Brick-and-mortar retail in the doldrums as shift to online accelerates
The year 2020 pushed Shoprite Holdings’ Checkers, Woolworths and Pick n Pay to invest more in online shopping platforms. Spar is the laggard.
First published by Daily Maverick 168 weekly newspaper
Woolworths group CEO Roy Bagattini offered shareholders and customers a frank mea culpa about the retailer’s online shopping offering that flopped during South Africa’s hard Covid-19 lockdown.
“Our e-commerce was fledgling and, to be candid, we were caught a little short during the Covid-19 pandemic,” said Bagattini in September during Woolworths’ 2020 annual results presentation.
A Woolworths internal survey found that 14% of its customers in South Africa started shopping online for the first time during lockdown. But the company’s online shopping – mostly for food – was a nightmare for customers who avoided frequenting the retailer’s brick-and-mortar stores during the first wave of Covid-19 infections. They had to wait days for online orders to be delivered. The unlucky ones waited weeks for new delivery slots to open.
Woolworths’ failures arguably underscore how the broader South African retail industry was not prepared for the quick shift to online platforms during hard lockdown, which restricted public life and the movement of people. South Africa’s online retail industry accounts for just 1.4% of total retail, according to a 2018 report by independent technology market research group World Wide Worx. In the US and China this is closer to 20%.
The biggest challenge for local retailers in getting online shopping right is investing in and growing their distribution network, which enables them to deliver to consumers, even in far-flung areas. To reduce pressures on its limited delivery capacity Woolworths launched an option for customers to order goods online and collect them at its 60 stores nationwide.
Shoprite Holdings – through its Checkers brand – became an early investor in online platforms before lockdown trampled the country. It launched the Checkers Sixty60 mobile app, which promises to deliver groceries and other goods in 60 minutes. But there’s a caveat to the speed – the app is only available in limited areas, provided you live in proximity to a Checkers store. The app works with more than 85 stores.
According to Shoprite CEO Pieter Engelbrecht, Sixty60 is the number-two shopping app in South Africa after Takealot. The app was popular during different levels of lockdown (see below).
Source: Shoprite Group.
“Three years ago I was talking about the race for [physical retail] space [among retailers]. We are now talking about the race for reach these days, especially in the digital space. This is becoming more prevalent during Covid-19 – that is to capture the customer digitally. The shift is enormous,” Engelbrecht recently said during Shoprite’s 2020 annual results presentation.
Pick n Pay’s partnership with on-demand liquor app Bottles in early 2019 has also paid off. The Bottles mobile app morphed from a liquor store into a Pick n Pay outlet when the sale of liquor was prohibited under hard lockdown, offering delivery of groceries within several minutes. In October, Pick n Pay bought Bottles for an undisclosed amount.
At a recent results presentation Pick n Pay CEO Richard Brasher revealed that Bottles has more than 350,000 registered users. Pick n Pay also reported that its large-scale timed deliveries to customers had “increased dramatically over the lockdown period”, with its online sales doubling and a 200% increase in active online customers.
Meanwhile, Spar hasn’t made large investments in online platforms. Instead, the retailer has invested capital and attention to excel in overseas markets including Switzerland and Ireland. DM168
This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick ‘n Pay Smartshoppers at these Pick ‘n Pay stores.