Sa Retailers Have Arrived At An E-commerce Crossroads

South Africa's e-commerce landscape has arrived at an important juncture. The explosive growth observed during the pandemic years has slowed somewhat while consumer spending power has faltered amid low economic growth and a global cost of living crisis. At the same time, competition is hotting up.

Asian retailers such as Shein and Temu are upending segments of the e-commerce market, rapidly grabbing market share and increasing pricing pressure on traditional retailers. Amazon's much-anticipated entrance into the South African market is expected to further turn up the heat - potentially creating a new benchmark for customer experience.

Yet if we look at the experiences of other emerging markets, the disruption may only be beginning. Barriers to entry for new players in the e-commerce channel are relatively low, creating space for more competition. It would be unsurprising, for example, for brands in segments such as tech, durables and clothing to go direct to consumer with e-commerce.

This is akin to developments in the Middle East, where e-commerce strategies have introduced 55 new brands to the market. Amid all these developments, opportunities beckon. With the current economic climate and shrinking consumer wallets, the landscape is ripe for innovation and competition.

Consumers are becoming increasingly proactive and creative in their strategies to reduce costs - creating opportunities for innovative brands and retailers to expand their market share. Those that can offer convenience, competitive pricing, a wider range of products and a personalised experience are likely to lead the charge in this rapidly evolving market.

Here are some of the key developments and trends to watch:

Many people do their research online and then buy in-store, or alternatively research in-store and then buy online - depending on price and value. Our research shows that 35% of South African shoppers agree that they use their phone in-store to help make purchasing decisions. Supporting customer choice can help retailers to maximise opportunities to acquire and retain customers.

Retailers with a real-world footprint can get an advantage by making it easy for customers to switch between touchpoints. It's now key to consider how to leverage formats like pop-up stores as well as platforms like Mr D and Uber Eats, and marketplaces such as Takealot and Amazon to expand reach.

In the current economic climate, price sensitivity is one of the key factors shaping how consumers shop. Behaviours such as bulk buying when products are on sale and reducing trips to the shops to save petrol money are becoming more common. Consumers are on the lookout for promotions and discounts both online and offline.

Around 60% of South African consumers say they shop around different stores and online platforms to get the best balance of prices, deals and options, while nearly a third use digital technologies such as mobile apps to find better deals. Around 31% are shopping online to get better deals and save transport money. Cross-platform presence and thoughtful promotions are key to winning market share in this environment.

With competition hotting up and consumers becoming more price conscious, retailers are looking to loyalty cards and reward programmes to improve customer retention and increase basket sizes. Some 59% of South African consumers shop with loyalty points to help manage spend.

For retailers, loyalty programme data is a goldmine of customer insight. Not only can it help them understand overall spending trends, but it can help them improve conversions and retention through personalisation. Artificial intelligence and machine learning are unlocking even more powerful insights for personalised marketing.

Personalised promotion strategies are more accessible thanks to online leaflets and digital loyalty schemes. They resonate well with households that are struggling to make ends meet or with buyers that need to support larger families. We're also seeing many innovations in loyalty - for example, towards the end of last year, Shoprite Group launched a monthly subscription-based loyalty programme offering unlimited Checkers Sixty60 deliveries.

Retailers and consumer brands know that amid tough economic conditions, innovation must also include the generation of new revenue streams. This might take the form of targeting new markets - as we see with Shoprite's OK Urban brand, an innovative cashless concept store that includes an artisanal bakery and coffee shop, or Makro's exclusive B2B online store for businesses of all sizes.

Globally, retailers have their eye on retail media networks (RMNs), a digital equivalent of in-store ads. These allow them