Supply chain trends and challenges in SA's ecommerce boom

by MJ Schoemaker: President of SAPICS (the professional body for Supply Chain Management).
Ecommerce is booming in South Africa and is set to keep growing. According to Statista, there were approximately 27 million ecommerce users in the country in 2022. It is predicted that by 2027, this will increase to 37.9 million users.

The ecommerce boom may be good news for consumers who enjoy the ease and convenience of online shopping, but ecommerce is not necessarily cheaper, more cost effective or more environmentally friendly than shopping in bricks and mortar stores. There are challenges for e-retailers and supply chain managers to overcome, to avoid the costs rolling over to consumers, and to minimise the environmental impact of online shopping.

One downside to ecommerce is the cost of returns. Up to 40% of goods purchased online end up being returned. This is substantially higher than in-store returns, where shoppers return just five to 10% of their purchases. The high rate of returns in ecommerce means that 20% more space and labour is needed for reverse logistics. Reverse logistics encompasses all the activities associated with a returned product or product components that are effectively moving backwards through the supply chain. It can add as much as 59% to the selling price.

Focus on cost effectiveness

In 2024, there will be more focus by all role players on the cost effectiveness of ecommerce and online shopping. We may see changes in returns policies, with customers being charged a fee for the collection of returns. They may be incentivised to drop returns off at bricks and mortar stores instead. Ecommerce has previously been viewed as a challenge to bricks and mortar retail, but the future could see the two co-existing ever more harmoniously, in order to contain supply chain costs.

Saving the planet

As the popularity of ecommerce grows, so does the packaging waste that it generates. Statista predicts that ecommerce plastic packaging will reach an estimated two billion kilograms by 2025. The rush toward ever-faster shipping and more Q-commerce (quick commerce) is creating the need for more truck trips, adding to carbon emissions. Q-commerce is the super-fast fulfilment of orders for smaller quantities of things like food, groceries and over-the-counter medicines. Leading South African retailers have implemented Q-commerce solutions.

Minimising ecommerce and Q-commerce’s impact on the environment will top the agendas of e-retailers and supply chain specialists in 2024. Factors like customer location (cities versus suburbs), choice of transportation and the speed at which packages are delivered all impact ecommerce’s carbon footprint. We can expect e-retailers and supply chain managers to assess these and look at what they can do differently this year and beyond.

Advanced technology, artificial intelligence and data

Advanced technology like artificial intelligence (AI) is being used successfully in a range of practical applications in the supply chain, including demand forecasting, risk, inventory and quality management, and transport and distribution optimisation. We can expect to see it used more in 2024, including in ecommerce supply chains, which need to be more intelligent, responsive and resilient than ever in today’s uncertain, disruption-fraught business environment.

Data is also vital to optimise supply chains, including in ecommerce. Through supply chain big data and analytics, organisations can identify inefficiencies more easily. They can reduce costs, improve customer service and strengthen resilience and agility to cope with frequent disruption. The integration of data, data analytics and key metrices across the supply chain will be prioritised in 2024, to enable the early identification of both potential disruptions and opportunities.

Risk management in South Africa

There will be ongoing risk management challenges in ecommerce supply chains in South Africa. Crime, rising transport costs and the electricity crisis will test e-retailers and supply chain managers. One courier company’s innovative solution to the hijacking of high value items like cell phones was to partner with a security service provider to undertake these deliveries. We can expect more innovation like this in 2024.

While challenges abound in ecommerce and Q-commerce supply chains in South Africa, their growth is also delivering big benefits, including vital job creation and skills development.

Useful resources:
The annual SAPICS Conference is the leading event in Africa for supply chain professionals. The 2024 SAPICS Conference takes place from 9 to 12 June 2024 at Century City Conference Centre, Cape Town, South Africa.
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