Author: Bilal Kathrada

Enter the “micro-e-entrepreneurs” Naseema Adams has had enough. She has decided to close her women’s clothing store after four years. “The rentals and operating costs are insane. It’s just not worth it any more,” she says. Adams has decided to become part of a global movement that is taking the world by storm: she is joining the ranks of what I call the “micro-e-entrepreneurs”. These are people from all walks of life, from college students to housewives, bakers, teachers and artists, who sell their products online using a multitude of different platforms to market and sell their wares. Some set up fully-fledged online stores complete with payment gateways, using services like Shopify, which allows anyone to set up a store within minutes. Others go more basic: they simply post pictures on social media and get by without checkout pages or payment gateways. Customers just place orders by direct messaging. Payment is made via electronic funds transfer (EFT) or eWallet, and the products are shipped via postal services. Still others use nothing more than WhatsApp to market their wares. To order, clients simply send a direct WhatsApp message, and then the process begins. These are people who, like Adams, have realised the power of technology, in particular the social networks, in getting their products to a potentially global market. More importantly, they have realised just how easy and cheap it is to get started. Over the years Adams began to post pictures, descriptions and prices of her products on Instagram and Facebook under her handle, @modesty_on_crescent. In time, she began to build up a fairly large following, mostly from Durban, where she operates. “I immediately realised two things: first, there was a huge market out there in the world, and second, the vast majority of these people could not come to my store because they were from all over the world,” she says. At the same time, fewer and fewer people came to her physical store, and her turnover took a dive. That, along with the soaring costs of running a physical store, prompted Adams to take action. She decided to go fully online and take advantage of the massive e-commerce market. Her business model is simple: she goes to suppliers, chooses items she feels will sell, takes photos of those items and posts them, along with brief descriptions and prices, to her Instagram account. She then uses the digital marketing skills she gained from the workshops and training courses she attended to promote her posts. Customers order via the direct messaging feature built into Instagram, make payment, and receive their goods within a couple of days. Things are already starting to take off. More and more people are taking notice of her Instagram posts with the attractive images and low prices, and sharing them with their friends and networks. Sales numbers are growing steadily, and it’s safe to say that her business is on its way. Adams believes it is her strong focus on service that has been the secret. “South Africans are still a bit suspicious about buying things online. But by focusing on service, we make them comfortable.” Global e-commerce is growing at a remarkable 18% a year, with online sales in South Africa going mainstream with an amazing R14billion in revenue in 2018. With numbers like that, it is not hard to see that there are certainly a lot of opportunities out there. Adams may or may not know it, but she is part of a global retail revolution that Alibaba Group’s founder, Jack Ma, refers to as “new retail”, where everything imaginable will be sold online by enterprising entrepreneurs who have a strong focus on customer service. “New retail” may be one of the fundamental causes of the “retail apocalypse” affecting so many traditional retailers, but on the other hand, it is also creating countless new opportunities for micro-entrepreneurs. Never before has it been so simple for anyone to start a business: all you need is a cellphone, some data and a great idea, and you are in business. And the potential for growth is unlimited. After all, when a young man by the name of Jeff Bezos decided to start a little website selling books from his garage in 1994, I don’t think he could have imagined his company would grow to become the trillion- dollar global online retail giant, Amazon.

  Skills not Degrees? How important is a university degree to land a job in today’s workplace? According to a recent study by LinkedIn, it is not as important as most people assume. The study found that executives at tech giants such as Apple, Google and Netflix had begun to question whether degrees actually prepared people for the work they would do. Prominent companies no longer give much importance to degrees as a prerequisite to landing an interview. “Getting a job at today’s IBM does not always require a college degree,” the company’s CEO, Ginni Rometty, has asserted. “What matters most is relevant skills.” They hire based on the skills people bring to the table – whether they have degrees or not. Tim Cook, chief executive of Apple, said at the White House during the first American Workforce Policy Advisory Board meeting: “Our company, as you know, was founded by a college drop-out, so we have never really thought a college degree was the thing you had to have to do well.” Half of Apple’s US workforce do not have degrees. Cook’s view is that colleges do not really prepare students with skills they need most. As shocking as this is, it is not exclusive to the US. Most countries, including South Africa, are experiencing the same trend, where prospective employers are no longer hiring on the basis of qualifications, but on marketable skills. This has major consequences for university graduates. According to Statistics SA, more than a third of graduates are unemployed. The question is, what can be done to remedy the situation? I believe the solution is for educational institutes to implement a three-tiered education system that focuses on more than just theory. At the base of the three-tiered system will be a sound basis of theoretical knowledge, which most tertiary institutes do offer. Unfortunately, most stop at this level. One level up from theory are practical, marketable skills that enable a candidate to “hit the ground running” at any place of work, the “most-needed” skills that Tim Cook refers to. Because the market is highly competitive and businesses are under tremendous pressure to deliver, most need people to get working as soon as humanly possible. As far as the third tier goes, we need to understand this in the context of two major trends in the past decade or so. Employment levels globally are on a steady decline. The reason for this is, among other things, that in the new, digitally-driven economy, companies are able to adopt a level of automation not possible before, leading to highly streamlined enterprises with relatively small footprints. The upside to this is that, thanks to technology, the barriers to starting a new business have all but disappeared. Today it is possible to start an online business with nothing more than a smartphone and a data connection – be it a retail, consulting or service business. All that is required is an entrepreneurial drive. The future of South Africa’s economy rides on small businesses, which employ about 30% of the country’s workforce. This is still small in comparison with more developed countries, where SMME’s employ upwards of 50% of the workforce. A combination of the three tiers of education will, over the next decade, not only reduce the unemployment rate, but produce a highly qualified, highly skilled, entrepreneurial and innovative workforce that will drive the economy to new heights.  

“Throughout the world, physical retailers are feeling the pinch of the rapidly-expanding e-commerce industry.” In my previous article I spoke about the impact of e-commerce on traditional brick-and-mortar stores. Throughout the world, physical retailers are feeling the pinch of the rapidly-expanding e-commerce industry. More and more people are buying their goods online and fewer are venturing out to malls. The situation is so dire that in the US alone stores are closing down at an unprecedented rate, with experts predicting that by 2025 a total of 75000 stores would have closed down. Large shopping malls are closing down and are lying empty. But why is e-commerce so successful, and why is it taking so much away from traditional stores? Why are people abandoning the age-old practice of visiting the mall to buy their goods? Since its early days in the 1990s, e-commerce has become a massive, burgeoning business for a number of reasons. The most obvious reason is convenience. There is nothing as simple as browsing on your computer, tablet or phone, making a few clicks, and then having your goods delivered to your door a day or two later. But there are a number of other reasons that drive the success of e-commerce, such as the range of goods offered. Online stores are able to display a vast range of goods, more so than physical stores can. “E-commerce is expected to become the largest retail channel in the world by 2021, according to Euromonitor International, outpacing sales through retail outlets like supermarkets, independent grocers, apparel and footwear retailers, among others. E-commerce will account for 14% of total retail sales in that year” Online stores do not need much space because they rarely keep stocks of their merchandise. All they do is display images and descriptions of their goods, and as and when orders come through, they simply ship directly from the source. This mode of operation gives online stores a bigger advantage: lower prices because they don’t have to pay huge rentals for prime shop-front premises. Because they are buying directly from the factories or distributors, they can save on shipping and warehousing costs and pass this saving on to customers. They’re able to offer shoppers a fully customised experience, allowing them to customise their items to their exact needs. For example, when buying a computer, you can design your own by choosing the processor, memory, storage, screen size, etc. Online stores even display customer reviews, so you can see what others think about the product you are considering purchasing. Combine these conveniences with the security of making a purchase from the safety of your own home, it’s no wonder why e-commerce is growing at an incredible rate. In South Africa, it is smaller than most countries but has shown major growth and has become mainstream. It’s a matter of time before it overtakes most other forms of commerce. The biggest driver of e-commerce is that, even though there are big global names like Amazon and Ali Baba, e-commerce has reduced the barriers to entry for small and micro businesses to almost zero. It is now possible for just about anyone to enter the lucrative e-commerce industry with nothing more than a cellphone and a bit of data. In next week’s article we will meet some enterprising people who are doing e-business in a surprising way.

Does technology drive retail, or does retail drive technology? In my opinion, it works both ways, depending on the situation. At times retail pushes technology innovation to meet the changing needs of the market; at other times new, emerging technologies force retailers to adapt or die. An example of the former is UK-based Ocado. Its fulfilment centres are almost entirely run by robots. Established in 2000, Ocado has grown to what it claims to be “the world’s largest dedicated online grocery retailer”. Its model is fairly straightforward -customers place orders for groceries via the company’s website. These are then packed and dispatched by packers. Ocado partnered with Waitrose, the UK’s biggest supermarket chain, the branches of which served as the fulfilment centres for Ocado orders. In late 2009, Ocado released its first mobile app named “Ocado on the go”, which allowed customers to purchase using their phones. Ocado also released an Apple Watch App, which it said was the first grocery store watch app in the world. Despite serving a niche market, Ocado was a success, and by 2015 was delivering 150000 orders a week. The next year, its new, fully automated fulfilment centre became operational in Andover, Hampshire. The centre is not just impressive in scale, it is also a masterpiece of modern technology. The huge 22000 square metre facility uses1100 robots working in grid formation  to pack shopping carts. The robots, all controlled by an artificial intelligence “hive mind” computer, are synchronised with each other so they do not collide, despite zipping around at four metres a second. The software controlling the robots is similar to an air traffic-controller system. Looking at the robots at work, one is reminded of a beehive. The battery-powered robots are not just synchronised, they also talk to each other using 4G technology. If one needs to temporarily stop work for a recharge, another will take over from where it left off. But the real miracle is how these robots collaborate. Instead of a single robot running all over the warehouse to pick up individual items for an order, which could take hours in a warehouse nearly the size of four football fields, they work in teams. If there is an order with, say, 50 items, the central computer communicates this to robots all over the warehouse, and each robot will pick up an item that is closest to it and drop it off at a central shopping cart. Once goods are packed into a shopping cart, the cart is then sent to a checkout system that scans each item and calculates the total, which is then sent to the customer via the app. As soon as the customer makes payment, the goods are shipped via Ocado’s massive fleet of low-emission delivery vehicles. Working together in this way, the robots are able to process 65000 orders a week. Ocado is at the forefront of automated warehouses, to the extent that it now sells its technology to other retailers around the world. Ocado has developed some of the most remarkable technologies in the world, and is disrupting the retail industry in a big way across a number of countries. Will this model work in South Africa, though? I think it could work, but in a niche of middle-to-high-income customers in the major cities. It will be some time before the model can go mainstream. This does not mean there is no room for innovation in the South African retail landscape. South Africa has unique challenges, and in those are opportunities for innovation. For example, the food sector works on small margins, and shops compete by putting out regular special offers that are usually published in daily or weekly newspapers. People are attracted to the shops by these “catch lines” and usually end up buying other, more profitable lines. There are some challenges with this approach. Newspaper adverts are expensive, static, and go out only at specific times. Additionally, the items advertised are based on calculated guesses, not on actual customer preferences. Now imagine if a shop could put out an offer directly to a customer’s smart phone at any time it wanted. Not only that, but the offer would be personalised to the customer’s needs, based on previous buying history, rather than being a generic advert. With technology like this, retailers could perhaps put out campaigns such as a “next hour” offer during the quieter times of the week, where an offer is valid only for that hour. An offer like that would cost the shop next to nothing, but would instantly bring in hundreds of feet. Technology like this will no doubt boost any retailer’s sales figures in a relatively short time. The best part is, this tech is easily available; big data and artificial intelligence are the main drivers, and are now cheap and accessible enough that even smaller businesses can afford them. The future of retail in South Africa is to provide better value for customers, and technology is an excellent enabler for this. Those retailers that innovate and embrace technology to become more human-centric, are the ones that will succeed.

Mallageddon – The End Times for Malls?    The “retail apocalypse” in the US has claimed more victims in the first quarter of the year than last year combined. By end of last month, almost 6000 retail stores closed in the US. Last year, the figure was 5864. This the continuation of a trend that has been going on since 2010 and, rather than slowing down, it is showing signs of accelerating. Researchers predict that by 2026, nearly 75000 stores would have closed in the US. Some of America’s major brands are in danger of being wiped off the face of the planet. Notable brands affected are budget shoe chain Payless stores, which shut all its 2500 North American stores this year, and toy retailer ToyRUs, which filed for bankruptcy last year. Bon-Ton, a departmental chain store that has been operating since 1898, went insolvent last year. Other brands, while not as badly affected as Payless and ToysRUs, are feeling the pinch. Fred’s, a discount department store chain, is closing 160 stores this year, while Family Dollar, a discount chain that specialises in items between $1 (R14.50) and $10, plans to close 400 of its stores. Things in South Africa are no different. While Stuttafords and Boardmans have disappeared, others like Edgars, Jet and CNA plan to close nearly a third of their stores, almost 1300, over the next two years. Toy store chain Hamley’s is in business rescue mode, while Baskin Robbins and Dunkin Donuts are closing shop. Things are bad for retailers, and all indications are that the retail apocalypse is getting worse. But it seems the apocalypse is not affecting everyone. Online retailers like Amazon are thriving: Amazon had its most profitable quarter yet this year and is the third most valuable company in the world, after Apple and Microsoft. Online retail in the US has grown over the past five years, amounting to nearly half the growth in the retail sector. The largest growth was between 2017 and last year with a huge 15% jump. By all indications, the trend is going to continue, with experts predicting that 25% of all retail in the US will be taking place online by the year 2026. E-commerce is showing positive growth in South Africa. According to the research paper titled Online Retail in South Africa 2019, by World Wide Worx, online retail grew to 25% between 2017 and last year, with R14billion in revenue last year. The research paper estimates that online retail is going to clock the R20bn mark by 2022, amounting to 2% of all retail. As for the rest of the world, it is growing at equally impressive rates. The global leader in e-commerce is, surprisingly, China. Amazon might be the first name to come to mind when we speak of online retail giants, but China’s Ali Baba is a strong contender with a higher growth rate than Amazon. South Korea earned its place in e-commerce history by being the first country where e-commerce became the No 1 sales channel back in 2013. Survival of the Fittest Online business is big business and will be the dominant form of commerce in the near future. The trouble is, South Africa lags behind the rest of the world for two major reasons. First, retailers do not seem to have woken up to the potential of online yet, and do not seem to see online as a future threat to their businesses. According to the paper, only one in five businesses are willing to reinvest a significant proportion of the revenue from their online stores back into those stores. Second, poor connectivity infrastructure and high data prices hinder the growth of e-commerce and the overall economy. While we keep debating the merits of online retail, companies like Amazon will keep growing and continue encroaching into South African markets, and it will only be a matter of time before retailers feel the pinch. But that is not their major concern. Technology has made it possible for just about anyone to start a global e-commerce business and many enterprising South Africans have launched their own successful online businesses. It is these people who are going to pose the biggest threat to retail giants and there is little they can do about it.