The impact of COVID-19 on ecommerce in SA
As a predominantly ecommerce focussed business that started in 2013, it's fair to say that the first 4 years of our existence often felt like we were swimming upstream. Why?
Because the South African retail sector was relatively slow in adopting ecommerce - largely as a result of the high cost of entry and the challenging associated logistics. Towards the end of 2017, we started to see a shift - albeit a relatively slow one - and by the start of 2019, it felt like the market had woken up to the realisation that in retail, an omnichannel offering was essential to staying relevant.
Looking back at 2018/2019, we partnered with almost 70 retail businesses to develop their online presence. What's quite interesting is that around 70% of these were start-ups or entrepreneurs who had identified an opportunity to level the playing field - competing with large footprint brick and mortar retailers, who still hadn’t got their act together in the ecommerce space. It would be remiss of me to say we started 2020 slowly. On the contrary, our ecommerce pipeline leading into to the new decade was healthy from the get-go, but what we've seen as a result of COVID is something none of us could have predicted.
The impact of the COVID-19 pandemic has been stark. It has changed retail in South Africa forever, fast-tracking the adoption of ecommerce for both consumers and retailers in the space of just a few short months. For 8 weeks, stores that were forced to close and that did not have an ecommerce offering were given no option but to rethink their future. Habits take just 3 weeks to change and during our 60 day hard lockdown, the South African consumer had very little to do besides surf the web, and, for the uninitiated, familiarise themselves with the convenience of shopping online. For many, what had never been tested before became a 2-month reality with new habits formed and old habits forever changed.
Looking specifically at our retail portfolio, we can segment our managed accounts into 2 distinct groups. There are those that panicked and pulled their marketing spend, and then there are those who simply changed their strategies - realising that lockdown presented opportunities for reaching consumers across multiple devices, in the comfort of their own home.
Let's be honest, besides baking banana bread, taking part in a fitness challenge, or going green with a veggie garden, the options for passing time during hard-lockdown were relatively slim. TV on repeat offered little respite and as a result, what we saw was a huge surge in digital media consumption and a massive spike in online shopping. Whilst most people in the industry anticipated a drop in consumer spending, for those advertisers that braved holding their marketing budgets strong, running lockdown deals and promotions resulted in a significant upside - in some instances with revenues breaking Black Friday numbers in what was essentially the darkest trading month of our lifetime.
Additionally, we identified lockdown as an opportunity to leverage the increased attention that consumers were paying to online channels and use this to drive hard with customer acquisition strategies for the purpose of growing merchant email databases. In almost all instances, this worked extremely well and as lockdown was lifted, merchants were able to go straight into marketing campaigns targeting newly added customers.
With people unable to visit malls or stores, we saw many consumers make an enthusiastic switch to online shopping, undeterred by the fact that items purchased would not be delivered until after lockdown was lifted. And, what's even more interesting now is that although we have seen a slight dip, ecommerce revenues are still well up on pre-COVID forecasts.
We also noted that merchants who quickly acknowledged the financial pressure on the consumer and implemented alternative payment methods made very healthy gains. A number of our merchants moved quickly to implement the PayJustNow payment option and the immediate incremental value this delivered was encouraging. Offering consumers the option of zero interest credit over 3 instalments meant that merchants were able to promote responsible lending during tough economic times but also leverage the opportunity to close sales that might have previously been abandoned as the consumer considered their purse a little more closely. What’s also been encouraging for us is how the tech giants responded so positively to the plight of small business with Google, Shopify and Facebook all offering respite to small business in a variety of ways.
As we look towards the next few months, the big question remains: what about Black Friday / Cyber Monday? Undoubtedly online will be a clear winner, and those retailers who have used the last few months to better position their offering, to implement tech solutions to avoid site failure and to acknowledge the need for multiple payment solutions that will help the consumer navigate their way through what’s bound to be a financially tough festive season, will almost certainly emerge victorious.
As someone who has been in the Digital Marketing space for 23 years now, I can't recall a time of change in the industry that has been as swift and as exhilarating as these last few months.