Online grocery shopping still not big in South Africa, but retailers should prepare

  

In the world’s most developed markets, online shopping platforms are necessary for grocery retailers to compete in an increasingly connected world. However, according to a retail analyst at Euromonitor International, Cedric Bra, South Africa is lagging behind in terms of online grocery shopping despite having a developed and competitive retail landscape. “Yet the industry is very much alive and the country shows useful examples of how bricks-and-mortar can still thrive.”

There are a number of advantages of physical grocery stores over the internet, one being the range of additional services they offer, adds Bra. For example, big South African retail chains like Shoprite and Pick n Pay have select counters within their stores where shoppers can access banking services, bill payments and money transfers.

“Such services are particularly successful with low income clients, many of whom have no bank account but want to be able to receive or send money to their relatives across the country,” Bra says. “This is a major advantage as it attracts footfall and reinforces customer loyalty to the brand.”

South Africa’s rising living standards, young population and growing middle class have increased the demand for retail goods and there is a shift away from traditional, informal retailers, or spazas, to a modern shopping mall experience. According to Bra, “this will result in an increase of 30% in store-based sales per capita by 2016, one of the fastest in the world.”

However, the country’s relatively low internet usage limits potential for e-commerce, and only a few South African retailers have set up online stores. Pick n Pay and Woolworths are the most active players in the online grocery industry, but it has not yet made an impact on their bottom line. Both retailers receive less than 1% of their total sales from internet retailing, says Bra.

South Africa’s largest retailer, Shoprite, does not offer an online shopping site as the company has rather focused on expanding its footprint to townships – where its core demographic lives – and opening up new stores in the country and across Africa. Shoprite is generally perceived by South African consumers as the cheapest retailer as the company has concentrated on keeping prices low.

Targeting mobile phone users

While internet usage via PCs in South Africa is relatively low, internet access via mobile phones is high, as is with the rest of Africa.

“Indeed, mobile technology has taken the limelight from home computers and nearly 95% of households owned a mobile device in 2011,” highlights Bra. “It is expected that in 2013, more smartphones will be sold than feature phones, thus providing a major boost to mobile internet usage. And this is where retailers should focus their attention.”

Consumers can research products and prices between different companies easily on their mobile devices, and are likely to spot and become aware of store promotions. According to Bra, retailers who become more visible and transparent online will increase traffic to their online stores and will see higher customer loyalty.

“Another tool is social media: getting customers to share feedback and opinions can help build brand equity and also provide a wealth of direct customer data that retailers can leverage to improve their offering.”

Bra adds that these strategies are needed in order for retailers to be prepared when online grocery shopping really does become big in South Africa – and he believes it will. Those who invest in these strategies will be the first to reap the rewards.



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