Oh the weather outside is frightful, but it’s not snowing in the south-western tip of Africa. The wind’s howling and four seasons are constantly…
Dutch founders Lars Veul and Derk Hoekert recently showcased their ecommerce solution called Pargo at the eCommerce Confex Africa. We caught up with them to see what all the fuss is about around pick up points.
Both have a strong background in ecommerce and have over the last two years help grow the online classifieds site Groupon SA. While trying to sort out Groupon’s ecommerce strategy, the pair immediately saw a gap.
“We asked the question, ‘Why are people in South Africa not using post offices as a delivery service?’ The courier service industry, on the other hand, is not on the same level as in Europe,” Veul says. “There was quite a lot of frustration because people miss deliveries.”
The pair decided to look at implementing a pick up point solution, where online shoppers chose a specific destination as a drop-off area for their parcels. This means flexible pick up times for the customer and more access to populations for the ecommerce clients.
In April last year Pargo was founded and by November the product launched.
“Traction customers has been amazing. There have been a lot of deliveries over the past few months,” he says. “Stores love the service because new customers are coming through their doors.” To add on to that, Pargo also pays a “small fee” to the points it uses.
Pargo currently has about 20 client stores in the Western Cape. By the end of February, the company is looking to see a total of 50 while moving into Johannesburg, Durban and other towns in between.
Veul explains how it works: “A customer checks out the product, choose a pick up point on Google Maps, when it arrives an email or SMS gets sent to customer, and the parcel can be picked up at a time of his or her choosing.”
“We also offer returns where customers drop off their parcels at these points. A return policy is very important for ecommerce, especially when it comes to fashion,” Veul says.
“At the moment we have partnered with Caltex Freshstop, Vee’s Video, Shell and are in discussion with a lot of other client stores. We’re especially interested in getting big retail chains onboard that have a good presence in South Africa,” Veul explains.
“What’s very important is the fact that we’re an independent company. We’re not linked to one courier company, one pick up point or one specific retailer. Anyone that wants to partner with us can do so.”
Hoekert explains that Pargo essentially looked at existing models in Europe and Australia and implemented them in South Africa. Australia’s ParcelPoint has over 1 200 partnered stores, while the UK’s Collect Plus today has over 5 500.
Hoekert tells us that Pargo has basically brought successful business models from abroad to South Africa. Having said that though, the team stresses the unique environment where pick up or drop off points could present a major opportunity for ecommerce.
As echoed by the various references made throughout the two-day eCommerce Confex, including ParcelNinja’s Justin Drennan, this is one of the innovations in local ecommerce we should be looking out for in the coming year or two.
Client stores are given scanners which helps Pargo keep track of the parcels. “What’s interesting is that we found people are picking up their parcels at night or during the weekends. Most people prefer to collect on a Sunday,” says Veul.
Read more: Ecommerce is changing: where to from here?
A lot South Africans seem to rather pick up their goods at a time and place of their convenience than having to wait at home all day for a stranger to arrive. Couriers can’t risk leaving a parcel by your front door and let the neighbour sign for it — it’s not Europe or the US.
This trend has also been explained once by Sylvia Gruber of beauty subscription service RubyBox. She noted to Ventureburn that ecommerce company once gave customers a choice to either have their goods delivered to their homes or collect at a nearby mall, where RubyBox has setup a pop-up store. She found than over 20% of the customers preferred to collect their parcels personally.
Apart from leveraging online shoppers’ comfort, Pargo’s founders also explains that pick up points will enable ecommerce companies to reach more of the rising local middle class. Veul explains:
Ecommerce companies see a huge potential with SA’s rising middle class. At this moment it’s not possible to do sale and deliveries with many customers because they live in areas with difficult delivery addresses where it’s either risky or information is hard to come by. Now we can setup pick up points in these areas which will allow clients to access the market.
“Today everyone has internet access but not everyone has credit cards, which means that ecommerce is inaccessible to them,” Hoekert explains. Pargo hopes to change this by eventually introducing more alternatives. “We’re also looking at eventually adding more payment solutions like a cash on delivery alternative.”
Hoekert hopes to expand Pargo into Africa within the next five years. For now though, watch this space.