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Absa Insights 2020

Covid-19 is shoving retail – and consumers - into the future

21 October 2020 3:10 PM

Along with the pandemic, the future of the consumer goods sector has arrived with a bang.

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It took a pandemic, but consumers in South Africa have adopted online shopping – a change that is likely to be permanent.

“At the beginning of our last financial year, e-commerce was 1% of our turnover,” says Anthony Thunstrӧm, CEO at The Foschini Group (TFG). “By the end of the year, it was 2% - a 100% growth rate. We’re currently running at between 5% and 6%. It moved us forward by about three years.”

“I don’t see online sales going back,” says Bongiwe Ntuli, Chief Financial Officer at TFG. “I see it escalating further.”

Stores are ending up as showrooms

Despite the shift online, and the likely permanence of the trend, TFG still intends to expand the number of physical stores from which it operates.

TFG has thousands of collection points for online shoppers across South Africa. “We’ve got more branches than the Post Office!” says Thunstrӧm, only partly in jest. “The store is still the easiest place to return a product.”

TFG has more than 500 of its South African stores connected to a central database – it doesn’t have to ship from a distribution centre.

Cash remains, for now

“We’ve seen a reduction in the use of cash,” says Isana Cordier, Head of Consumer Goods and Services at Absa Corporate and Investment Banking. “But it was predominantly due to trading conditions. I don’t think cash is going away.”

Nevertheless, says Cordier, banks are trying to introduce different payment mechanisms to displace cash to some extent.

Challenges remain, but some are getting it right

Amongst food retailers, Shoprite has stolen the show.

“Sixty60 has been a successful project. They got their logistics right,” says Evan Walker, a portfolio manager at 36ONE Asset Management. “The feedback from consumers is positive. They’ve jumped ahead of their competitors.”

For retailer such as Foschini, complications will probably be store-related (i.e. ensuring hassle-free returns, dispatching the correct items, etc.).

“Getting people back into the stores [to buy clothes] is going to be a challenge,” says Walker. “They’re going to have to be innovative. They’re going to have to offer incentives, offer an experience and improved service, so their stores don’t become redundant to the consumer.”

Internationally, about 70% of online clothing sales take place on a smartphone app, and personalisation has become fundamentally important. “We’ve launched a couple over the last few months,” says Thunstrӧm. “You can take a photograph of how you’re dressed. The app catalogues that photo against every product across all our brands. It then comes up with five or six suggestions based on your photo and past purchase history.”

For more detail, listen or watch the discussion below.

Watch the entire, unedited discussion below.

21 October 2020 3:10 PM

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