🤑 The Future of SA E-Commerce?
Hi there,
Tired of them golden teeth? The world’s first tooth regrowth medicine is going on trial in Japan. The team behind it aims to have it ready for commercial use by 2030.
In this Open Letter:
- Mall tricks: Is this what SA e-commerce is missing?
- SA’s secret airship, Elon’s Twitter limit & AirPod doctors.
- Fast-track: Tools for the first 5 days of your startup.
- Meet us: Got plans for Thursday the 13th?
TRENDING NOW
What E-commerce in SA needs
150 million more buyers or some good old startup hustle.
Naspers recently released its annual results and in it, the performance of South Africa’s largest e-commerce player, Takealot. It recorded a loss of R400 million in the fiscal year ended 31 March 2023. This is despite a 13% increase in gross merchandise volume (GMV) and a 12% rise in revenue in local currency.
Former CEO, Kim Reid, who left Naspers to buy Take2, rebrand it to Takealot and eventually merge it with Kalahari.com (Nasper’s old e-commerce play), said previously that Takealot should be profitable by 2021.
Two years later, the loss has grown. And maybe even more worrying is that over the last 3 years, their revenue growth has slowed down substantially.
Much of the reporting on the matter focussed on some of the obvious factors – tough economic circumstances, loadshedding, and increased fuel prices. But is there more to this than simply the current climate? We think there is…
An American model in an African Context
Amazon has been the global e-commerce pioneer for years. And many e-commerce offerings around the world have modelled Amazon in their territory. But just how practical is their model in South Africa?
Americans earn on average ±$ 60 000 (R1.1m) per year, while in South Africa the average salary is around R350 000. Add in some of the extra costs South Africans need to pay for healthcare, education and security and it's even less.
Now consider that the USA has 166 million salary-earning employed people, compared to South Africa’s 16.1 million. Not only is the disposable income per wage earner 4 times less but there are also 90% fewer wage earners – yikes!
Perhaps that’s the reason why Amazon has never set up shop locally – even though a large part of the AWS team is based in Cape Town.
The shopping mall nation
6 years ago, South Africa ranked 6th in the world for the number of shopping malls. Visit any large mall in your area on the weekend and you will see grazing the isles have become one of the most popular pastimes. And that’s the design:
- Give people a reason to go
- Get an anchor tenant where you buy groceries – you need to eat, so head to the mall and buy that.
- Offer entertainment – and yes even having lots of shops is entertainment for some.
- Design the mall in a way that you get lost (we can’t factually prove this but conversations with architects seem to confirm our thinking after getting lost in Canal Walk, Cape Town 1274 times).
- And as you mindlessly stroll or scramble to find your parking exit, you walk past shops selling those things you kind of want but don’t urgently need.
- The instant gratification of seeing it and taking it with you now kicks in and you buy.
Perhaps that’s what’s missing from Takealot-style e-commerce – there’s no anchor tenant and one can tend to forget about it. Next time you are at the mall to buy groceries, pop into Game to check out that TV you want to buy. Not to mention there’s no delivery delay – load it up and go.
SA’s established mall model is likely e-commerce’s direct competitor. But Takealot knows this, so what else has changed?
Easier than ever to launch e-commerce
Roll back the clock to pre-2020 when Takealot had a massive strategic advantage. Last-mile delivery was underdeveloped, and when they scooped up Mr Delivery (Mr D) back in 2014, they secured dominance with the ability to do same-day delivery.
Then Covid came along and not only is everyone doing it, B2B service providers make it easier than ever for established brands to launch e-commerce offerings. And it’s mostly on the logistics side, where last-mile-as-a-service delivery providers, such as Pargo and even Uber are eating away at Takealot’s competitive advantage. You don’t need a MrD to launch a compelling e-commerce offering.
And this means Takealot is facing stiff competition from all angles. We recently covered Dischem’s growth in e-commerce, whose R400 million in customer spend could very well have been Takealot customers a few years ago. And Dischem isn’t the only one. Bash, founded by former Superbalist founders (which ironically sold to Takealot) is consolidating the TFG brands under one online megastore. And with some good old SEO sorcery as well as some startup hustle, they claim to have outranked Superbalist on search.
An approach to consider
If E-commerce can replicate the mall’s anchor tenant trick, this could bring their cost of acquiring a customer down substantially and allow for larger margins on bigger ticket items. Recent ads by Pick n Pay ASAP! suggest that they are exploring this.
You can order your groceries and get them fast. And, hey, why not add that luxury item you’ve been eyeing all this while…
Smart move.
As for Takealot, finding out how to integrate its offering to be front and centre of its customers' lives will be crucial. Perhaps being the “everything” e-commerce store is hurting them.
Dive into some niches or better yet, find a way to pitch right next to an “anchor tenant of the internet” – perhaps a Naspers-owned media site, who knows…
Got e-commerce experience? Hit reply and share your insights…
IN SHORT
1️⃣ Firstbook. Not on Facebook? Well seems like everyone else is. Facebook is the number 1 social media platform in SA, with TikTok gaining ground pretty well – driven primarily by SA youth’s social media habits. (if you are on Facebook, go give us a follow)
🖥️ WhatsApp Meetings? That WhatsApp group your boss made for everyone at work might soon replace Zoom for meetings. WhatsApp is testing video calls with up to 32 participants. For now, it’s only available on desktops.
🔒️ Touch grass. In what is yet another fascinating episode of how to run a massive organisation like a startup, Elon Musk introduced a new rate limiter on Twitter over the weekend. You can now only see 300–6000 posts per day (depending on your subscriber status). This is all done in an effort to limit data scrapers that are using Twitter to train large language models.
🩺 DocPods. Apple AirPods are set to become your hearing Doctor. The next generation of AirPods could check for potential hearing issues and measure your body temperature (thankfully) via your ear canal. We guess it’s true what they say about an Apple a day…
🪁 AirShip. After years of flying “under the radar,” a South African-built autonomous airship was unveiled at the 2023 Paris Air Show. With awesome applications, these airships can be operated inexpensively with little infrastructure. We never knew airships were still a thing, much less that they were being built in SA.
COME SAY HI
Startupclub ZA is hosting a meetup next week Thursday (13 July) in Cape Town. The event will feature an interview with Bevan Ducasse (Yoyo formerly WiGroup) and Greg Chen (Mobiz) followed by some networking and good vibes.
BUILDER’S CORNER
Tools for the First 5 Days of Your Startup
Ok, so you’ve validated your Startup idea (using the handy tips from a previous Builders Corner) and looks like you’re onto something promising. And so it starts…
This is where most techies jump in and start building, setting off a months-long rabbit-hole adventure of pizza, caffeine and blinking away the sleep.
We say no, build on the business side of your idea a little first.
See, startups are such an investment, you need to be 1’000’000% sure it has legs and you’re still gonna want to be “climbing that hill” in 10 months’ time.
Here’s how to spend your first 5 days
- Nail the name
It’s more important and powerful than you think. Needs to convey what you do but also be memorable, adaptable, distinct and super easy to spell and pronounce – without being cheezy. Plus: Some say you need to be able to use it as a verb – like Google – and keep in mind that you might want to expand one day, so it should be able to grow with you.
Check out Namelix AI name generator.
- Get the a logo
Logos go everywhere. From your business, right the way through to your product. It makes a powerful first impression of your company – and if it’s super memorable or recognisable, it serves as a bat signal high in the night sky – golden arches anyone?
Plus, in the tech space, did you even attend a conference if you don't get a company’s logo as a sticker?
Give Looka AI logo maker a try.
- Build a one-pager website
We’ve said before that you don’t even need a product to start building a client list and testing your idea on the market. Starting a sales funnel-powered website is an awesome way to do just that. You can always expand on it later.
Check out 10Web AI builder for a quick site and then start building a funnel by offering some value-adds for download in exchange for emails – test ideas with PageGenie’s landing page builder.
- Do some Content for the Socials
Build a community around your product, showcase your wares, and educate potential customers in your network about the benefits of your product. With so many social channels to choose from, it might be worth your while to focus in on one – where your specific target audience might be and grow from there.
Ask ChatGPT or Bard to help you generate some posts based on known problems your target market is facing that your solution can help solve (just trawl relevant subreddits on Reddit for ideas or search AnswerThePublic), then use Buffer to easily share and schedule posts on up to 3 social networks for free.
- Learn What’s Working
Iterate. Iterate. Iterate. If you find that certain types of content perform better to grow your audience, drive traffic to your site and make sales, double down your efforts.
Do a bit of social listening and deep analytics with Socialbaker, or optimise your ads (if you’re running any) with Wordstream’s machine learning or AdCopy, otherwise just rework, recycle and repost your top-performing content with Feedhive.
Next up, you’ll want to refine your funnel, start building some pitches and get some trial users – but that’s for day 6 onwards.
Did we miss something? Hit reply and let us know if we should anything to this list.
PLUS: Don’t sleep on our 25 AI Tools for Startups – free when you refer a friend.
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