How to start an ecommerce business in South Africa

Parcelninja CEO Justin Drennan is an ecommerce veteran who has helped numerous South African online businesses succeed.

Drennan is known in the South African ecommerce market as an active investor, and someone whose guidance can help make a company successful.

He has invested, and helped to build, numerous local startups, including Superbalist, i-Pay, Insurance.co.za, Wantitall, and Conversio.

He is well known for his involvement in Superbalist and Wantitall, and has consulted for many large corporates on their ecommerce strategies.

The MyBroadband community was recently given the opportunity to ask Drennan questions about ecommerce and tech investments in South Africa.

The best questions and answers from the Ask Justin Drennan Anything on ecommerce and tech investments discussion are below.

You can view all his answers here.


lexor – How did you manage to convince C5 Holdings to provide R20 million in capital for Parcelninja, even with your well-established track record from creating Wantitall?

The process was slightly different to the normal way most businesses go about raising funds. We were in a position whereby we had a business which had been well established for a number of years and had a solid management team in place. We found that C5 was looking for tech businesses on the continent and was able to add value to our existing operations.

We were introduced to them through an intermediary, and therefore we didn’t have a formal pitch process, but rather provided information to them on the business, and discussed the opportunity together.

The normal requirements from an investment were looked at: Product/market fit, Traction, Team, Size of opportunity.


Venomous – What is the most complex part of setting up an ecommerce concern?

I feel that payments, platform, logistics have largely been solved. I don’t really see it as complex – it’s now a matter of having the correct team, selecting the correct niche, having enough marketing budget and being able to execute.

In poker they talk about sitting down at the correct table. In ecommerce you need to make sure you have the correct niche, with enough margin.


uph0n1c – There’s a gap in a certain industry that I want to take. How do you begin/how do you start setting up a website/online service to fill this gap, as this will take a notable investment?

I’d have a look at what Andy Higgins and the guys at https://www.uafrica.com/ are doing. I think they provide an amazing platform to help get you to market ASAP, with exceptionally low cost.


King Size – What is the future of DStv and will Netflix and Amazon Prime make it a Kodak moment?

It looks that way for now. I no longer use DStv, and my kids have never really seen an advert. Netflix + Showmax + YouTube for kids = on demand quality programming.

Sport seems to be a fairly large moat, however, with FB and Amazon looking into that, things might change quickly.

Can DStv innovate quicker than Netflix can scale? That’s the question.


FlexSA View – Seeing as you are so active, involved and you have such a big influence on the local ecommerce marker, what are your thoughts on Cryptos? And do you think they have their place to actually be used in the local ecommerce market to purchase goods?

The guys at Payfast and Bidorbuy have been supporting crypto for a while. While I think blockchain is an interesting technology, I’m not sure which crypto/coin/protocol will be the winner.

It seems to be the same as the dot-com boom. If you had picked Amazon back then, you’d be rich. However, there are a lot of failed businesses on the path to creating Facebook/Google/Amazon.

Right now, it doesn’t seem to have large adoption regarding ecommerce payments… even from the guys who are bleeding edge.


snoozee – Customer and Product profitability analysis/pricing models are obviously key for ecommerce sites (as they are for any other retailer). What sort of emphasis do you place on this, and is there any particular software that you use for this particular purpose?

We’ve been working on this for a number of years. We’ve always taken a data-driven approach to our customers and marketing. Every cent we spend is accounted for and ROI analysed.

For customers we use a standard RFM model to maximise customer ROI and make sure customers are engaged.

On the products, we’ve done A/B tests many times in the business, and we continue to do this. If we drop prices X, what impact does it have on sales. Is the net effect greater than before the drop? – we have a look at this all the time.

We really do have a lot of data, and have been using it since day 1.


Now read: Bidorbuy founder Andy Higgins – Best answers on ecommerce

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How to start an ecommerce business in South Africa