Post office’s mystery-filled e-commerce site coming ‘soon’

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba
Johannesburg, 21 Feb 2020

Effective customer service and earning the trust of prospective customers and business partners will better the prospects of success for the South African Post Office’s (SAPO’s) e-commerce platform.

So say analysts, remarking on reports that the national postal service plans to go live with its e-commerce platform as early as March.

Information on SAPO’s pursuit of the e-commerce market was first brought up by former telecoms and postal services minister Siyabonga Cwele in 2018.

At the time, Cwele revealed the post office had partnered with Universal Postal Union to establish SA as one of three e-commerce hubs in Africa. He also noted SA was the first country selected for the project, with plans to announce the two other nations in East and North Africa at a later stage.

Details of the e-commerce site’s name, product offerings or when it will launch are hard to come by, despite numerous attempts to obtain more insight.

Instead, the postal service briefly responded to ITWeb, saying: “The SA Post Office intends to launch an e-commerce platform soon and will announce more details closer to the time.”

Sensible move

Years of maladministration, poor management and stifled growth have had a disastrous impact on the country's largest postal operator’s efforts to return to glory.

Furthermore, the slow pace in response to technology advancements has not helped matters.

This is why Lulama Qongqo, investment analyst at Mergence Investment Managers, believes a move towards an e-commerce plan is “understandable”, given the post office needs to generate more revenue to increase the probability of remaining a going concern.

At the same time, it is very ambitious, she comments. “Hypothetically, it is a great idea as they already have a labour force to fulfil orders and a very decent footprint but there’s still plenty of investment required for them to make it work.”

Albeit small, SA's e-commerce market is healthy and growing fast, at a rate of between 20% and 30% a year, according to Arthur Goldstuck, head of World Wide Worx.

Goldstuck goes on to say the market seems to be accelerating now, and could reach 2% of total retail by the end of next year, a year sooner than earlier predicted.

Although there is little-to-none information about the post office’s e-commerce platform, the government entity’s country-wide presence should serve as a plus for the new business venture.

Delivering two million mail items daily, SAPO has a large physical network of branches that can be used as access points to government services by communities, especially those in rural areas.

Arthur Goldstuck, head of World Wide Worx.
Arthur Goldstuck, head of World Wide Worx.

Given that some of the current e-commerce players have had a years-long head-start, which includes billion-rand investments and experience, Goldstuck believes SAPO cannot compete with them.

Instead, it must become an efficient, effective and profitable e-commerce site in its own right, and not in comparison to major players, he emphasises. “If it [SAPO] measures success according to how it stacks up to others, it is engaging in an ego trip.

“The core strategy should be to expand on the existing services of the post office, perhaps offering products that are complementary and export-oriented, rather than pretending to be playing in someone else's big leagues. Focus on effective customer service and profitability rather than ego and it will better prospects for success.”

For Qongqo, gaining consumers’ trust will help the post office make strides in the local e-commerce space.

Trust is crucial to assure customers that their sensitive payment and package information will be kept safe and that packages will arrive on time and intact, she states.

“They [SAPO] will also have to make a significant investment in IT personnel and systems. The e-commerce world is very skills-intensive and the speed at which you adapt to technological changes can determine whether you fail or succeed. They also need to ensure they get their reverse logistics right, as this has a direct impact on customer loyalty and costs.”

Hype versus reality

According to Goldstuck, the post office does intend to have a differentiated e-commerce offering, which will set it apart from the likes of Takealot and Makro.

However, it takes much more than just a credible product offering to have a successful e-commerce site, he stresses. “That is long before you even get to the land of pipe-dreams, where you talk about rivalling Amazon and Alibaba. The moment those comparisons are made, unfortunately, the entire project sounds like an exercise in hype.”

Qongqo comments it will take a lot of improvement on SAPO’s part to compete with incumbents.

“They need deep pockets to compete with all retailers for talent and the capital to see them through the initial stages of starting an e-commerce business. Most companies that have e-commerce businesses have had to go through months or a few years of making losses or operating at very thin margins before becoming profitable.

“If they can find a niche where they’re not competing directly with the existing e-commerce companies, they have the potential to do well. Given our poor economic growth, riddled with low retail sales growth, the likelihood of surviving without real differentiation is very low and much worse when you’re starting on the back foot like SAPO, where customers actively avoid using your services.”

The investment analyst advises the post office to focus on fulfilling orders in rural areas. This, she says, is because existing local e-commerce businesses have struggled to expand due to low population density relative to other countries with larger e-commerce sectors.

“They [SAPO] can do this because of their existing footprint. Besides door-to-door deliveries, they already have a great footprint for click-and-collect. I hope they will take advantage of the low-hanging fruits currently at their disposal.”