How SMEs can take advantage of the e-commerce boom in Africa

• E-commerce in Africa will continue to grow rapidly over the next few years, which is why international giants are rushing to bring their platforms to the continent.
• However, local e-commerce companies are struggling to keep up with all the innovations in this field.
• Steven Heilbron, CEO of Capital Connect, outlines several industry trends and how local SMEs can stay relevant.

The retail landscape in South Africa is changing so rapidly that most businesses are unable to keep up. According to an Accenture report from May this year, most South African e-commerce companies are unable to keep up with all the innovations and changes taking place in the industry and simply exist in the space without thriving.

“Over the last few years, South African retail has undergone a profound transformation, with digital platforms and e-commerce changing consumer expectations. However, we are only in the early stages of digital transformation and SMB retailers will need to be agile to keep up with emerging customer demands and new competitors,” explains Steven Heilbron, CEO of Capital Connect.

Capital Connect offers financing to SMEs and other businesses in South Africa, but financing alone is enough to get you to your destination. Heilbrone highlights some of the trends shaping local e-commerce today and how SMEs can leverage them to boost their growth.

The first trend to note about local SMEs operating in this space is that the space is steadily becoming home to giant online retailers.

“The entry of international e-commerce giants such as Amazon, Temu and Shein into the local market is expected to drive rapid growth in the coming years. SME retailers may need to focus on improving their in-store experiences, leveraging social connections and investing in their own digital commerce offerings to stay relevant,” Heilbron explains.

However, money will continue to flow into the sector, particularly in South Africa. A 2024 study by World Wide Worx shows that online retail sales grew by 29 percent to R71 billion in 2023. The sector is expected to cross the R100 billion mark by 2026.

Grocery delivery services saw particularly strong growth in the study.

However, due to the variety of options available in the industry, customers have come to expect that everything will be as per their requirements.

“Last mile delivery services have set consumer expectations for fast fulfillment of fast food and grocery orders. Nowadays, we see logistics providers and e-commerce companies working together to ship almost any product on demand. “Takealot offers an on-demand delivery service within 60 minutes in selected suburbs of Cape Town,” said the head of Capital Connect.

“And Shoprite Group’s Checkers Sixty60 now offers same-day delivery of small appliances, household appliances, consumer electronics and other goods. The service is currently being pilot tested in Cape Town. SME retailers will need to partner with local delivery companies to offer faster delivery options to compete,” he added.

So how will retailers go about providing these services? The first step is to use automation in certain processes, something Amazon has become particularly adept at.

These include cloud-based platforms and connected devices such as RFID tags and smart shelves. These systems enable retailers to automate areas such as inventory management and customer service.

“Retailers and merchants are also using automated cash handling solutions to streamline processes, reduce errors, reduce risk and increase security,” Heilbron said.

“Automated cash handling systems can save you up to 40 percent in time and money. Improved automation can lead to lower costs and increased business efficiency.”

The next two trends focus on the use of new technologies, such as fintech and omnichannel.

Marketing company Infobip has made a big splash in omnichannel in recent years, largely because it offers omnichannel services to other companies.

Omnichannel means seamless support for online and offline channels, including consistent pricing, product availability and customer service. Omnichannel retailers can increase sales by reaching customers through touchpoints such as physical stores, e-commerce platforms, social media and mobile apps.

Meanwhile, fintech innovations can reduce friction at payment points and increase customers’ ability to pay for goods and services online. Nowadays, you’ll notice that platforms like Takealot offer multiple payment options when you go to checkout. All this is ensured by partnerships with fintech providers.

“For example, they offer solutions that enable retailers to manage cash and cashless payments in one ecosystem to support customer choice, and also offer retailers easier access to instant alternative capital through the app, so they never miss out on growing retail opportunities,” he explains .

“Continued technological disruption creates a number of threats and opportunities for retailers. They have many real opportunities, from doubling the in-store experience through entertainment and promotions, to investing in digital platforms and delivery capabilities.”

“Whichever path they choose, they need quick and seamless access to alternative capital to implement their development strategies,” Heilbron concludes.