Just before his death in January 2020, the renowned American innovation academic Prof Clayton Christensen published his final book, “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty.”
The thrust of the book was simple and controversial enough: “Poor countries are best developed, not through the traditional channels of investing in things like public education and healthcare, but rather through the introduction of ‘market-creating innovations’, that service the needs of those that are largely ignored by current value mechanisms and create new ways in which people can gain access and contribute to an economy.”
Even though it makes politicians look good when they publicly campaign for billions to be spent on education, or magically construct lavish healthcare funding schemes that are intended to benefit the future trajectories of all; these investments predictably underperform when it comes to their impact on poverty reduction.
We assume that these are the critical levers to prosperity, but research into their effectiveness does not concur. These apparent “good news” stories however tend to be favoured by political and economic analysts which is probably why we tend to fixate on them rather than one of an amazing industry transformation that has taken place in South Africa over the past four years.
Before the pandemic (a much-overused expression that should be referred to from now on by the acronym “BTP”) the percentage of retail trade that was conducted through online channels in South Africa was around 4% of the total “recorded amount”.
This figure was well below international benchmarks in more developed markets and, depressingly, the South African index also included all online banking transactions as well as transactions for random things that get purchased on the internet like airline tickets and all the ticket trade that goes through portals like Computicket.
The category was always growing, but slower than a snaking queue at Home Affairs.
Back then there were several assumed challenges holding things up.
Logistics was a perennial scapegoat, as was the frustratingly low level of general population internet penetration. You didn’t need to hunt too hard for credible reasons to justify the position that “making money from an e-commerce channel was difficult and not worth the headache to try”.
Access to a viable retail trading environment, both online and offline, for most aspiring South African entrepreneurs, was entirely off-limits. The cost of shop rental in popular shopping centres was also beyond reach, which reserved trading in the category for only the most well-capitalised of competitors.
Lockdown
Then hell froze over in early 2020 and we were all stuck at home with nothing to do. Lockdown was a gift from the heavens for the category. Being forced to stay at home was a critical catalyst for many households switching to fibre internet connections and choosing to start using things like Netflix and Showmax to distract themselves from thinking about sending the kids to boarding school. Suddenly subscribing to access Game of Thrones and the Real Housewives of Pretoria made perfect sense, and it was safe to do so.
Then came the debut of the Checkers Sixty60 phenomenon and almost overnight a rocket was tethered to e-commerce and set alight. All of the other supermarket brands then suddenly woke up and attempted to catch up with similar e-commerce offerings.
Read more in Daily Maverick: How Checkers quietly won the delivery app wars
Outside of quick service grocery delivery, TFG launched their Bash online and app platform. The MRP Group bought Yuppiechef to bolster the giant gaping hole they had in the premium homeware section of their brand portfolio, but also to strengthen their position in the digital realm. The monstrous Chinese e-commerce business Shein turned their immense sales pipeline into the region on; as did Temu. We went from a situation of dismally limited choice to an abundance of online shopping options… in the blink of an eye.
Now Amazon.co.za is here (they’re still busy warming their engines up before they hit the afterburner switch) going head-to-head with Takealot and Superbalist. And don’t forget that the Shoprite/Checkers group are still in the mix, having just announced that they will now be making 10,000 new items from their Checkers Hypers available to users of the service in selected locations.
It is now projected that by next year, more than 10% of all retail trade in South Africa will be done online — that’s a 150% increase in just four years.
These are certainly wonderful times to be a shopper in South Africa, but this is also a new dawn for entrepreneurs who were previously excluded from participating in retail.
While the big players pour billions into developing and fortifying value chains and training the average South African consumers to become great online shoppers, what is being created as a by-product is a far more robust and functioning e-commerce ecosystem for the South African economy.
This would have normally taken the local incumbents a very long time to create, but thanks to the mammoth amounts of foreign investment that are flooding in, the commercial viability of the category has leapt ahead in record time.
What this means
Selling things, no matter where you live in South Africa, has never been easier or more financially viable than it is right now.
It doesn’t matter whether you are offering old clothes or a used pram on sites like Yaga or Facebook Marketplace; or you have big ambitions and you’ve developed a new brand of designer sneakers and sell it via your own dedicated store on Takealot or Amazon Marketplace.
This new e-commerce ecosystem In South Africa is a classic example of one of Clayton Christensen’s “market-creating innovations”. It’s one that has the potential to create thousands of jobs (in design, manufacturing, logistics and marketing); profits from new brands that can command higher margins for their products, and most importantly; shift the South African culture to one that is more entrepreneurial and more welcoming of the entrepreneurial spirit. DM