Battle of the Markets Will Shape the Future of Omni-Channel Retail in South Africa

Gareth Paterson, Director of Client Strategy at NIQ and GfK

That’s according to Gareth Paterson, head of client strategy at NIQ and GfK (an NIQ company) in South Africa, who spoke at the Ecommerce Live conference, which took place at the Sandton Convention Centre in Johannesburg on 12 September 2024. He says that e-commerce growth around the world has rebounded – after stabilizing post-Covid in 2022 – with growth on digital platforms such as marketplaces outpacing growth in total e-commerce sales.

Data from NIQ shows that consumers worldwide spent $3.25 trillion in the top 100 markets in 2022. About two-thirds of global e-commerce sales take place in markets that are seeing sales growth twice as fast as the overall e-commerce market. Similar trends can be seen in South Africa, where competition has intensified since Amazon entered the market.

Innovation accelerates in South African e-commerce

Paterson says: “Competition has intensified, with local players in the FMCG, technology and durable goods markets launching apps with competitive features such as same-day delivery (or even next-hour grocery delivery); subscription services that provide unlimited deliveries for a month; and larger product ranges. Retailers have had to innovate in response to price pressure and product variety from companies like Temu and Shein.

“After the Covid-19 tipping point, we have seen South African retailers’ strategies transform into an omni-channel approach, where they seek to offer a consistent experience across digital and physical channels. It is no longer about reaching customers through their local store or website with home delivery – it is now about supporting customers wherever they are and whatever touchpoint they use.

“Today’s customer journeys can include digital and virtual experiences, such as ordering online and collecting in-store, or searching in-store and ordering online. Increasingly, they also include digital platforms and apps that the retailer or brand does not own – including third-party marketplaces such as those offered by Takealot or Makro; super apps that consolidate multiple services in one place, such as VodaPay or Capitec Bank; delivery apps such as Mr D and Uber Eats; and social platforms such as Facebook.”

Paterson says competition is becoming particularly fierce in the marketplace arena, with players such as Takealot and Makro driving advertising and commissions from third-party sellers on their websites as key drivers of growth. The marketplace offering is a key part of Amazon’s proposition for South Africa, with Chinese e-commerce players such as Temu and Shein – which have shaken up South African retailers – starting to open up their platforms to third-party sellers in other parts of the world.

More paths to the consumer, but more competition

“As consumers continue to be pressured by years of slow economic growth, power outages and high interest rates, every retailer and manufacturer should be considering how to optimize their omnichannel strategy,” Paterson says. “There are more ways to reach consumers than ever before, and more competition. That makes it more important than ever to understand where customers are, how they make purchasing decisions and what the costs and opportunities are for each channel.”

“For large retailers, marketplaces are a potential opportunity to open up new categories they haven’t had a presence in and offer brands or products without managing inventory,” says Paterson. “This is a huge SEO opportunity because the more comprehensive a retailer’s offering, the more visible they will be on Google. But finding the right balance between protecting existing revenues and capitalizing on the marketplace is key.

“Meanwhile, for emerging brands and SME retailers, marketplaces are a way to expand their reach without distribution agreements or commitments. They’re a way to test their offerings and business models and quickly understand whether they resonate with their audience. They can then move on to other channels once their market share meets their expectations.”

When determining where markets fit into their omni-channel strategies, brands and retailers should consider the following questions:

• Which partners and channels match our target group and product?

• How can we guarantee that our offer will be discovered?

• How do we optimize our offering for specific channels, engagement opportunities, and purchase engagement? This includes price segmentation, bundle sizes or service offerings, and customer experiences or expectations of fulfillment within that channel, how customers search for products or reviews.

• Is our pricing and promotional strategy right?

• What are the benefits and risks of sharing our platform with third parties?

Paterson says: “As the omnichannel trend accelerates across multiple channels, including mobile shopping, live shopping, social media, smart devices, augmented and virtual reality, and the rise of artificial intelligence, we are seeing an explosion in the ways we can reach, engage, and sell to consumers. For both manufacturers and retailers, ensuring they understand the multiple channels they deal with is key to success as technology helps them grow and reach more customers in competitive markets. You need to be ready to meet your customers where they are.”