Supermarket giant Shoprite is leveraging its fast-growing e-commerce services to capture vibrant, sprawling informal markets.
The group has put in place e-commerce services for its Cash & Carry wholesaler, which delivers to businesses such as spaza shops that buy in bulk. This should make it easier for operators in this sector to tap into this convenience in a similar way that the Checkers Sixty60 delivery service has allowed consumers to buy goods.
Deliveries will be free for operators within a 50km radius of its 24 Cash & Carry stores around the country. Africa’s largest supermarket group has become a market leader for online retail with its Checkers Sixty60 delivery service
The informal sector, including spaza shops, is a huge market to tap. It is said to contribute about R180bn a year ... and this figure is growing. Business research firm Trade Intelligence estimates that about 11.1-million South Africans do their grocery shopping at these stores, mainly because of convenience and lower prices.
Trade Intelligence also found that as much as 40% of food consumer purchases each year are from informal traders and that most of South Africa’s 150,000 spaza shops are run by foreign nationals.
Mark Cotton, head of B2B eCommerce at Shoprite, says it is critical to ensure that spaza stores get the same levels of convenience that business-to-consumer customers have been experiencing online. “This allows them to rather spend time with their own customers and building their businesses ... it’s been a largely underserved market until this point, with a lot of online competitors focusing on business-to-consumer e-commerce.”
Shoprite already has two of its wholesale businesses up and running on e-commerce platforms: Red Star Wholesale Catering Services, mainly for the catering industry and restaurants; and Transpharm, which delivers to its pharmacy network and the wider pharmacy sector. E-commerce options for Red Star have been operating for about 18 months and for about six months at Transpharm.
Cotton says it took longer to set up e-commerce to the wholesale sector because of the complexity of the market. “It’s a different customer both in terms of what they’re looking for, the delivery in the last mile is critical and you have to service this customer through various channels.”
He says Shoprite’s solution is geared to the customer in-store as there is often a personal relationship between the customer and the store. “There’s a human relationship and there’s a culture of negotiation and you have to facilitate this. You’ve got to approach it through multiple channels, that adds an additional layer of complexity to serving this customer segment.”
The delivery in the last mile is critical and you have to service this customer through various channels
— Mark Cotton
Cotton stresses the importance of associates in the stores to be able to look products up, know what the inventory is and to negotiate on price. “This really is unique in this space with this particular customer segment and is a big focus of who we want to serve in the future.”
As to comparisons with the successful Checkers Sixty60, Cotton says it’s the same premise in terms of convenience but otherwise it’s vastly different.
He says there are various ways to place orders online but adds that some businesses prefer to interact with people and negotiate. “You have to cater for that,” says Cotton. The magnitude of deliveries also differs, with large trucks being used, and the Cash & Carry stores resemble warehouses more than stores.
Cash & Carry is a relatively small division within Shoprite and the 24 stores are split equally between general merchandise and liquor. But it’s a space that offers Shoprite huge potential and growth, says Cotton. “There will also be a focus on financial service offerings alongside current ones such as extension of credit.”
Shoprite bought several retail and wholesale brands from Walmart-owned Massmart — including Rhino Cash & Carry and Cambridge Foods. “The e-commerce is how we differentiate ourselves from the competition and take it to the next level,” says Cotton. “That’s what the focus is on, rather than focusing on the competition. It represents a great opportunity for us to support small businesses in South Africa.”
Spaza shops and smaller retail businesses often face significant obstacles such as high transportation and fuel costs, as well as difficulties in meeting demand within the informal sector. Overstocking can lead to high carrying costs, increased risk of theft and cash flow challenges.
Cotton says the new Cash & Carry digital platform provides customers with reliable and visible stock access. “The delivery service eliminates the need to store excess inventory, frees up much-needed cash flow and gives business owners more time on the shop floor to focus on their customers and business growth.”
There are plans to open additional wholesale stores around underserviced areas in South Africa where Shoprite does not have geographical coverage from a store. Shoprite already taps into the township market with Usave, a chain launched in the early 2000s which trades in lower-income segments and is geared towards the township market.
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