Click and Collect: The Future of South African E-commerce?
South African e-commerce is in a unique position globally, where we have long lagged in the adoption of online shopping only to face a boom in demand following the COVID-19 pandemic.
In 2019 e-commerce accounted for only 1,6% of online retail sales, compared to 14,8% in the United States according to an article by Reuters.
This year, however, the same article outlines that 64% of consumers bought groceries online for the first time due to the pandemic, and since the lockdown has ceased only 50-70% of consumers have regularly returned to shopping centres.
This could be the paradigm shift South Africa needs to catch up with the rest of the world, and it represents a turning point that may decide which businesses thrive and which don’t survive in years to come.
Click and collect is an exciting, relatively new, solution to bridging one of the biggest challenges in South African e-commerce today: logistics.
Below we’ll go over what it is, how it works and why your business may want to consider implementing it.
What is Click and Collect?
Click and collect is a delivery model where a customer “clicks” to purchase something online, and then “collects” it from a physical location later, usually a physical location of the retailer, a designated pick up point at another business or a third party location.
This is an alternative to the home delivery model, where a customer purchases goods online and then has the goods shipped directly to their home address.
Many businesses, small and big alike, have started adopting the model as a way of streamlining their logistics and providing added convenience for consumers.
Businesses with huge retail supply chains like Pick n Pay, Checkers, Woolworths and more stand to benefit greatly from implementing click and collect, and many of them have started rolling it out in recent years.
There are also third party couriers which offer the model, such as Pargo, to small and medium-sized businesses without their own dedicated logistics centres and supply chains.
How Does Click and Collect Work?
- A customer purchases something online as per normal but chooses to use click and collect as the delivery model.
- They either select a convenient collection point, or the company communicates the best collection point near the consumer.
- The company sends out a notification when the consumer’s order is ready for collection.
- Consumers are then free to go and pick up their goods at their own convenience.
Click and Collect vs Home Delivery
Click and collect offers an alternative to the current industry standard of home delivery, but why is this useful?
Well, particularly in developing markets such as South Africa, there are many factors at play which make it a desirable option both for consumers and businesses.
We’ll briefly outline these below, to give you an overview:
Click and Collect for Consumers:
Pros vs Home Delivery For Consumers:
- Easier to schedule your time around. You can collect the goods whenever best suits you, instead of working around delivery windows.
- Cost savings. Businesses can typically pass on cost savings from the model to consumers, making it a cheaper alternative to hope delivery.
- Limit contact with other people. Particularly in the era of the pandemic, people seek to limit contact with strangers as much as possible. Some click and collect models allow entirely contactless pickup.
- Environmentally friendlier. Consolidating logistics means fewer vehicles on the road, which means less environmental impact from them. This is attractive to environmentally conscious consumers.
Cons vs Home Delivery For Consumers:
- Less convenient for some. In many cases, consumers are already time-constrained and may prefer the convenience of having home delivery so they don’t have to schedule a time to pick up their goods.
- Location dependent. If your chosen business doesn’t have a collection point near you, the model becomes inconvenient and implausible for consumers.
- Potential service issues. Some of the benefits of click and collect are negated if the business fails to plan around it properly, e.g. if a collection point is overwhelmed with demand at certain times of day this can become a point of frustration.
- Transportation. The model relies on having your own mode of transportation, which restricts its appeal to some consumers (especially in places like South Africa without a robust public transportation system).
Click and Collect for Businesses:
Pros vs Home Delivery For Businesses:
- Long-term cost savings. The model offers significant long-term cost savings by allowing the business to consolidate some of its logistics. Mass shipping deliveries to drop off points is typically cheaper than individually shipping goods to consumers.
- Solving the “last-mile” problem. Particularly in developing nations like South Africa, the “last mile” of the delivery process has been a long-standing challenge for businesses to solve.
- Making use of investments into retail space. If current trends continue, many businesses will be faced with the decision of whether to scale back investments into retail real estates or find other uses for it. This is an attractive solution.
- Cross-sell to consumers. Click and collect allows us to direct consumers into physical retail spaces, which creates great opportunities for cross-selling and remarketing to them.
Cons vs Home Delivery For Businesses:
- Implementation costs. Converting current delivery models to click and collect can be costly initially, especially for large businesses with established systems in place, because new software and processes may need to be developed.
- Logistical challenges. Click and collect can be a logistical challenge in terms of managing inventory and ensuring collection points aren’t overwhelmed with demand.
- Challenges for new businesses. Businesses without a retail and logistical infrastructure may struggle with the model. New businesses may have to decide if they will offer home delivery, click and collect or both using third-party solutions.
- Managing customer expectations. Particularly when starting, customers may expect a level of service that your business is still working towards, and unable to provide yet. You need a solid ramp-up strategy to avoid losing customers.
Why is Click and Collect Good for the South African Market?
One of the biggest challenges in nations with developing e-commerce industries, like South Africa, is solving the problem of the “last-mile” delivery.
The “last mile” refers to having efficient and timely deliveries at the last stretch of the transaction process.
I.e. once the goods leave your distribution and make their way to the consumer, and how we schedule around this.
Consumers expect a very high level of service, with delivery times of less than a week, or even as low as next-day delivery, becoming the new norm.
Consumers also expect increasingly small delivery windows. They want to know as accurately as possible when their goods are actually going to arrive.
Many sources have found that customer satisfaction in the last-mile can be a “make or break” point if they’ll become a repeat customer.
The challenge in South Africa is bridging the gap between expectations derived from more developed markets, and our own local infrastructure for handling deliveries.
Click and collect is a great solution for bridging this gap, as many businesses are starting to find.
It allows businesses an alternative to the last-mile which can plug into existing infrastructure and simplify logistics.
Instead of having to manage a hundred shipments, we can ship a hundred sets of goods to a single point and focus on scheduling the most efficient timing to have those hundred customers collect their goods.
Not to mention, the challenges of e-commerce delivery to remote or under-developed areas. Reaching these market segments is an entirely different challenge that we won’t be covering here.
Click and Collect Benefits for Small Businesses
One of the biggest challenges of starting a new e-commerce store is handling the logistics of shipping your products to consumers.
Creating your own delivery network is prohibitively expensive for most brand new businesses and entrepreneurs, so people often turn to third-party courier companies.
These companies will handle the logistics for you, using their existing infrastructure, and simplifying the process.
A major downside of these companies, though, is the high costs associated with them.
Click and collect service providers provide a good alternative to these companies, because they can generally offer the same level of service for substantially less.
New businesses like Pargo are shaking up the courier industry in this way, challenging other couriers to try and come up with more competitive models.
This is great news for new businesses, but as we mentioned previously it also presents additional challenges.
Consumers expect increasingly high levels of service, and we have to decide how to balance these expectations with our own costs.
Hiring a courier company and a click and collect service, for instance, is probably too expensive and as such we have to choose which service we can offer.
That is until courier businesses catch up with the model and perhaps offer combined packages that allow you to use both models for a combined price.
Regardless, click and collect represents an exciting new trend for new and small businesses to capitalise on to drive down costs and provide better customer service.
Should I Use Click and Collect for My Business?
In general, we recommend small businesses should look into click and collect if they want to get ahead of the curve and look for opportunities for cost savings.
They should be careful, however, not to sacrifice service quality to do so. If your customer base prefers home delivery, they know best.
For large businesses, the model can also be worth looking into as a longer-term strategy to bring down costs and offer added convenience.
Just be careful to manage the transition carefully, as having poor quality service is incredibly damaging in today’s market.
There’s no hard and fast answer, however, and whether the model suits your business will be on industry and case-by-case basis.
Click and collect is an exciting new business model for South African e-commerce businesses to explore, which addresses many of the challenges we currently face and offers an appealing alternative, or add-on, to traditional delivery models.
Whether it becomes the new standard for South Africa or becomes just another option consumers expect to see as standard, remains to be seen.
We hope this article helped you understand the subject in more detail.
If you enjoyed this article or found it helpful, check out more e-commerce marketing content on the inSyte blog or listen to the inSyte Podcast.
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