The retailers who will survive South Africa’s current tough economic climate are those who place customer needs firmly at the centre of their activities while pursuing a renewed focus on business fundamentals.
A panel of leading retail industry specialists told the Gordon Institute of Business Science (GIBS) Retail and Consumer Insights Conference that while tech advances like machine learning to leverage data on consumer behavior, autonomous check out and mobile point of sale all had a place in local retail, appealing to customers who are increasingly sophisticated and connected requires a back to basics approach.
A focus on customer needs and experience
“The retail landscape is complex and you have to take into account the state of the shopper and their reason for a purchase. People are busier than they have ever been and are more connected than they have ever been. We have to ask ourselves whether we think enough about the customer and how to serve more and more of their needs,” David Smollan, CEO of Smollan retail solutions group told the conference.
Retailers who respond quickly and do things differently are the ones who will be able to grow by taking share from their competition, he continued. “You have to constantly be thinking about the customer and how to serve that individual.”
Investec equity research analyst Dave Smith explained that people are spending less money on ‘stuff’ and more on experiences. “Retailers have to be nimble and able to adjust and take market share, as this is their only likely source of growth in the short term,” he said.
Head of People and Performance at Cotton On Africa, Dagmar Artz, called for a return to the retail fundamentals of product, people and property: “You need to have the right people in your space, and product curation is very important – you must know who your customer is.”
Country manager for Cotton On Africa Natalie Wills reiterated this: “We have to keep the absolute primary focus on the ever-evolving customer.”
“Gone are the days when the South African market operated differently to the global market – customers are very savvy, partly due to technology and connectivity through social media. They are on trend, and retailers have to work at being locally relevant,” she continued.
Wills added that there are retail basics that South African stores can work on getting right, including the availability of sizing and range in store.
People and culture
Smollan commented that retail is “unbelievably rewarding” as it is one of the few places where talented people can be hired without a tertiary education and developed to move onto the next level of their career, allowing retailers to “create their culture at scale.”
Artz explained Cotton On was investing heavily in digital learning and staff training: “The truth is our store teams are not ready to face the future. We have to go out and prepare our humans.” However, as the average age of the Cotton On store team is 24, she added that the principles of digital came naturally to their store staff, and all that remained was to “translate what we know into how it serves our customer.”
Digital technology and channel integration
Smollan said digital and social media has had a profound change on the industry, breaking down the hurdles between retailers and customers, who were now able to forge a direct relationship.
Andrew Smith, co-founder, and CEO of pioneering South African online retailer Yuppiechef explained that price, range, and service are the three differentiators in online retail.
At its launch, Yuppiechef decided to focus on range and service and rewarded customers’ trust with a personalised experience by including handwritten notes in all packages it delivered.
“We didn’t want to compete on price as it quickly becomes a race to the bottom,” Smith said. He added that he believes Black Friday is bad for both retailers and customers. “Black Friday was introduced when there was no obvious value proposition to shopping online other than price. Black Friday is the pinnacle of price, and nobody can resist.”
Smith said while e-commerce does work, it has its limits. Yuppiechef opened four physical stores in Cape Town last year, with more planned. “E-commerce in South Africa is hard as the retail experience as entertainment is entrenched - South Africa has one of the highest mall per capita ratios in the world.”
“A physical store was an obvious extension of our range and service offering and enables us to meet customers where they are at,” Smith said.
Retailers must think creatively in order to use online as an asset to serve customer needs, wherever they choose to buy and to grow their business, Smollan said. “Brands and retailers need to think carefully about what the store of the future looks like.”
Smith said he believes the future of retail is not online or offline, but rather omnichannel – a combination of physical stores and e-commerce: Retail with a level of integration between platforms which allows for a great in-store experience and one unified channel offering flexibility in how customers are able to buy, receive, collect and return goods.