The past few years have sparked significant change in society and the global (and local) economy.
By Karmany Reddy, head of strategy and marketing at Orderin
Most businesses, where possible, transitioned to working remotely and quickly became the new norm for businesses and consumers alike. People have changed the way they work, socialise, and even shop. E-commerce and on-demand delivery have seen rapid growth, spurred by the global pandemic and various lockdowns, which interrupted traditional buying behaviour and diverted consumers online.
Now, as the pandemic slows into an endemic stage and society moves towards a state of normality, one should ask whether these changes are here to stay and, if they are, how businesses can adapt and take advantage of them.
Fast-food delivery was already reasonably well-established before the pandemic, while grocery delivery was in infancy. Today, however, you can stand on the street outside your home – especially in major cities – to see how quickly both have become part of the everyday South African experience. Consumers are growing accustomed to convenience and are starting to expect it at every turn.
However, on-demand e-commerce in South Africa faces steep competition compared to other markets. According to a report by Business Insider, Amazon has surpassed 150 million Prime subscribers globally. In some locations, Prime subscribers can receive deliveries within two hours free of charge.
By contrast, outside of the major grocery chains, few South African online retailers offer same-day delivery. Those that do offer convenience also generally require customers to pay a premium delivery fee on each occasion rather than as part of a membership subscription.
That raises a few questions about South African e-commerce. How big is the market for high-frequency convenience e-commerce? What other sub-sectors are ripe to enter this new frontier? And, more importantly, what can online retailers do to ensure they are in the best possible position to serve that market?
South Africa’s e-commerce growth
While it is difficult to put an exact rand value on the potential addressable market for on-demand delivery in South Africa, there are some indicators that can give us a reasonable idea.
For example, the volume of e-commerce sales in South Africa has steadily risen in the past few years. A study by WorldWideWorx reveals that in 2020, e-commerce accounted for 2,8% of retail sales, double the share in 2018. While growth slowed slightly in 2021 as Covid-19 restrictions were eased, it still accounted for sales of around R42-billion, or 4% of all retail sales.
One might bear in mind that these statistics do not account for people who choose to buy in-store because they cannot wait for the item to be delivered. There are always snap purchases that cannot wait for potentially unreliable delivery service – think of a family that needs a beach umbrella for a holiday – even delivery within two hours may be too slow. If online retailers can meet those needs and deliver on-demand, those who can afford it will take the option – even if it means paying a little more.
Furthermore, South Africans will spend more time online as data prices continue to fall, which, in turn, will open up new markets for online retailers. Data from ResearchandMarkets shows that the global same-day delivery services market is expected to reach $11,43-billion by 2025. With on-demand growing globally, including in other major African markets, South Africa cannot afford to be left behind.
New sectors and technology
On-demand retail is still in its early stages – even in developed markets – but it will grow into several verticals in the coming years. For example, South Africans have already seen pharmacies follow the lead of the food and grocery industries. However, the larger online stores and brick and mortar retailers are likely to follow suit soon enough, but the greatest opportunity to scale lives with small e-commerce players and startups.
In South Africa, these kinds of businesses will be crucial as the country looks to revive both its economy and employment statistics. However, small online retailers are not able to provide on-demand delivery by themselves, as they generally lack the infrastructure and financing necessary to make it viable.
That is where delivery-as-a-service (DaaS) comes in. At Orderin, we see DaaS as crucial to the next phase of South Africa’s online retail revolution. If small e-commerce players can provide convenient customer experiences on par with those of the big online players, then they can grow and thrive.
It is all about the experience
There is no doubt that online shopping will continue to grow and generate demand for e-tailers to offer tailored delivery services – particularly on-demand delivery. Eventually, every online retailer will have to succumb to this shift in consumer behaviour to thrive in the post-pandemic norm.
Ultimately, pursuing on-demand delivery should not occur in isolation from the other components of your business strategy. When paired with the right technology, partners and resources, you will be able to build a holistic customer experience and effortlessly maintain the core aspects of your business.