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Global e-tailers’ SA entry is double-edged sword for couriers

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 13 Jun 2024
Competition among local couriers has increased dramatically with the entry of global e-commerce players.
Competition among local couriers has increased dramatically with the entry of global e-commerce players.

The arrival of global e-commerce players in South Africa is leading to increased business opportunities and competitionin the local last mile delivery and freight industry, with companies scaling up their businesses to gain a competitive-edge.

Courier companies tell ITWeb that the entrance of global e-commerce firms Amazon, Shein and Temu locally, is leading to a burgeoning e-commerce sector, significantly disruptinglogistic services.

With the expansion of these e-commerce platforms, there’s increased demand for local courier services that can handle the growing volume of deliveries, offer timely and accurate tracking, and manage the logistical challenges of reaching customers across diverse geographic locations, they say.

As a result of the fierce competition and pressure, delivery companies are revamping and expanding their operations to meet the growing demand for their services.

“The entry of these global e-commerce players has significantly disrupted the local courier industry by creating new opportunities for growth and collaboration,” comments Khathutshelo Mufamadi, Droppa founder and CEO.

“At the same time, it has intensified competition and increased the pressure on local couriers, to match their high standards of service and rapid delivery times. This has necessitated a significant investment in technology and infrastructure to keep pace, as well as an emphasis on innovation to maintain competitiveness in the rapidly-evolving market.”

Droppa,also referred to as the ‘Uber for bakkies’, offers a single account that gives access to multiple logistics companies and courier services on one platform.

Prompted by the growing demand for its service, Droppa recently collaborated with DSV, The Courier Guy, Skynet, PUDO and Uber Package, notes Mufamadi.

“This allows us to scale our business, while strengthening reliability and efficiency, ensuring we can meet the heightened expectations of the market.”

Khathutshelo Mufamadi, Droppa founder and CEO.
Khathutshelo Mufamadi, Droppa founder and CEO.

Courier services are regarded as the backbone of e-commerce, facilitating the seamless flow of goods from sellers to buyers.

These services ensure the convenience promised by e-commerce platforms extends beyond the digital transaction, to the physical delivery of products. They directly impact customer satisfaction, repeat business and the overall reputation of e-commerce platforms, the couriers say.

Arthur Goldstuck, CEO of World Wide Worx and author of the ‘Online Retail in South Africa 2023’ study, believes the surge in Gen Z’s shopping habits is also contributing to the exponential growth of online shopping.

With 98% of tech-savvy Gen Z owning smartphones, 32% of them shop online at least once daily, compared to 25% of millennials, 15% of Gen X and 7% of baby boomers.

Gen Z, the digitally-native generation born between the mid-1990s and early-2010s, are reshaping the way local consumers shop, revolutionising the expectations surrounding the delivery experience, spurring the need for efficient, seamless and tech-driven delivery solutions, he notes.

“The strategic shift towards competitive e-commerce offerings and enhanced customer engagement, including sophisticated AI tools, has fundamentally transformed the retail landscape in South Africa,” notes Goldstuck.

According to the study, online retail in SA has witnessed remarkable growth, exceeding 6% of total retail sales, and reaching R71 billion turnover in 2023.

As the e-commerce landscape continues to expand and evolve, local courier services will need to embrace innovation, sustainability and make use of strategic collaborations to navigate the challenges and opportunities of the growing sector, asserts Goldstuck.

When it launched, Amazon said its approach to logistics is the big differentiator for its business – with the e-commerce giant partnering with numerous third-party couriers for fulfilment services.

The e-tailer said it would offer a selection of local and international brands across 20 product categories – available for same-day or next-day delivery, along with more than 3 000 pickup points.

Tech assistance

Craig Pitchers, CEO of The Courier Guy, says the rising demand for courier services has led to the company investing in the integration of advanced software systems for route optimisation and logistics management to streamline operations, reducing delivery times and costs.

“We have invested in automated sorting at our main hub in Johannesburg, improving throughput and sorting accuracy, thus reducing time and re-work. Additionally, our online customer portal offers features such as tracking and event notifications.”

The Courier Guy’s customer support team uses conversational bots to gather customer information. “By integrating these bots into our customer service offering, The Courier Guy has saved around R1.4 million per year,” notes Pitchers.

Lars Veul, Pargo co-founder and CEO, believes the global e-tailers are well aware of the delivery challenges in SA and the high costs associated with these problems.

“They are actively looking for alternatives and have embraced the click-and-collect (pickup point) model as a solution to help bring down cost, while increasing convenience for the online shopper.

“The high parcel volumes that these companies bring into the country put a strain on the courier networks, because couriers use a static home delivery model, with a one-to-one ratio of parcels per delivery. The increased volumes hardly create any consolidation or economies of scale,” explains Veul.

Pargo has seen increased interest in its click-and-collect model, as couriers are now looking for alternatives, allowing them to take some pressure off their network and create efficiencies within their delivery model, he notes.

“The collaboration we see within the industry and the combined effort to look into ways to create a more efficient and affordable delivery model will eventually benefit everybody.”

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