Page 12 - Logistics News - September October 2023

R E TA I L

Traditional vs pure-play retailers

By Jan Tukker, Managing Director, BusinessChain - supply chain professionals
who have vast experience in strategic sourcing, logistics, distribution, supply
chain systems, and people development. www.businesschain.co.za
Find out ways that traditional retailers can compete with pure-play retailers in a
very competitive retail landscape.

nline-only, also known as pure-play retailers, Why so sluggish?
have quickly established themselves in a very So why were the traditional retailers so slow off the mark?
Ocompetitive retail landscape. Their agility and And how can they leverage their capabilities to compete in the
customer-centricity have placed tremendous pressure online space? The reasons for the slow reaction differ for each
on traditional retail businesses, stealing revenue and business, but the main themes include margin protection, legacy
customers from them. Traditional retailers have been systems and skills.
sluggish to respond to this threat and are scurrying for
solutions. Here, we outline the reasons for their slow Retailers did not want to erode their margins at the
response and provide some key takeaways. expense of shifting their business model to compete in an
expensive online environment. Soon they realised, however,
The growing online retail landscape that they’d better start their journey to multichannel retailing or
I don’t need to convince you that buying online is convenient, face the risk of losing market share, if not go out of business
efficient and cost-effective for customers. It saves a journey altogether. Reluctantly, they began investing, but not nearly
to the store, finding and paying for parking and is super sufficiently to change their business model. They’d soon
convenient for busy people. The pandemic has exponentially realise that an online channel isn’t about having an alternative,
grown online sales and although this is an exceptional case, but rather a complement to their brick-and-mortar channel.
it is commonplace for international retailers to generate more Multichannel retailing can increase margins if the channels work
than 25 percent of their sales online. H&M reported that its symbiotically.
online sales as a share of the group’s net sales in 2021 were 38
percent. The IT systems issue is one where retailers developed
business systems over many years to support store-based retail.
This figure for clothing retail in South Africa is only Supporting these systems and developing new capabilities
3.5 percent, indicating that we are in the infancy of our online within them is a sizable undertaking. Redirecting attention away
retail evolution. The potential growth is noteworthy, with this from the brick-and-mortar retail requirements – essentially
author believing that the figure could grow to rival international pausing any new developments in favour of online systems
online sales figures. To back up this claim, the growth in development – is a game-changer. They never needed to deal
smartphone usage is over 62 percent penetration – nobody with customers digitally because their stores handled customer
would have believed this in 2005. It proves that our population engagement and sales. Indeed, a complete paradigm shift.
demands connectivity and convenience. Our consumers need
convenience and time, which is exactly what buying online Lastly, the skills requirements for online differ from traditional
provides them. In addition, our consumers’ transport costs are a retail. It’s like an athlete needing slow-twitch muscle fitness for
significant portion of their monthly earnings. Saving transaction a marathon versus the fast-twitch requirements for sprinters.
costs, for them, is a key driver of online growth. Selling online needs agility and speed.

The caveat, though, is that online shopping needs to be Catching up
cheap and easy, with the delivery of goods done conveniently. Retailers found themselves in a race against time to close
If done correctly, customers who are sceptical about online the gap that pure-play retailers had gained. Once the strategic
shopping build trust in this retail channel. This conversion rate is direction had been accepted, capital was released to invest
critical to growing online spending. more significantly in their online capabilities.

10 SEP T E MB E R/O CT O B E R 2023 www .l o g ist i csn e w s .c o .z a