It is undeniable that the retail landscape is changing. The nature and extent of this evolution were discussed in depth during the recent GIBS/Trade Intelligence Future of Retail Conference. Across five days and only online, industry experts delved into essential insights for retailers and offered insights into how best to stay relevant in a post-Covid-19 world.
Retail expert and MD of Avroy Shlain Cosmetics, Susan Mawer, facilitated the five 90-minute sessions. Panellists tapped into changing business models, informal markets and township retail, how landlords can entice customers and create experiential malls, and the evolution of the industry in 2021 and beyond.
Retail’s new horizons
Susan Mawer kicked off by citing Leon Megginson, Professor of management and marketing at Louisiana State University, who said: “According to Darwin’s Origin of the Species, it is not the most intellectual of the species that survives. It is not the strongest that survives, but… the one that is best able to adapt and adjust to the changing environment in which it finds itself.” She then said: “I think this is true at the moment. We are going to see change and transformation like we have never seen.”
Dominant themes that emerged over the five days included the need for omnichannel strategies and customer-centric business models. Convenience emerged as a key driver of consumer habits, and symbiosis across the different industry sectors also came through strongly. Possibly, however, the key takeaway from the conference was that retailers who were not paying attention to these trends would most certainly be left behind.
Omnichannel retail strategy
It was agreed that perhaps the biggest trend impacting the sector was the need to adopt omnichannel retail strategies. By definition, an omnichannel strategy means that retailers offer consumers a fully-integrated shopping experience that includes brick-and-mortar stores, online shopping, mobile browsing and anything that falls between these options.
Mike Smollen, chief growth and innovation officer of the Smollen Group, noted: “Anybody with a really strong omnichannel strategy has done really well… Allowing themselves to be online exposed them to a larger portion of the population.”
What was really interesting about the idea of omnichannel retail is that this is not only a trend that impacts national retailers – the informal sector is also taking note of digital tools. GG Alcock, the author of KasiNomics and Kasinomic Revolution, said that although vendors still had their food stands on the street corner, they started posting their offerings on Facebook and WhatsApp, and offered delivery. “I believe in the future of digital and technology. In Africa, and particularly in South Africa, it is not going to be online virtual and web-based; it’s going to be Facebook and WhatsApp,” he said.
Richard Mukheibir, CEO of Cash Converters, added that this emerging trend was skewed towards “digitisation with that human context”. It is about using technology to remain close to customers and to staff. However, moving with the times requires agility, and businesses need to be able to think on their feet and adapt to changes almost in real-time. Using the Cash Converters story as an illustrator, Mukheibir explained that it launched its web shop in August 2020. Initially, people could only buy online, but they can now also sell online, and apply for and pay off loans, all in real-time.
Ultimately, omnichannel retail is about making shopping easier for the customer. This feeds into the next trend – convenience.
Not only are our lives becoming increasingly busy, but Covid-19 has made consumers a lot more cautious and aware of their personal safety. The informal sector is offering this kind of convenience – quick and easy shopping, explained Alcock. Whether people need a takeaway lunch, fruit, or to top up on basics, vendors, spaza shops and the taxi-rank (or rain) economy offer people a quick and easy shopping experience.
Suburban shoppers are also demanding convenient shopping options. This desire saw small suburban shopping centres and strip malls faring better than the larger malls over the past year. As was the case with the informal sector, these smaller centres also offered a safer shopping environment due to smaller traffic volumes and the fact that stores were operating ‘outside’ rather than in a closed environment, explained O’Connor.
As such, retailers operating in malls must now start working with their landlords to find innovative ways to draw people back. CEO of Vukile Property Fund, Laurence Rapp, explained that currently, the statistics indicate that people are only venturing to malls when they have something specific to buy. Although the per-head conversion rate is high, the malls are not getting the level of pre-Covid foot traffic they enjoyed.
To counteract this need for convenience, shopping will have to become more exciting for shoppers, and the experts urged retailers to view the sector holistically to try and once again boost foot traffic.
The symbiosis of retailing
For this reason, viewing the retail ecosystem as several symbiotic relationships could be a game-changer. Sipho Vuso Majija, director of Fortress REIT Property Portfolio, told delegates, “50% of our shoppers actually shop in the informal sector, as well. So, when you’re talking about a tenant mix, it goes beyond the walls we build.” He stressed that landlords must view informal traders as part of their tenant mix. Setjhaba Makhatho, director of BiBi Cash & Carry, agreed. “Wherever there is a group of informal traders, they always bring feet into our stores,” he said.
Yongama Njisane, principal economist and head of the technical committee of the Retail Inquiry at the Competition Commission, took this a step further by observing that malls should not only embrace the informal sector on the outside of their centres but that landlords should also work with these traders to drive their growth and inclusion within shopping malls. “There is certainly a need for a model that probably is more pro small business than we currently have,” said Njisane. However, he stressed that these smaller retailers would need a lot of support if they were to survive in a big retail environment.
The national retailers were then also urged to use this synergy between the formal and informal sectors and find ways to work together to drive their brands into the townships and rural areas. However, getting this right would require a thorough understanding of the needs of these traders and how they operate in what is often a very formalised sector, explained Alcock.
Ultimately, drawing people in with a compelling and appealing experience will appeal to the consumer, requiring a greater understanding of their needs and wants.
Make customers central to the strategy
Now, more than ever, customers must be central to any retail strategy. “It’s not just about understanding your customer; it’s about actively engaging them, involving them, and making sure it is a reciprocal relationship,” said Mawer.
Graham O’Connor, CEO of the Spar Group, added: “I think there’s a big opportunity to get more information, and then to use that information smartly so that we can attract our customers and keep them.” So, good data is now becoming key.
Research has shown that value, convenience and a great shopping experience are increasingly important trends within the consumer mindset. People also want to lead healthier and more conscious lives, and they want their retailers to have a greater purpose that extends into the community.
Throughout the conference, other trends were also mentioned, such as the importance of hygiene within the retail sector and the fact that cash is still the driver of the South African economy. But the take-home point of the week was clear: If retailers are going to survive, then consumers and their safety and convenience must be at the centre of all future retail planning.
People won’t stop shopping, but how they shop is currently undergoing a sea change of note. Retailers need to keep up.
Adapting retail in a Covid world
Covid-19 has had a huge impact on how retailers operate, and although the pandemic may not have been responsible for developing trends, it certainly has accelerated their uptake. Here are 10 trends retailers need to take note of in 2021:
- Health and safety must be prioritised. From hygiene to food packaging, customers need to feel that their well-being is being put first.
- Convenience is now more important than ever. People want to be able to shop easily without exposing themselves to Covid-19. As such, online ordering, deliveries, and click and collect, all need to become central to retailers’ business models.
- Omni-channel retail strategies offer customers a holistic shopping experience in this digital world.
- Enhanced shopping experiences are key for retailers to draw people in. Customers want to feel good about shopping, whether it is in-store or online. Functional is no longer an option.
- Value is now more important than ever, so retailers need to become more innovative around how they present offers and deals.
- Community well-being is becoming increasingly important to consumers as recessionary conditions bite, and the less fortunate are impacted.
- Symbiotic ecosystems give customers a greater choice as they can access national, entrepreneurial, and informal retailers.
- Cash is king. Retailers need to ensure they cater to consumers who want to use cash, especially around their online offerings.
- The informal sector is a vital retail sector, with some estimates suggesting it contributes more than 18% to South Africa’s GDP and employs 17% of its workforce.
- Data and information are key commodities but need to be mined from the right sources to be relevant and useful to retailers.
Seizing change by the digital horns
Consumer expectations and demands are changing. Retailers are no longer setting the agenda; the customer is.
This shift is, in part, being driven by the increased adoption of technology. “The importance of data analytics technology and ecommerce platforms are changing business models and [highlighting] the importance of agility and partnerships,” said Mawer. “Retailers are going to have to be brave – what they did yesterday isn't necessarily going to work today.”
To make relevant shifts, retailers need to understand the dominant consumer trends and then deliver products and services that meet those demands.
Understanding the consumer
For Kerry Elliot, head of the School of Retail Trade Intelligence, it was clear that brands will no longer be in control in the future. Rather, the shopper is now in the driver’s seat. “To understand the changes that are taking place in retail, we need to understand what is happening and what is shaping shopper behaviour,” said Elliot. She noted that consumer behaviour was being driven by personal, political and economic factors, as well as technology, among other things.
Elliot shared some of the findings of the Trade Intelligence 2020 Malls to Markets report, part of which explored consumer behaviour. The report identified five major trends influencing today’s consumer: value, convenience, experience, healthy living, and conscious living.
When it comes to value, shoppers are looking to get more for their money. This means that retailers have to be innovative about how they offer specials. Trade Intelligence retail analyst, Andrea du Plessis, says 65% of African shoppers use broadsheet newspaper advertising to compare the pricing of products across retailers, 53% make a shopping list based on these broad-sheets, and 69% of African shoppers have switched brands to save money. There has also been a 20.4% increase in private label participation.
Due to the Covid-19 outbreak, 37% of consumers have turned to online shopping. Of these, 80% said safety was the main reason. However, with people getting more comfortable with the online environment, 27% say they will continue to shop online, even in a post-Covid-19 world. Last year saw online shopping grow from 1.4% of total retail expenditure at the beginning of 2020, to 5% by October, with the report predicting it would reach 10% by year-end. Trade Intelligence believes that over the next five years, 57% of sales growth will stem from ecommerce.
Although shoppers are looking for value in their everyday purchases, they do spoil themselves every now and again. “The same shopper who is shopping for a great purchase, because they are savvy, is also shopping at Woolies for a chicken, or for Nike and Adidas because on the weekend they are looking for a beautiful shopping experience and that experience is the drawcard,” explains Elliot. This need for a positive experience also has to be translated into the online format. Smollen told delegates: “There was a massive number of first-time online consumers in the last year who would never have dreamt of ordering anything online. If those people had a good experience, chances are they are going to switch to online.”
Elliot said the research indicated that people are increasingly concerned with healthy ingredients when it comes to health. In addition, packaging is becoming an important consideration. “Consumers don’t want to buy items that have been touched by other shoppers, but they are still looking at things like sustainability packaging,” says Elliot. O’Connor also added another dimension to the health concern when he said, “What we won’t see change back [in a post-Covid-19 world] is the level of hygiene and cleanliness in stores.”
5. Conscious living
Now, more than ever, consumers are becoming aware of how their consumption is impacting others. Not only are there environmental concerns, but people want to see communities and the less fortunate benefitting from their spending. The research shows that people are turning their focus to local stores that support their immediate community. Initiatives such as sanitaryware for girls are becoming very popular among consumers, said du Plessis.
The movers, shakers and innovators
Understanding that the consumer is now in charge of the retail agenda, many new and innovative businesses are starting to take their place in the market. Over the last few years, there has been terrific innovation in the South African digital and online space. Delivery companies like Parcel Ninja have sprung up, and the informal economy – using WhatsApp and Facebook to sell products and services – are now also offering foot and bicycle deliveries. The pandemic has pushed companies to increasingly offer same-day delivery or even one-hour delivery, all in a bid to make online shopping easier and more convenient for consumers.
A noteworthy aspect of the conference was the inclusion of five local start-ups, all of whom are thinking out of the box and changing the way South Africans shop:
- OneCart – Lynton Peters, OneCart CEO, explains that the business enables users to shop from multiple stores in a single online transaction. It is an easy and convenient form of shopping, which has the added benefit of enabling shoppers to select the best delivery time for them.
- UCook supplies meal kits and craft meals. The company, which delivers a box with a recipe card and all the ingredients, prides itself on using ethically sourced, whole ingredients. “It’s healthy, wholesome food… We are activating aspirational cooking,” UCook’s David Torr said at the conference. The convenience and health benefits of these meals appeal to families with enough disposable income to afford prepacked meals three times a week.
- Faithful to Nature is described by its CEO, Paul Cook, as South Africa’s largest online retailer for natural products. The Cape Town-based company sells natural, healthy and environmentally friendly products. “The growth in ecommerce, and an omnichannel strategy, sits behind Faithful to Nature, as well as a stringent ingredient policy. We are about being natural and sustainable for the planet’s health,” Cook said.
- Aumax sells men’s watches online. The company’s business model is interesting. “Our delivery people are actually salespeople, which is unique in the market,” explained CEO Sakhile Maseko. This approach means the customer can see and feel the product before they buy it. The system also allows people to pay using cash, which is important to many Aumax customers. Aumax also guarantees a 12-hour delivery, which encourages shoppers to use the online service rather than visiting a mall. This offering, said Maseko, has been great for the business.
- Uber Eats is an offshoot of the Uber e-hailing system. “In 2014 we created a team and they were given one question: ‘What else do people want to get with the push of a button?’ This was when Uber started experimenting with food. We quickly realised that there was a huge appetite for fast, reliable food delivery,” explained Shane Austin, general manager of Uber Eats South Africa.
But success has come at a price. All the businesses have faced myriad challenges, from infrastructure development to theft to how to expand their market segments across diverse economic strata. They have all had to adapt on the fly to changing circumstances. But being small and agile has given them the edge and enabled them to experiment with solutions. Mawer summed it up when she commented to OneCart’s Peters, “You adapted as you progressed. No over-thinking the opportunity.”
A new business model in a nutshell
As the retail landscape evolves, innovation, agility and a customer-centric approach are what the new generation of retailers will have to subscribe to. This is a world where consumer demands dominate. Fortunately, technology facilitates many interesting and novel solutions that reflect the various needs of our economically and culturally diverse country.
Winning tips from the rising stars
New and small businesses have the advantage of being agile, and of being able to adapt to challenges quickly, using innovative solutions. Here are some tips from South Africa’s online retail pioneers:
Be prepared to scale your business to include consumers from diverse economic strata.
- Affluent consumers offer a finite market.
- Cash before cards. The majority of South African consumers still prefer cash. Only offering online payments may severely limit your online consumer base.
- Innovation is key. Giving your online customers the service they demand requires innovative solutions. Can you take your online offering to your consumer? Can your delivery personnel also be your sales team?
- Make online easy. Keep upgrading and improving your online platform to ensure you are making the shopping experience appealing, easy and convenient for your shoppers.
- Good online experiences will keep people coming back. Speedy deliveries and hassle-free returns will encourage greater online loyalty.