Lack of trust holds back e-commerce growth

While e-commerce is still in its
infancy in South Africa, many
people are scratching their heads
and asking, ‘What are we going to
do when it takes off?’ says Martin
Bailey, chairman of Industrial
Logistic Systems.
According to Bailey, most large
retailers, like Shoprite and Pick
n Pay, support online shopping
from brick and mortar outlets.
“Most don’t keep stock in their
own warehouses. And if they
say shipping will be in seven
or 10 days, it really means they
haven’t got the product and have
to buy it from
someone else. That
requires several
deals to be made
with hundreds
and hundreds
of suppliers – a
really tough link to
optimise.”
Some companies
run e-commerce
from a central
warehouse, but
the only guys with
a proper distribution centre
are Takealot, which dominates
the South African e-commerce
market.
While Takealot’s website is
good, Bailey believes it was its
acquisition of Mr Delivery (now
called Mr D), that has truly set it
apart. “That was a clever move;
it gave them smart distribution
infrastructure.”
He says until now the focus
in South Africa has been on the
creation of slick websites and the
refinement of the online buying
process. The exception has been
Takealot, which has also invested
in large warehouses.
From Bailey’s point of view,
Europe is easily the most advanced
from a warehousing point of
view, while Amazon’s facilities
in the US are unpleasant to work
in and are poorly designed and
conceived. “Its website is brilliant,
but its warehouses are really oldfashioned,”
he explains.
“But Amazon is just so big
(it operates 36 warehouses and
growing across the United States),
that it works.” It is also highly
decentralised. “That is one of the
big things that most people don’t
realise.”
Bailey says a major issue
facing e-commerce
businesses all
over the world is
customer returns,
particularly with
regards to clothing.
“Many companies are
dealing with a 25%
return rate.”
Commenting on
why e-commerce
hasn’t taken off in
a big way in South
Africa, he points to a
lack of trust. “The belief exists that
everyone in Africa is trying to rip
someone else off. That said, it is
also a numbers game; there may be
50 million people in South Africa,
but only three million of those are
in the right income bracket.”
According to Bailey, mobile
phone retailers are the most
advanced in terms of their
e-commerce infrastructure.
Large retailers have also not been
left behind, with Makro, Game,
Dion, Pick n Pay, Shoprite and
Woolworths, among others, all
catering to online shoppers.
“There is exciting stuff coming,
but it is taking its time,” he said.
INSERT & CAPTION
Most large retailers
support online
shopping from brick
and mortar outlets.
– Martin Bailey