Listed retail group Woolworths is rekindling its online shopping business, which has been spared the crimp in consumer spending due to the economic slump, says Craig Ludwig, divisional director of general merchandising.
Woolworths was one of the first retail chains to offer online shopping services in the late 1990s through a site called “Inthebag.co.za”. However, it struggled with the model, which eventually faded away and was absorbed into the overall Woolworths site.
“We were one of the first to offer an online service to cater to customers' needs. What we have learnt is that it is important to ensure the service that is offered is efficient, that the location is right and fits in with the customer,” Ludwig says.
Yesterday, the group reported its results for the year ended 30 June. It does not strip out revenue from its online business, as this is considered to be a tiny fraction of the R21 billion turnover.
The lure of digital
Lindsey Mc Donald, an analyst at international consultancy Frost & Sullivan, says it makes sense that Woolworths' traditional target market would make use of online shopping services.
“As South Africans become more digitally aware, they are going to use more and more online shopping services for groceries. However, the key for companies such as Woolworths is to manage the brand equity and to ensure the distribution system is reliable,” she says.
Mc Donald says that, while there are no reliable figures available for online shopping, she does expect it still to be a tiny portion of the overall retail numbers.
Retailers have been hampered by the economic recession and high interest rates. However, Ludwig says Woolworths' mainly middle-class shoppers are happy to pay for convenience and this will be key to the online shopping model.
“We offer our customers a two-hour window of when they want their shopping to be delivered. They go online, select what they need, pay for it, and then an SMS is sent to the delivery company,” Ludwig says.
He says another key aspect is the relationship between the customer and the delivery company.
Have a little faith
“Trust plays a big role here between the customer and the delivery person. Often the customer will actually give the driver his or her house keys in order to make a delivery,” Ludwig says.
Woolworths uses a network of mini-entrepreneurs whose schedules and vehicles are coordinated through black-owned and -managed company, Niche Logistics.
Ludwig says: “A good shopping portal needs a highly-reliable delivery service. It was clear that owning and managing a fleet of trucks for online deliveries was simply not a viable option for Woolworths. In partnership with Niche Logistics, we were able to develop a world-class delivery solution - one that is efficient, flexible and cost-effective.”
Ludwig adds that this model also offered Woolworths an opportunity to help develop a new black-owned and managed enterprise, a commitment which forms part of Woolworths Good Business Journey - a long-term plan to help communities, the country and the planet.
Niche Logistics manages a national fleet of 25 delivery vans and drivers that are allocated to specific Woolworths stores within designated areas.
Personal service
Deon Leminie, owner of Niche Logistics, says: “Woolworths sends the orders at midnight and we SMS delivery instructions through to the drivers shortly thereafter. The model works so efficiently because it combines the best of technology with the human elements of personal service and individual responsibility.”
Ludwig says Woolworths has supported Niche Logistics, with the development of a billing system, volume and slot IT management system that helps streamline the delivery process.
“But it is the human element of the model which makes it work so well. Each driver is effectively their own boss, running their own business. This engenders a level of responsibility and commitment. As each driver is dedicated to a specific store, they develop a close relationship with both the store and their 'regular' customers to whom they deliver,” Leminie says.
Niche Logistics delivery vans are based mainly in the major metropolitan areas of Cape Town, Gauteng and Durban. Ludwig says this delivery footprint is expected to grow as people living in more remote areas begin to shop online.
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