COVID-19: what’s next for South Africa’s retail industry?

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John Watling | Managing Director | Retail Business | Accenture Africa | mail me | 


While traditional bricks-and-mortar retailers attempt to navigate their way out of the Coronavirus pandemic, local online retailers are seeing a massive spike in sales, as the shift from real to virtual goes into overdrive.

What’s next for the retail industry, and as lockdowns are eased around the world, to what extent will these spikes remain?

According to our Global Consumer Research – Impact of COVID-19 survey, people have already begun shifting their purchasing priorities. In South Africa the shift is even more pronounced due to the immaturity of eCommerce in the country.

Overall, consumers said that they were buying more personal hygiene products, cleaning products, canned foods and fresh foods than before the outbreak, and purchasing fewer consumer electronics, and fashion and beauty items.

The crisis is also causing consumers to consider the health and environmental impacts of their shopping choices more seriously. For example, 60% of consumers are spending more time on self-care and mental well-being, and 45% are making more sustainable choices when shopping.

Changing priorities

The dramatic increase in online demand is largely here to stay, as the change in our behaviour creates new habits – and a great many digital converts.

In South Africa the number of first-time online grocery customers is staggering. As a result, traditional retailers must adapt quickly and accelerate their transition to e-commerce and omnichannel fulfilment, as well as increase their decision-making pace.

One of the ingredients that had distinguished the winners from the losers has been the ability to establish ecosystems. In particular strong partnerships into their supply chain will drive greater resilience.

Locally, one of the largest supermarket chain stores, partnered with Bottles – the on-demand delivery app – to deliver groceries. Following the ban on the sale of alcohol in March this year, Bottles re-purposed its app to deliver grocery essentials to customers.

Exclusive Books also partnered with Uber Eats to deliver bestsellers to the comfort of customers’ homes.

The demand for greater convenience will extend beyond the pandemic. If a consumer discovers that it’s more convenient to have water delivered than to buy it direct from a supermarket, they will adopt this pattern long term.

In retail, convenience always wins and throughout this crisis the consumer is reinventing convenience on a scale rarely seen before.

Personalised purchasing

There are other external factors that will change the way the retail industry operates. Workplaces for instance have changed locally as they have around the world.

We have spoken to more than 60 CEOs of global companies across all industries who tell us how impressed they are at the ability of their workforce to operate from home.

It is expected that post COVID-19, many companies will revisit their workplace and office policies, which most likely will allow a flexible working arrangement. This will impact the life of the employee, which in turn will impact the way they shop and the way they consume. People will not have to wait for the weekend to shop, thus opening up mid-week shopping runs – especially if done online.

As flexible working arrangements create new online shopping habits, it’s easier for retailers to personalise the shopping experience and tailor an assortment of goods or promotions to an individual.

In an increasingly digital world this is critical, and for online retailers this has been clear from day one. For predominantly offline retailers – formed on the 30-year-old mass consolidation business model – less so, although this is changing rapidly.

The power of technology

Technology is a huge game changer. There are two key categories that directly address the needs of the industry in the coming months.

First is increased supply chain automation. In the past, large warehouses kept supply chain costs low through stock consolidation. But currently and looking into the future, increased diversification and personalisation are driving costs back up.

One solution is to deploy robots in warehouses to retrieve stock from shelves and deliver it to a pick station where a human operator fulfils the order. Automated vehicles that shuttle inventory, supplies and materials from one location to another within a facility are also increasingly common.

Second is artificial intelligence and extended reality. To deliver a truly personal experience, retailers must use complex analytics to gather and understand customer data. From that, through the use of extended reality, brands can enhance the consumer experience by delivering a more integrated, convenient and personalised service. We see this as the most important category in the months ahead.

Market growth

By how much the online retail industry grows remains to be seen. In 2016, the online retail industry in South Africa – according to Globaldata Retail – was worth approximately $918 million, growing to around $2.36 billion by 2020.

It is also expected to jump to $3.22 billion by 2023. In South Africa we believe that it could reach this number in 2021, accelerated by the COVID-19 epidemic.

Whatever the future holds, there is no doubt that the crisis has changed the face of this dynamic industry.

To successfully emerge from the pandemic, we recommend that brands follow a five-step plan:

  • First, they should assess their product range and examine what can be sold in what quantities in the new context and make adjustments accordingly.
  • Second, they should assess their workforce utilisation and redeploy employees to different areas of the business wherever possible.
  • Third, they should focus on their digital channels so that, first and foremost, they are open and thereafter refined to ensure that customers enjoy the best online experience.
  • Fourth, they should adjust the pace of their decision making and financial forecasting,
  • and fifth, they should revisit their partner ecosystem to become more resilient, more diversified and, wherever possible, more local.

In doing so, more and more brands will be able to find their way out of these unprecedented times and become an important part of the new normal – the highly personalised and constantly evolving omnichannel era.


 



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