Digital retailers force offline competitors to adapt

Harsh Sada, managing director of Nielsen Africa Retailer Services and E-Commerce

Harsh Sada, managing director of Nielsen Africa Retailer Services and E-Commerce

Online shopping in Africa is becoming more and more popular, with ecommerce sites like Zando, Takealot and Yuppiechef (to mention just a few) delivering online retail solutions that have been customised to the needs of the local market. This is starting to have a real impact on brick-and-mortar retailers.

Despite varying levels of network infrastructure, access challenges and modern trade development for markets in Africa, overall internet penetration is on the increase, says Nielsen Africa Retailer Services and E-Commerce managing director Harsh Sarda. He says the most successful modern and traditional trade retailers and manufacturers will be “those at the intersection of the physical and virtual worlds, leveraging technology to satisfy shoppers how, when and where they want to shop”.  Sarda adds that a key aspect of meeting these needs is in-store digital enablement options that bring the ease, convenience and personalisation of online to bricks-and-mortar stores. 

“Instituting digital strategies into the in-store experience is therefore not just a nice-to-have for key consumer markets — these options can increase dwell time [the time customers spend in a store], engagement levels, basket-size [how much customers buy] and shopper satisfaction,” he says. 

South Africa’s burgeoning connected commerce era means that consumers are no longer shopping entirely online or offline but rather taking a blended approach, using whatever channel best suits their needs. 

This is one of the key findings of the recently released Nielsen Future of Grocery Report, based on a survey that polled 30 000 online respondents in 60 countries to understand how digital technology will shape the retail landscape of the future. 

Connected South African consumers are ready for retailers to engage with them across an array of digital channels. Top of the list are online or mobile coupons, which 13% of local respondents say they already use and 52% would “definitely be willing to use in future”. 

More people are also using their smartphones to research what they want to buy, and this could partly explain why 60% of respondents say they “are already using” or “are definitely willing to use” retailers’ apps or loyalty apps on their mobile phones to receive information or offers while they are in a store. This willingness to interact with digital tools is evident from the 60% of respondents who are “already using” or “keen to use” a store’s wi-fi network through their mobile phone to receive more information or offers while they are in the store. 

Sarda says: “At present, shoppers do all of the work, putting the pieces together to arrive at their final purchase decision.  In a competitive retail environment, retailers and manufacturers can add value and differentiation by providing digital tools to help consumers take control of their shopping experience, while also increasing sales potential.  Mobile [technologies], in particular, can tip the scales in favour of increased [control for shoppers], empowering them to shape the shopping experience more than ever before.” 

The successful retailers of the future need to understand that they don’t have a choice between having an active online space in addition to a brick-and-mortar environment — they need to develop a presence in both, says Jacques Burger, chief executive of M&C Saatchi Abel in Gauteng.

“The online shopper is often also the offline shopper. The different environments lend themselves to different messages, products, offers and experiences, and it’s important that marketers play to the strength of each medium and understand the role of each in the context of the shopper’s mindset,” he says. 

“From a marketing perspective, there is a lot more emphasis on delivering an engaging experience in the offline space, while the online environment means we can ‘find’ the customer anywhere, truly offering a 24/7 shopping experience. Brands need to understand how to make the most of this in terms of what they offer as a product or service.” 

Burger says online shopping can drive foot traffic to a brick-and-mortar store, creating a so-called “long tail” to shopper behaviour. (This industry term describes a strategy of selling relatively small quantities of a multitude of unique products, usually in addition to selling larger quantities of a smaller number of popular products.  It was popularised by Chris Anderson in an October 2004 Wired magazine article, and elaborated on in his book The Long Tail: Why the Future of Business Is Selling Less of More.)

“However, this is dependent on getting the mix between what is offered online and offline right,” Burger says. “Look at brands such as the US cosmetics retailer Sephora, which uses lots of theatre in its stores and encourages experimentation among its customers — something that its very successful online environment cannot deliver.

“In the absence of a clearly considered and differentiated strategy though, offline businesses can suffer when they are competing against the online environment purely on price and product,” he adds.

Mohsin Begg, manager at KPMG SA, concurs, saying that one of the biggest opportunities that shopping malls need to take advantage of is offering an “omni-channel experience”. 

This is when consumers are provided with a seamless shopping experience across online and offline channels — something that will keep them engaged online and giving them a reason to shop offline.

The 2015 Global Consumer Executive Top of Mind Survey, which interviewed senior executives of companies that service the consumer market across the world, proves the point. It points out that one of the top priorities is having an omni-channel strategy, due to the strong growth in e-commerce as well as the increased role of the internet throughout the customer’s path to purchase and the supply chain. 

One omni-channel approach is a “click and collect” service, in which consumers order their purchases online and then collect them at a store or other location. For example, South African retailer Makro will soon launch a service like this for its online sales, delivering goods to lockers at “intermediary locations” such as garage forecourts, office parks and fast food outlets, says Harda. 

Burger says South African stores need to be more digitally connected to the consumer and their marketing efforts need to be more targeted, so that the needs and preferences of consumers are addressed by the retailer.

 “As consumers are becoming more comfortable with using their devices to browse for products on the web and to make purchases, online retail is growing in South Africa,” he says.

In analysing the impact of whether this is affecting the performance of traditional shopping malls, we need to understand that South Africa, being a developing nation, lags behind its global counterparts in developed countries such as the US, where online shopping has contributed to a large amount of the retail sector. The scale of e-commerce in the US is large enough to make mall owners and developers think carefully about their tenant mix and what they need to do to retain consumers’ interest in shopping malls.”

He adds that in South Africa, even though e-commerce figures are in the billions, shopping malls are largely unaffected, because they offer a real touchpoint for consumers to interact with. They also attract consumers who want to socialise and relax. 

“In South Africa, new mall projects seem to be a common occurrence compared to the opposite which occurs in the US, where some malls are being converted into spaces used for purposes other than shopping premises,” he says. 

“South African consumers generally want shopping malls to remain relevant and they compare favourably to international trends which is why landlords need to provide the correct tenant mix to their portfolio, with the right design of the mall that targets the correct market they are looking to attract,” Begg says. 

Derick Henstra, executive chairman of dhk architects, the firm behind the recently completed Baywest Mall in Port Elizabeth, concurs. He says malls need to “excite and entertain”, rather than “confuse and disorientate” patrons.

“One of the most important aspects of mall design is flow, and we set out to create a mall that is a pleasure to navigate,” he says. “In this particular case, the uncomplicated design of the mall achieves two objectives: it ensures that the mall detracts from its natural surrounds as little as possible, and it keeps shoppers’ attention on the reason they are there in the first place — the stores.

“People relate to buildings they feel comfortable in. Some malls are an incredibly torturous experience, with long and confusing routes which are very distracting to the eye. It takes you away from the focus of the product, which is the shops and what they sell and what the mall stands for.”

Begg adds that certain malls in South Africa have seen a reshuffle in occupancy where some stores have been moved around to smaller areas to make way for newer, larger and more appealing stores that are capable of creating a demand. This has been the case in recent years with many upgrades being done, all in an effort to remain relevant and current and to attract international prospects which have chosen to enter South African shopping malls in an effort to serve the demand and interest.

“There are certain categories in shopping malls which may be affected more by online categories than others such as businesses in music, CD/DVDs, computer products and computer related gadgets,” he says. “Locally, we have noticed physical music stores experiencing difficulty trading in malls because more consumers are downloading music off the internet or subscribing to music. Other categories — such as clothing stores, grocery stores and furniture stores — are examples of what keeps shoppers returning to malls.”

Begg adds that South African retail stores that launch online shopping platforms could use this as a strategy to increase sales and as an opportunity to integrate physical store and online channels to deliver an integrated shopping experience.