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Covid-19

How a year of lockdown reshaped online retail

Empty supermarket shelves. Eerily quiet streets and shopping malls. Closed airports. Just silence and fear.

The start of lockdown Level 5 in South Africa was midnight of 26 March 2020. And with it, life as we had known it changed.

From the panicked scrambling of toilet paper purchases and tinned food supplies, to the sophisticated convenience of navigating online shopping without having to leave home, one year on the pandemic environment has seen marked changes in the way we shop.

In the space of a few months, contactless shopping and payments became mainstream, e-commerce became a key driver of revenue, and new sanitation rules and protocols part-and-parcel of daily routines.

In fact, McKinsey found the sector experienced 10 years of growth in just 90 days. Similarly, IBM’s US Retail Index, found the pandemic accelerated the shift away from physical stores to digital shopping by roughly five years.

“The pandemic completely rewrote the rules of retail overnight, turbocharging trends that had taken years to gain traction within a matter of months, and transforming consumptive behaviour changes,” says Derek Cikes, commercial director at part-payment platform Payflex.

Cikes outlines some of the key pandemic-led changes to the retail landscape over the past 365 days:

Rise of the user experience economy

Consumer trust in online shopping has increased and with it, greater traffic across all sectors. Shopping online has become more sophisticated, with shoppers expecting experiences to be intuitive, streamlined and frictionless. The popularity of Zulzi and the Checkers Sixty60 shopping app with delivery fulfilment within the hour of shopping, shows the significance of the speed of fulfilment as a key driver of online shopping.

“Simplicity is the key, enabling the user to effortlessly navigate the e-commerce website and find and acquire the desired items. To survive in the post-pandemic online landscape, merchants need to offer a streamlined platform with an easy path to purchase.”

Democratisation of payments

With the pandemic forcing consumers to shop differently, the previous one-size-fits all approach to payments was rendered obsolete. New innovative options from e-wallets to buy now pay later (BNPL) models have proven instrumental in democratising payments, providing consumers with greater choice and flexibility in managing their cash liquidity.

Covid has brought financial strain. TransUnion’s Financial Hardship Report found 84% of South African consumers are concerned about their ability to pay their bills and loans with credit products topping their lists. What’s more, the average South African owes R18,292 on their credit card accounts.

“Consumers now think more carefully about how they spend their money. This has in turn fuelled a demand for alternative payment solutions that offer a more budget-friendly while enabling them to manage the way they pay.”

Over the last 365 days, BPNL fintech Payflex has quadrupled their year-on-year customer sign-ups as more consumers seek payment solutions, which bypass the fees and interest associated with traditional credit card payment methods.

A sharper focus on clicks and mortar

Omnichannel moved beyond a retail buzzword into a key strategy for both success and survival. Switching between multiple touchpoints on the retail journey is now part-and-parcel of the shopping experience, with McKinsey research showing that more than half of customers engage with three to five channels during each journey they take toward making a purchase or resolving a request.

“The online store needs to be an extension of the physical one and vice versa. An omnichannel strategy has become instrumental in providing a unified, seamless experience throughout every touchpoint of the buyer’s journey especially with shoppers now expecting a continuation of the brand experience wherever and however they interact with a brand.”

YuppieChef, a leader in the South African e-commerce and omnichannel environment, was recently bought by Mr Price in a surprise deal. This move will provide Mr Price with key insights into the significance of understanding an established online business, which will ultimately be instrumental in helping to create a more formidable Mr Price brand in the online retail space.

No touching please

The way people pay shifted rapidly to digital alternatives with the onset of the pandemic, as consumers and businesses reduced reliance on cash and increased acceptance of contactless alternatives. In fact, the pandemic accelerated the decline of cash by over three years.

“We’re more weary of touch than ever before. And even though we have returned to public spaces (complete with the obligatory sanitiser sprayer greeting us at the door), thoughts are increasingly turning to touchless technology and how it can be implemented in the retail sector, specifically when it comes to payments.”

While consumers had already begun to embrace digital payment options prior to the pandemic, the health crisis rapidly accelerated the adoption rate with more consumers seeking safer, contact-free payment options.

Change of transactional space

Covid-19 has fast-tracked the growth of the e-commerce sector in South Africa with local online retail set to pass the R62bn mark ($3.5bn) this year. To understand this context, you have to compare that to the 2018 figure of R14bn.

“The pandemic represents a critical turning point for e-commerce in South Africa, accelerating the industry forward by between five and 10 years. Online shopping has evolved, especially in the growth of online stores, with all the favourite brands in an online offering, together with the fulfilment and customer journey, being increasingly tailored to mirror the instant gratification of the in-store experience.”

Maturing consumer behaviour

Retail consumer behaviour changed at an unprecedented speed over the last year as new habits and behaviours formed and crystallised in response to the Covid-19 pandemic.

The ability to shop 24/7, from anywhere, in any way, means today’s consumers expect more from retailers than simply purchase of a product. Today’s consumers now demand ultra personalised, tailored retail experiences that offer them a seamless customer experience. In addition, the crisis has pushed consumers to think about their shopping choices more carefully, especially when it comes to the way they pay, sustainability and health and hygiene.

A recent Google report on new consumer shopping behaviour trends in South Africa found 41% of consumers now view speed as the most important part of the shopping experience. Followed by convenience (40%), price (39%) and stock availability (33%).

Similarly, McKinsey found 79% of South African consumers have tried a new shopping behaviour since the emergence of the pandemic. While up to 90% intend to continue shopping online post Covid-19.

Immersive tech bridges the gap

As online retail continues to evolve, e-commerce merchants are finding ways to differentiate their offering. A critical game-changer for retailers going forward will be how they create that ‘wow’ experience for consumers in a highly crowded e-commerce environment without person-to-person contact.

Since the outbreak of the pandemic, immersive technologies like augmented reality (AR), 360° video, 3D content and virtual reality (VR) have played a critical role in closing the sensory gap, providing the purchasing ‘proof points’ consumers need to evaluate a product digitally.

”Meaningful experiences remain essential to the future of retail. AR creates a new digital experience that enriches the relationship between consumer and brand as well as provides greater purchasing certainty and control over the digital shopping experience by helping to recreate the in-store experience.”

A new retail era

In the face of both global and local vaccination programmes, we can finally begin to view an end in sight. And with that, we can start to get a clearer picture of the sheer scale of change to the retail sector.

By now it is clear that the Covid-19 pandemic has completely rewritten the rules of retail. Growth in competition, rapidly changing customer expectations, and the emergence of new technologies is fundamentally changing every facet of retail as we know it. In fact, 30% of consumers believe shopping experiences will never go back to the way they were.

And although the pandemic presented the South African retail sector with significant challenges, it has also provided unique opportunities and valuable lessons to meet customer demand in new and innovative ways.

“The last year has been without question a transformational year for retail. As we enter a new retail era of a post-pandemic world, it is clear that many of the consumer changes that were born out of the pandemic are not only here to stay, but also likely poised to grow and continue reshaping the industry for many years to come - especially as consumers demand greater personalisation and convenience,” concludes Cikes.

Payflex
Payflex is a revolutionary online payment product that enables online shoppers to shop now and pay in 4 interest-free instalments over 6 weeks. No debt. No fees. No catch. Our partners experience a 30% increase in sales when they integrate Payflex with their online stores. Working with Payflex means your business will also see a 70% increase in order values and an 80% increase in repurchase rates. A win-win model for all.
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