Covid-19 is shoving retail – and consumers - into the future
It took a pandemic, but consumers in South Africa have adopted online shopping – a change that is likely to be permanent.
“At the beginning of our last financial year, e-commerce was 1% of our turnover,” says Anthony Thunstrӧm, CEO at The Foschini Group (TFG). “By the end of the year, it was 2% - a 100% growth rate. We’re currently running at between 5% and 6%. It moved us forward by about three years.”
“I don’t see online sales going back,” says Bongiwe Ntuli, Chief Financial Officer at TFG. “I see it escalating further.”
Stores are ending up as showrooms
Despite the shift online, and the likely permanence of the trend, TFG still intends to expand the number of physical stores from which it operates.
TFG has thousands of collection points for online shoppers across South Africa. “We’ve got more branches than the Post Office!” says Thunstrӧm, only partly in jest. “The store is still the easiest place to return a product.”
TFG has more than 500 of its South African stores connected to a central database – it doesn’t have to ship from a distribution centre.
Cash remains, for now
“We’ve seen a reduction in the use of cash,” says Isana Cordier, Head of Consumer Goods and Services at Absa Corporate and Investment Banking. “But it was predominantly due to trading conditions. I don’t think cash is going away.”
Nevertheless, says Cordier, banks are trying to introduce different payment mechanisms to displace cash to some extent.
Challenges remain, but some are getting it right
Amongst food retailers, Shoprite has stolen the show.
“Sixty60 has been a successful project. They got their logistics right,” says Evan Walker, a portfolio manager at 36ONE Asset Management. “The feedback from consumers is positive. They’ve jumped ahead of their competitors.”
For retailer such as Foschini, complications will probably be store-related (i.e. ensuring hassle-free returns, dispatching the correct items, etc.).
“Getting people back into the stores [to buy clothes] is going to be a challenge,” says Walker. “They’re going to have to be innovative. They’re going to have to offer incentives, offer an experience and improved service, so their stores don’t become redundant to the consumer.”
Internationally, about 70% of online clothing sales take place on a smartphone app, and personalisation has become fundamentally important. “We’ve launched a couple over the last few months,” says Thunstrӧm. “You can take a photograph of how you’re dressed. The app catalogues that photo against every product across all our brands. It then comes up with five or six suggestions based on your photo and past purchase history.”
For more detail, listen or watch the discussion below.
Watch the entire, unedited discussion below.
With the Festive season upon us, it is worth unpacking some of the data to better understand exactly how consumers reacted this year.Read More
The pandemic has hastened much-needed consolidation and made clear the value of bringing supply chains closer to home.Read More
Covid-19 has changed the consumer goods sector. Some changes will reverse, but others are permanent and may even accelerate.Read More
Consumer spending is holding up, but behaviour has changed – perhaps permanently, especially the move online.Read More
2020 has forcefully disrupted many consumers, and left traditional consumer-facing businesses having to re-assess and re-configure.Read More
There’s an inevitability to it – these commodities (such as vanadium, if the tech improves) have a bright future ahead of them.Read More
There is just so much money-printing going on in the world right now, says Bevan Jones, CEO of African Source Markets.Read More
The Paris Agreement forces companies and lenders to be responsible and to consider the climate in their operations.Read More
Many countries on the Continent are increasingly providing investors with the stability and regulatory certainty they seek.Read More
Supply/demand fundamentals are looking good, for now. Absa Corporate and Investment Banking provides a view on 2020 and beyond.Read More