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As the CVD-19 epidemic is declining and consumers are returning to shopping malls and physical stores, the growth of e-commerce in 2020 is on the rise. However, online marketing has dominated South Africa’s formal retail market, and businesses that invest in e-commerce space are constantly investing in their growth.
As the epidemic swept across the country, PayFast’s digital portfolio grew by 101 percent between 2019 and 2020, still remarkably declining to 36 percent between 2020 and 2021, and 20 percent between 2021 and 2022.
At a recent PayFast e-commerce virtual summit, the company’s head of production, David Cossell, noted that domestic e-commerce growth could not continue beyond the epidemic.
Online shopping in South Africa accounts for less than 10% of total retail sales, less than 20% in the US, 20% in the UK and 50% in China.
Looking to China
Kuzel lists some factors that contribute to this remarkable growth in China. He pointed out that online retail is the preferred marketing channel in China because the physical shopping experience can be confusing and confusing.
In particular, e-commerce Behemoth Alibaba highlighted its role in providing the backbone of the industry. “You need a major player to build infrastructure to support the industry,” he said.
Over the past 20 years, Alibaba has invested heavily in logistics warehousing and digital marketing services and created its own payment system and cloud computing system, creating consumers and B2B markets. “Everything you need to run e-commerce as an industry has been saved. Alibaba has paved the way for China’s e-commerce to grow rapidly.
China has a high efficiency, low cost delivery service and advanced digital payment landscape, mobile wallets and QR code control the country’s payment space. In 2018, about 40% of all payments [in China] They were made using mobile platforms, and have probably grown significantly since then. Mobile payments have made it easier to pay for goods – even in front of retailers [transactions] Or online, ”said Cusel.
China has a strong mobile business culture. Unlike in Africa, most Asian countries have skipped the PC and desktop era and moved directly to smartphones. “More than 80% of the population in China owns a smartphone, and 750 million people in China buy mobile devices online,” he said.
With that in mind, how can South Africa open up the e-commerce growth that China has achieved?
E-Commerce Infrastructure Investment
Kuzel encouraged companies to continue investing in e-commerce infrastructure, the backbone of e-commerce. “Takealot has done an incredible amount of work to develop this e-commerce infrastructure and has joined the ranks of major traditional retailers bringing their stores online.”
“Checkers Sixty60 is another great brick and mortar retailer that has received online and is helping to bring e-commerce to South Africans.”
This foundation not only serves consumers and big online players, but also entrepreneurs who hope to benefit from e-commerce opportunities.
That is, there is a clear distinction between formal and informal markets, and the latter, often without basic services such as water and electricity, let alone e-commerce infrastructure.
“The biggest challenge in South Africa is that it is very difficult to get goods back to the normal economy – there are few roads and the right addresses and people are not the owners of the vehicle. We have to innovate on how to solve this. We cannot open more than 50% of the domestic e-commerce economy.
Ideas that embrace Africa
Doing business in Africa presents unique challenges, but Kuzel has encouraged entrepreneurs to build businesses that meet the needs of our consumers.
E-Taylor Yebo Fresh, a domestic business, has been prominent in bringing e-commerce businesses to cities and stocking up on products and product combinations that are not available in traditional supermarkets. The innovation is being used by the city’s spacious spas shops and other community brands to help facilitate commercial transportation.
Advances driving digital payments
According to Kusel, the next challenge to be addressed is access to digital payments. We must log in to a larger bank account, but this does not translate to larger digital payments. We really have a huge smartphone and internet connection – about 70% – which is a big boost for the future, ”he said.
Cash has been a king in South Africa, especially in informal markets. Currency exchange is a reliable, fast and comprehensive understanding. And the digital payments space still has a long way to go to reach this level of consumer confidence.
“At least 50% of transactions are still in cash. 95% of Sassa Grant users spend their money in cash within seven days, and eight out of 10 informal merchants do not have a bank account.
The soon-to-be-launched payment system is set to launch a banking industry-led payment modernization, expand digital payment infrastructure, and create more payment innovations, Cossel said. The industry-wide partnership is led by BankServAfrica in partnership with the South African Payments Association and the South African Banking Association.
Commenting on the benefits of the instant payment system, Kuzel said, “Interbank transactions can take place in less than 60 seconds, but now it takes two days. The ability to use an account such as an email or phone number or ID number simplifies the process. Digital payments are fast, reliable and easy to use, so if we can change the culture around cash payments, it will be a great victory for our industry.
He added, “The introduction of payments into the digital space allows us to record what is happening so that we can make better decisions. It is a great victory for the country. But we must continue to innovate beyond money. I don’t think relying on banks to drive this is the way to go [the challenge] “All over Africa.”
Provide an interesting experience
Finally, Kuzel said we need to drive an online marketing culture to boost online sales – in a country with a strong connection to malls.
“South Africans love shopping malls. We have less than 2,000 malls in SA and those retailers are great places. There is entertainment, clean, spacious and cheap parking. All of these things make physical marketing a good experience, and we need to think about how we can make online marketing more engaging as an industry.
“We have to accept the fact that South Africans love shopping malls,” Kuzel said, adding that retailers can have an exciting and comfortable experience by combining online sales with physical retail.
“If we can solve infrastructure challenges, the e-commerce business in South Africa must stay here,” Kusel concluded. “By transitioning from cash payments to digital payments, developing the infrastructure we need to grow and making the experience more participatory, I think we can get closer to 50% of what China has achieved.”
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