Could digitisation see the birth of real township retail?

The possibilities presented by digital technology have enormous potential to drive flourishing township economies. The green shoots are already there, something which has been demonstrated by how quickly we made the transition from the offline world to the online world – in everything from #workingfromhome to online shopping, in the wake of COVID-19. Dependency on digital technology to conduct our daily activities has grown significantly in recent years and, for the first time in South Africa, this dependency is filtering into informal and township enterprises. This is generating a boom that we need to carry forward into the post-pandemic world, especially for the power it holds to unlock the potential of township retail.

Mobile-based transaction and banking solutions are driving an entirely new way of doing business in countries like Nigeria and Kenya, bringing even small vendors well and truly into the mainstream economy. With so much to be gained, especially in the wake of the economic impact of COVID-19, the question that bears asking is this: what are we waiting for or, as importantly, what’s holding us back? To begin with, many township traders don’t see themselves as retailers and making this conceptual leap is the first step towards tapping into the entire retail value chain. The potential for both business growth and job creation is substantial, especially in an economic landscape that’ll never be the same again.

The greater issue is the cost of access, with the cost of both mobile phones and data being much higher than in many other African countries. This is something that affects South Africans across the board and there is an on-going campaign to bring charges into line with continental competitors. These challenges aside, changes to the way of doing business are presenting opportunities that simply weren’t an option a year ago. Mainstream retailers, for instance, are rapidly expanding their ecommerce offerings to accommodate an increasing number of shoppers who’re making the move to online shopping. As demand grows, one of the most significant difficulties they’re facing, though – especially in township markets – is one of efficient fulfilment.

This opens up an opportunity for disruptive and innovative partnerships and new operational models that could enable township retailers and other service providers to become fulfilment partners; creating a space for growth in warehousing, inventory management, logistics and delivery services. As opportunities present themselves in food services – the sector spearheading the move to digital due to lockdown restrictions – other retailers, such as fashion outlets and alcohol resellers, could follow suit. The untapped potential, even for smaller, owner-run businesses, is huge.

Just one success story with this type of model – although not township-based – is the Bottles app. When the country went into level 5 lockdown and alcohol sales were banned, Bottles entered into a partnership with Pick n Pay, converting from being a liquor delivery service into a service that provides same-day and next-day grocery deliveries. This partnership has been so successful that Pick n Pay has entered into an agreement to purchase Bottles. There is an important lesson in this.

Although there is a high level of aspiration-driven upward mobility in townships, there is also a concentration of bottom-of-the-pyramid entrepreneurship. It would therefore be remiss to think that there is short-term capacity to take full advantage of digitisation. A win-win operating model could, instead, lie in partnerships between mainstream retailers and township-based businesses, which have in-depth knowledge of both the geography and market dynamics in their areas. And while we have to accept that there’ll occasionally be hiccoughs as these new models are tested and implemented, it’s clear that the benefits to both businesses and customers are immediate and real.

As a report by the WesternCapeCoLab, affirms, the effective use of digital technology presents an exceptional opportunity for South African townships, acting as an accelerator for the creation of entirely new areas of entrepreneurial activity and also as a means to develop new capabilities in existing businesses that will fuel both growth and job creation. The secret? There’s a high level of mobile penetration in the townships, so mobile apps are the ideal touchpoint for reaching customers who’re eager to embrace new retail solutions. COVID-19 has opened the door, we just need to walk through it.

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