South African retailers have embraced a considered approach to digitalisation, innovation, and technology adoption to load their arsenal against the fiscal onslaught of a wounded economy.
By Hendrik Bredenkamp, MD of NEC XON Retail
They are under so much pressure from the ratings downgrades and political instability, yet they have already optimised traditional operations in many cases, that they must find new methods to cut costs and boost gross profit. Digitalisation and online shopping trends from abroad have offered a few advantages to some while many are making exploratory forays.
Delivery boxes, for example, offer customers the opportunity to collect items bought online from a locker at their local petrol station. Crypto currencies offer retailers enormous potential revenue savings. And, often unseen by consumers, is the innovative cloud-based transaction-matching system that reconciles supply chain records, which is a big (and otherwise expensive) headache for most retailers.
The retailers view crypto currencies and blockchain technology as one of the few remaining opportunities to streamline costs. Some crypto coins specifically reduce transaction costs to a fraction of what banks charge retailers.
Crypto currency payments don’t go through a bank like debit or credit card transactions. What a lot of consumers don’t realise, or forget, is that the retailer pays a fee for every transaction that is done via card. When you consider the millions of transactions the large retailers do every month that amounts to a lot of revenue lost to them. The local retailers are taking a serious look at embracing crypto currencies.
But one of the biggest stumbling blocks to retailers adopting crypto currencies at the moment is the fact that the blockchain technology makes governments uneasy as they are not able to control crypto peer-to-peer payments, which is why they are investigating ways to regulate crypto.
Crypto currencies are global, cutting out the central control of local country’s treasuries and banks when people transact. Retailers will keep a sharp eye on government’s moves on accepting crypto as an official payment method, as well as developing crypto coins specifically for retail, before accepting it as a mainstream option for their customers. But it is just a matter of time before it is part of our daily lives.
Cloud-based transaction matching
Cloud-based transaction matching, such as COSMOZ from the Swedish company Neovici, is another huge cost cutter for the retailers so it’s a bright star in their immediate radars. It’s all about improving supply chain efficiencies and shedding wasted expenditure. It matches orders, deliveries, and payments throughout the supply chain where queries and errors lead to steep expenses. It uses artificial intelligence (AI) in the cloud so it offers powerful scalability without heavy capital outlay.
Local retailers lag the adoption rate of their global counterparts so they are able to gain up to 40% efficiencies using specialised administrators and ERP systems like SAP, while their international peers are getting as much as 90% using third generation systems such as Cosmoz.
Delivery boxes are an attempt to unite the physical and cyber worlds and get closer to online shoppers. Online shopping has become a driving force for South African retailers. A local retailer with an international footprint is today literally making 10 times the online revenues they made two years ago. It’s growing that quickly.
But the interesting thing is that it’s not replacing brick and mortar entirely.
Amazon, Apple, and Wal-Mart are the world’s biggest online retailers. Apple and Wal-Mart already have physical stores but now even Amazon has them and it’s using innovative technology like Go for cashless checkout without tills in a bid to make them less costly and customer friendlier. And it’s also looking at drones to deliver packages to customers.
Local customers obviously aren’t happy going entirely online or brick and mortar so it will be interesting to see how the retailers strike a balance. Internationally consumers will predominantly buy online and get the goods delivered.
Digitalisation is often heralded as the panacea for retailers in a wounded economy but it is precisely this stricken financial era that underscores a sense of pragmatism seldom seen in past technological adoptions like the dotcom boom of the early noughties.