Make or break for online retailers in South Africa

South Africa’s e-commerce market has become flooded by international players, such as Amazon and Temu, making it more competitive and more appealing to a broader audience.

Because of this surge in growth, many industry players expect a 30% to 50% increase in sales volumes over the Black Friday and Christmas spending season compared to 2023.

This is according to Bob Group head of product Jaco Roux, who told MyBroadband that the biggest challenge for the sector will be the sheer quantity of orders that must be fulfilled within a short time frame.

“Balancing stock availability, fulfilment speed, and heightened customer expectations can be difficult during peak periods like Black Friday,” Roux said.

“Effective communication with customers is crucial; by keeping customers informed about increased volumes and potential delivery timelines, they can help manage expectations and eliminate the element of surprise.”

Roux pointed out that the industry has started expanding delivery networks and investing in alternative collection methods to ensure customers get their packages during peak demand.

For instance, Amazon announced that it extended its delivery hours as of 1 November to account for the extra demand over Black Friday and the Christmas period.

“Customers can shop with confidence knowing that most items bought now through to 23 December will be delivered before Christmas,” said Amazon’s managing director of its sub-Saharan Africa operations, Robert Koen.

The American e-commerce giant has also made 3,000 pick-up points available nationwide for shoppers to collect packages.

“Additionally, tighter integrations with courier partners and a structured fulfilment process help to streamline operations and increase capacity, reducing potential delays,” said Roux.

He highlighted that couriers have also been ramping up their service offerings by providing greater capacity in anticipation of the increased delivery volumes.

However, as order volumes rise, so does the opportunity for crime, which Roux noted as increasingly affecting delivery operations.

“Many companies are adopting comprehensive risk management strategies to protect drivers and customers,” he said.

“These include prioritising safer delivery routes, providing drivers with safety training, and offering secure collection options for customers to reduce doorstep delivery risks.”

FarEye CEO Kushal Nahata recently said that crime targeting the sector has increased the need for security, driving up operating costs.

Nahata, whose company develops technologies for increased efficiency in last-mile delivery, pointed out that South Africa’s delivery prices are 50% to 100% more expensive than the global average.

Between 20 and 25 delivery vehicles are hijacked per day, according to Nahata, forcing security companies to invest in increased security.

Data from Tracker shows that these hijackings tend to increase in the second half of the year, especially around Black Friday and Christmas.

The same data points to delivery vehicles being more prone to hijacking than personal vehicles.

Because of this threat and the evergrowing e-commerce landscape, stakeholders have become aware that they need to tend to the matter urgently.

To do so, FarEye brought together the industry’s stakeholders, including Clicks, Massmart, and Woolworths, to discuss the matter.

At the event, the supply chain industry body, the SA Production and Inventory Control Society, released a report on last-mile delivery in collaboration with FarEye.

The report’s findings included that security costs are the biggest concern for couriers at the moment. Poor road conditions are another contributor to increased operating costs.

It also noted that 20% of respondents have their own fleet of delivery vehicles, whereas 60% outsource their last-mile deliveries.

This is part of an effort by companies to constantly find innovative ways of controlling costs and bring about economies of scale.

Nahata points out that market growth through the entry of major players such as Amazon will increase volumes and make it easier to keep costs under control.

He says this will require collaboration from all stakeholders, including regulatory authorities and the government.