As South Africa’s online retail market braces for the arrival of Amazon.com and the possible entry of Walmart, many strategic shifts can be expected in 2023.
The headline findings of the Online Retail in SA 2023 study, released in December by World Wide Worx and Mastercard, shows online shopping grew by more than 30% last year and is likely to grow by another 25% this year.
If that sounds counterintuitive in the context of looming recession, it’s because the growth is not a result of increased shopping, but of consumers shifting from physical shopping to online channels.
In many cases it is cheaper to buy products online due to being able to shop around easily and take advantage of temporary discounts on a far greater scale than is possible in stores.
For this reason, the dominance of major e-commerce players does not preclude newcomers or small players from entering the market: as the pie grows, so will opportunity.
But that is not the same as saying any newcomer will succeed and any gap in the market will find a market in the gap.
Particularly in the world of fashion, which probably makes up the single biggest category of online retail in South Africa in terms of number of stores, differentiation is key
Ultimately, it comes down to specific strategies, niches and nuances. Particularly in the world of fashion, which probably makes up the single biggest category of online retail in South Africa in terms of number of stores, differentiation is key.
A case in point is MyRunway, which gives consumers access to fashion from designer brands at discounted prices. It essentially relies on sourcing high-quality product that no longer finds space on retailers’ shelves, but still has a ready market.
It sources, at scale, directly from local and international brands, so it is not competing with fleamarket-style retailers selling remaindered goods.
Its sales in December were up by 35%, in line with annual growth reported in the research. One day alone, Black Friday in November, saw 150% growth over the same day last year as consumers went looking for products they would have bought from retailers, but at a discount.
“We didn’t do anything silly in terms of insane discounts,” says MD Rob Noble. “But we can offer significant discounts and still operate a sustainable business model, and it was no different on Black Friday. It’s just that our deals must have looked even more appealing vs the average offering from the other guys.”
The approach means MyRunway, founded in 2012, is profitable and has attracted investment. While it remains majority privately owned, it sold a minority stake to the LA Group last year and raised venture funding from Spear Capital in 2020.
The key to its success? The niche.
“Focusing on a niche allows the e-commerce business to focus on a specific group of customers and their needs and preferences,” says Noble.
MyRunway’s niche is the “value-fashion consumer” and that gap found a ready market: more than 2.5-million people have signed up as members, despite minimal marketing.
“By identifying and catering to a niche market, a business can differentiate itself from competitors, especially more general retailers, and gain a competitive advantage. This can be especially beneficial in crowded e-commerce markets where it can be difficult to stand out.
“This also allows the business to be an ‘expert’ in its market and completely own this space. With the planned arrival of Amazon in South Africa, this will be a serious advantage to businesses that have achieved this.
"The platforms that are focused and the best at what they do stand to be big winners as Amazon drives the next wave of e-commerce adoption. The platforms with a general offering trying to serve everyone will need to go head to head with them and that is going to be a very expensive battle.”
• Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za
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