E-commerce boom leads to delivery services headache

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 04 Aug 2020

As e-commerce continues to boom in SA, spurred by the COVID-19 pandemic, many online retailers are struggling to cope with the demand and disruptions to their supply chains.

The COVID-19-induced lockdown has led to reduced footfall in retail stores, with the shift in consumer shopping behaviour expected to lead to a permanent uptick in online shopping.

SA’s e-commerce sites have been reporting a dramatic uptick in sales since government lifted the lockdown restrictions on online shopping in May.

However, industry insiders believe the surge in online shopping has resulted in challenges for online merchants, with some of the biggest e-tailers admitting their supply chains are suffering under the onslaught.

While some e-commerce sites use third-party delivery services, the majority utilise existing in-house delivery services, which they have been forced to scale up amid the increase in online orders.

Arthur Goldstuck, head of World Wide Worx and chairman of the Sasfin Bank digital advisory council, says with online-only operations seeing between 20% and 50% growth, and physical stores with a strong online presence seeing up to 100% growth of online sales, the sectors that have benefited the most from this massive increase are the payments and logistics industries.

“For delivery fulfilment, some entities have their own fleets, such as Takealot, which owns Mr D Delivery and therefore has the fleet of delivery bikes and cars at its disposal. Others have had to invest very quickly in this environment, such as Checkers, which initially relied on Zulzi, and now has its own Sixty60 operation with fulfilment teams in major stores.

“Nevertheless, courier services are probably seeing the strongest growth they've ever experienced in SA, where they are aligned to the needs of the online retail and fast food delivery industry. In any middle class or affluent suburb nowadays, you don't have to walk down the street for long before a delivery van passes you. On weekends, there is a constant movement of courier vehicles and bikes in and out of suburbs. This is clear physical evidence of just how busy the courier industry is being kept during this period,” notes Goldstuck.

Checkers, which was originally a laggard in the digital space, has very quickly moved from relying on third-parties, with potentially inconsistent services, to having probably the most efficient grocery delivery service in the country, he adds.

“This is unprecedented in SA, and brings courier services almost in line with the expectations of customers in highly developed markets such as major urban centres in SA. Pick n Pay and Woolworths, by contrast, still operate on a largely centralised basis, which means they still require one to book a delivery slot. This was the experience with most delivery orders from the major chains at the beginning of lockdown, and big chains still seem to be operating in that mode.”

Goldstuck believes that while this represents a massive opportunity for Checkers to take a leadership position in online grocery deliveries in SA, it also exposes the flaw in the fulfilment strategy of two of the largest grocery retailers in the country.

Similar challenges have been faced globally, with grocery delivery platforms such as Shipt, Walmart Grocery, Instacart and Amazon initially scrambling to scale up their supply and delivery logistics during the first phases of the lockdown period.

Matthew Leighton, spokesperson for e-tailer OneDayOnly, says the e-commerce boom happened at a time when it was very hard for e-commerce businesses and the logistics companies to scale up quickly and seamlessly – during lockdown.

OneDayOnly, which reported 40% growth in sales during lockdown, utilises both in-house and outsourced delivery services.

“Because the increase in e-commerce happened very quickly and without much prep time, courier companies as a whole were understandably hard-pressed to cope with the demand. Trying to accommodate a vast increase in deliveries takes time, which unfortunately, the logistics sector did not have.

“The courier business is extremely admin-intensive and as a sector, they face an enormous challenge trying to incorporate work from home in an industry where it's not really possible to do that.

“However, there are things that go a long way in a time like this, such as clear and direct communication to the end-user to keep expectations managed; live tracking is also helpful. Most logistics companies make use of their own track and trace URLs and provided that information is current, we've noticed it works well with our customers,” Leighton points out.

Meeting delivery timelines

Warrick Kernes, founder of Insaka eCommerce Academy and director of the e-commerce Forum Africa, says some courier companies have been delivering more parcels per day then they did during Black Friday last year.

“It's no secret that the step-growth in online retail has put significant strain on the courier companies that were not prepared to deliver so many parcels.

“We've seen some proactively sending out communications and letting their clients know exactly what's going on and I applaud them for that, and we've seen others making the mistake of hiding behind silence and this has led to many online sellers becoming frustrated and looking for alternative partners to move to. Open and honest communication is what we need from the service providers right now so that we can work with them to ensure our customers are updated and looked after,” advises Kernes.

Jonathan Smit, MD and founder of PayFast, believes that as Internet and mobile penetration increases, businesses will need to embrace new tools and enhance existing processes to keep pace.

“Despite e-commerce making up a small sector of the economy, the pandemic has doubled adoption across the board. This is on trend with established e-commerce markets in the US and other countries.

“The boom has resulted in some challenges for merchants relating to delivery timelines, product availability, increasing online shopper traffic, and the ability to fulfil customer demand. No one could prepare for the impact that the pandemic would have on supply chains both locally and abroad.”

PayFast provides payment processing services to hundreds of online merchants in SA, including Shopify, Superbalist and Takealot.

Smit believes leveraging technology for logistics and warehouse distribution can play an important role in helping to streamline supply chains.

“Invest in the right digital tools to help your business in peak periods and improve internal processes to make scaling easier. Initially, setting up automated processes will take time and may require additional resources, but the long-term value that automation adds to growing your business sustainably, outweighs this short-term investment.”

Takealot declined to comment on this issue.