The battle of the marketplaces will shape the future of omnichannel retail in South Africa

Gareth Paterson, director of client strategy at NIQ and GfK

That’s according to Gareth Paterson, director of client strategy at NIQ and GfK (an NIQ company) in South Africa, who was speaking at Ecommerce Live, held on 12 September 2024 at Sandton Convention Centre in Johannesburg. He says that e-commerce growth worldwide has bounced back – following post-Covid stabilisation in 2022 – with growth on digital platforms such as marketplaces outstripping the increase in total e-commerce sales.

Data from NIQ shows that consumers worldwide spent $3.25tn on the top 100 marketplaces in 2022. Around two-thirds of global e-commerce sales take place on marketplaces, which are experiencing double the growth in sales of the total e-commerce market. Similar trends can be seen in South Africa, where competition has heated up following Amazon’s launch into the market.

Innovation accelerates in South African e-commerce

Says Paterson: “Competition has heated up, with local players in FMCG and the technology and durables retail markets launching apps with competitive features such as same-day delivery (or even one-hour delivery for groceries); subscription services for unlimited deliveries during the month; and larger product ranges. Retailers have needed to innovate in response to pricing pressure and product variety from the likes of Temu and Shein.

“Following the Covid-19 inflection point, we have seen South African retailers’ strategies morph into an omnichannel approach, where they strive to offer a coherent experience spanning digital and real-world channels. It’s no longer a case of reaching customers through a local store or via a website with home delivery – today, it’s about supporting customers wherever they are and whichever touchpoint they use.

“Today’s customer journeys may include digital and virtual experiences, such as order online and pick up in a store or researching in a shop and ordering online. They also increasingly span digital platforms and apps that the retailer or brand doesn’t own itself – including the third-party marketplaces such as those offered by Takealot or Makro; super apps that consolidate multiple services in one place like VodaPay or Capitec Bank; delivery apps like Mr D and Uber Eats; and social platforms like Facebook.”

Paterson says that competition is becoming particularly heated in the marketplace arena, with players such as Takealot and Makro regarding advertising and commissions from third-party sellers on their websites as a major engine of growth. The marketplace offering is a key part of Amazon’s proposition for South Africa. Chinese e-commerce players such as Temu and Shein – which have shaken up South African retailers – have started to open their platforms up to third-party merchants in other parts of the world.

More routes to the consumer, but more competition

“With consumers still under pressure following years of slow economic growth, load shedding and high interest rates, each retailer and manufacturer should be looking at how to optimise its omnichannel strategy,” says Paterson. “There are more routes to reach the consumer than ever before, but also more competition. This makes it more essential than ever to understand where customers are, how they make their purchasing decisions, and the costs and opportunities of each channel.”

“For large retailers, marketplaces are a potential opportunity to open new categories they were not present in and offer brands or products without managing the stocks,” says Paterson. “This represents a huge opportunity in terms of SEO since the more comprehensive a retailer’s offer, the more visible it will be on Google. But, finding the right balance between defending existing revenues and profiting from a marketplace is key.

“For emerging brands and SME retailers, meanwhile, marketplaces are a way to expand reach without distribution contracts or commitment. It’s a way of testing out their offering and business models, and quickly understanding whether they resonate with an audience. They can then move on to other channels when their market share meets their expectations.”

In determining where marketplaces fit into their omnichannel strategies, brands and retailers could consider the following questions:

• Which partners and channels are a good fit with our target audience and product?
  
• How do we ensure discovery of our offering?
  
• How do we optimise our offering for specific channels, engagement opportunities and purchase engagements? This includes price segmentation, pack sizes or service offerings, and customer experience or expectations in terms of fulfilment within this channel, how customers search for products or reviews.
  
• Is our pricing and promotional strategy right?
  
• What are the benefits and risks of extending access to our platform to third parties?

Paterson says: “The omnichannel trend is accelerating through multiple channels that include mobile shopping, live shopping, social media, smart devices, augmented and virtual reality and the development of AI, we are seeing an explosion of ways to reach, engage, and sell to consumers. For manufacturers and retailers alike, the critical success factor is to ensure they understand the multiple channels they are dealing with as technology helps them expand and reach more customers within competitive markets. You need to be ready to meet customers where they are.”