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Even though South Africa’s ecommerce sector is estimated to estimated to make up only one percent of the total market for consumer goods, we’ve over the last few years seen many players bank on this figure to grow. Investors are confident to say the least.
To give you an idea of how determined stakeholders are hundreds of millions of dollars have been pumped into online-only stores like Takealot, while traditional retailers are forced to restructure their entire business models in order to stay relevant. At the same time the latter group is constantly trying to perfect the omni-channel experience, where customers can ultimately move seamlessly between different shopping channels like websites, mobile apps, and of course retail stores.
Ventureburn recently spoke to Brent Curry, the CIO at The Foschini Group (TFG), about the group’s relative late entry into the online shopping space, and how it’s faring in this highly competitive space.
The South African fashion lifestyle retailer comprises of about 20 brands, some of which have launched online over the course of the last two years. These include popular retailers such as @Home, Hi-Online, Duesouth and more recently Sportscene and Total Sports.
Curry found that, though TFG entered the online market a bit late, its investment looks to be paying off. With unique offerings such as enabling customers to shop with their Foschini cards (instead of credit or cash only), it’s currently trading above its growth target. So much so that @Home’s top seller is its online store.
Ventureburn: What sets Foschini Group apart from other players in the ecommerce space, whether they be traditional retail or native like Takealot or Superbalist?
Brent Curry: We had a relatively late intake into the market, especially in the retail space. Mr Price had launched. Woolies had launched. What we did is that we’ve spent about two years researching the ecommerce internationally so we were talking to the Urbans of the world and America Eagle and John Lewis, and we’ve learned about their approach.
When we first launched, we knew we couldn’t just go online, we had to differentiate. A good selling point for us is that we’re the only company in the world that offers our private label card as a credit card. Basically, if you have a Foschini card you can now go online and purchase with that card. We suddenly got this mass of people who probably wouldn’t have had a credit card who now have access to online trading.
We are unique in the offering of our Focshini card, and 70% of our online traffic is card-based. If you look at the [overall TFG group], 55% use our card and 45% use cash or credit card.
VB: Foschini Group has a parent site where the likes of @Home, Duesouth and SportScene are found, what are the pros and cons of this approach?
BC: Because we have 20 brands in the group, our strategy was that we’re going to create a mall, so you can shop for all our brands. That’s the other strength of ours. You can go to Markham and pick a product for your basket and then ship from there into Foschini or Duesouth. You can have one checkout, one payment.
Today, around the world, people who have multi brands tend to have dual checkouts. We shop across all of those. The pros of that is if you go to our store today, you can shop across all our 20 brands with one Foschini card.
VB: Which of these stores have been the most popular since they’ve launched online?
BC: The two maturer ones that we’ve launched about a year ago are @Home and Hi-Online. Both of them are doing extremely well. Then we launched Sportscene this year, so they haven’t had a full year’s trade but they’re doing really well.
@Home is very popular. People don’t have to touch and feel appliances. It’s an easy online business, but what we’ve found with Sportscene is that the target market is the online market — a much younger market. They’re all tech savvy. Interestingly, we find the majority of online sales in Sportscene are expensive sneakers and shoes. That’s a very big trend internationally.
VB: With Foschini Group relative late entry into the online space, what disadvantages do you have? If you were to compare a platform like @Home to YuppieChef?
BC: We had a lot of time to think the development process through. For example, having one checkout for multi sites is great. If Yuppiechef had to go and acquire other businesses, it’s very difficult for them to do that. We have much more flexibility.
We will be spending over R100-million on our systems and our processes. We said that we’re going to put the right processes in and make it stable. And that’s what we’ve done.
I think the downside of a lot of companies is that when you get these promotional backfires there’s a lot of worry that the systems won’t be too stable enough. We’ve got a very strong, stable system that’s hosted in the UK. We’ve invested in the right infrastructure.
The downside [for us] is that Yuppiechef has a market presence. But @Home has a very good market presence itself, so it wasn’t too difficult to shift in getting customers to come and shop.
VB: What has the revenue growth been since the stores launched this year and last year?
BC: When we started we stated that we want to have five percent (about R500-million) contribution to the group turnover by 2020. We’re currently trading above our planned target.
2.5% of @Home and Hi Online trading is being done online. This is actually good in South African context. To put this into perspective, @Home’s top store is their online store. Across all the bricks and mortar, the highest turnover store is online. Furthermore, online users tend to buy double the volume they do offline.
VB: You’ve mentioned the amount of money you spent on creating this online infrastructure. What major challenges are there when it comes to logistics?
BC: The big thing is that online is 24/7. With bricks and mortar you don’t have that. You’ve got to be geared for that. The big challenge is that because you’re online, your site — which is your front door — you have to be more dynamic. You can’t just push the stock in and sit back. You have to keep monitoring because the process is much more agile.
VB: Why is it so important for retailers to establish themselves online?
BC: The five percent contribution to group turnover is a conservative figure. We believe there’s going to be exponential growth. We believe that our customers have our shop in their bag. They have a smartphone. They can go to bricks and mortar outlets but they can pick up their phone and shop as well. They have the true omni process.
Emerging markets are a little bit lagging — in the UK they talk about 30% of retail being done online. We have a company called Phase Eight that we acquired this year. Their online is 27% of their business. We don’t doubt that it’s going to shift towards that percentage. We’re just being ultra conservative.
Strategically, you have to be online. The consumer expects you to be there.
VB: What are the main challenges of setting up a true omni-channel experience?
BC: The number one challenge is to strategically know exactly why you’re doing what you’re doing. You have to select the right platform, technology wise. We’ve spoken with so many companies that said they’ll start small, and need something to build from. But before they know it they’re downgraded and have bad customer experience. Once you upset a customer, they don’t come back online. We get very few complaints.
VB: Is there any talk of expanding these stores into the rest of Africa?
BC: Yes, absolutely. We see this as an absolute advantage to have an online component. We already have stores across Africa. We want to create a true omni experience for our customers there. We want to roll out our internal brand first and then shift into our divisions that are all trading north of South Africa.