Traditional fashion retailers who are making their way on to the worldwide-web will find they have a formidable rival in the form of online upstart Zando.co.za.
Launched in January the online fashion retailer attracts 200 000 unique visitors a month and is growing its online sales at an estimated 30% year on year. Though off a zero base, this makes the 6% growth in traditional retail sales look pale in comparison.
Not to be outdone Mr Price launched its online offering in July. Woolworths has an offering while Truworths and Edgars both have limited online services. Edgars is in the process of extensively revamping its online shop.
Preceding Zando by many months is the Naspers owned online boutique 36Boutiques.com which represents a number of SA designers.
“South Africa is ready for an offering like this,” says Zando’s 27-year old co-founder Manuel Koser. He founded the business along with Peter Allerstorfer. They hail from Germany, and Austria and are 27 and 30 years old respectively.
This young team was exposed to the opportunities in South Africa through their work in the consulting fields. Koser worked for the Boston Consulting Group, while Allendorfer was with McKinsey.
Working out of a remodelled industrial warehouse in Observatory, Cape Town, Zando employs well over 100 mostly hip and young people. Not far away in Ndabeni the company occupies a 1 500m warehouse which houses its merchandise. It stocks over 300 local and international brands of clothing, shoes and accessories, which translates into an inventory of 9 500 styles.
While Koser does not disclose sales levels, he says that every day the company dispatches one large truck to Johannesburg and several smaller trucks for Cape Town and surrounding areas.
“South Africa ticked all the boxes for an online fashion offering,” he says. “It has a high fashion spend as a proportion of gross domestic product (GDP); there is good online awareness, internet and mobile penetration is increasing, growth prospects are good, and there was no comparable fashion offering available.”
Simon Leps, CEO of Fontera Digital Works, a Cape Town developer of e-commerce platforms for global and local retailers believes that online retail is just about to explode in SA. “There is a huge amount happening at the moment. Consumers are now used to shopping on Kalahari or on Amazon and they are receptive to new offerings,” he says.
Aside from the traditional retailers mentioned, other local online stores include kurt geiger.co.za, yuppiechef.co.za, 5rooms.com, zoomfootwear.co.za and soon bankskitchenboutique.co.za.
Internet penetration no longer limits the viability of online retail. Local ecommerce developers are developing online shopping platforms for computer, tablet and mobile users. “We have been interacting with a lot of young kids, black and white, they are huge adopters of mobile technology,” says Leps. “They are very happy to browse and shop using their smartphones.”
Credit card penetration is not a limitation either. Typically innovative, South African e-tailers have developed alternative payment solutions. At Zando for instance you can pay via EFT, credit card or cash on delivery. Mr Price is the same.
Zando and 36Boutiques also offer free delivery. “We want to build long-term relationships with our customers,” says Koser. “That means getting people comfortable with sizing and returns. Free delivery is part of that,” he says.
As any retailer will know, getting the stock mix right and then having it in stock in the right colour and size is complicated enough. But add to that the logistics of single item delivery and the system becomes incredibly complex.
And that is just for starters. With no brand and no physical market presence, marketing is a massive priority for Zando. It is one of the company’s biggest expenses.
The company was shrewd enough to establish a brand presence – using Facebook and Twitter – before it went live. Since then it has expanded its marketing to include online advertising, radio and television.
So how are a couple of 20-somethings getting all of this right?
The answer lies in the cookie-cutter business model. Though Zando is a South African company, it has international shareholders in the form of German VC Rocket Internet and Swedish private-equity player Kinnevik, which owns a 25% stake in Rocket.
Rocket, which has an office in Cape Town, specialises in incubating and developing e-commerce and other consumer-oriented online companies. Its other local start-ups include 5rooms.com and glossybox.co.za.
Kinnevik works closely with the founders of Rocket Internet to start up companies and build them into Internet players. It seems to be a partnership that works: Rocket Internet’s online expertise combined with Kinnevik’s experience and network.
Rocket’s footwear and fashion portfolio includes Zalando in Europe, Dafiti in Brazil, Lamoda in Russia, Namshi in Middle East and North Africa, The Iconic in Australia and Zalora in South East Asia.