Selling Online Workshop: Showcasing Selling & Shipping Products | UK South Africa Tech Hub
Interested in starting your very own ecommerce business? Then there are quite a few things you should know. Luckily, the UK South Africa Tech Hub has put together a comprehensive video workshop introducing the key areas you need to focus on if you want to start selling online in South Africa.
Seeing as it is said that last-mile logistics is the biggest limiting factor to ecommerce growth, we’ve chosen to highlight this portion of the workshop below. You can also watch the entire workshop at the end of this post.
Lars Veul On Getting Your Goods To The Customer
I am the co-founder of Pargo. Pargo is a company that is trying to create accessible and flexible delivery to enable ecommerce and commerce growth in Africa. So we are basically two things.
We are a technology company. We’ve created a smart logistics platform on which you as a business can sign up and have access to different delivery services. An important part of our business is that we’ve added a network of parcel pickup points that we use to get the parcels in the hands of consumers.
Although we have many other services on the platform, the pickup point network is really what makes us stand out between other businesses. Maybe to illustrate I’m quickly going to explain what we’re not. We’re not a courier company in the sense that we don’t have our own drivers, we don’t have our own trucks, but we integrate different courier companies on our platform. So when you use Pargo, you have access to different courier companies and different services. And as I said, the most important one being the parcel pickup points.
I think you guys received a lot of insight into e-commerce, how to set up a shop and how to manage the payment side. But remember, there is no online shopping if you don’t have delivery. The whole idea about ecommerce is that people can order their goods online and then get them delivered either to their house or to a pickup point.
But, you know, that’s just the gist of it. The challenge and the reality is that delivery is actually quite a big problem in Africa. It’s not easy and I would say it’s often not going too well. And I think it’s one of the main reasons why a lot of people still don’t buy online.
So getting the delivery right is super important. At the moment, we really see this as the biggest limiting factor to ecommerce growth on the continent. And that is because of the following reasons that are highlighted here.
The reality about this continent and about this country is that a big portion of the population lives in areas that are not easy to service. If you live in a township, if you live in a rural town, a small village somewhere, but also even if you live in a housing estate, it’s difficult for couriers to get to you.
The issue of access is also compounded by the fact that many people live in areas and housing without recognisable addresses. There are many areas like townships, where there are no proper addresses. The postal system in South Africa also doesn’t make a lot of sense. So there’s a lot of issues around delivery and these are real problems that we try to solve.
Another problem is the cost of delivery in Africa. Delivery in Africa is about two times more expensive than a delivery on average in Europe. Their delivery would be about 7-8% of the total delivery cost and here it can go up to 15% of the total value.
Another big issue is convenience. So the reality is that most ecommerce companies, most South African companies, in general, still only have one delivery option.
And then lastly, it’s reliability of service. Many people are not at home. So let’s say that the address is right, the cost is not too bad, people are happy with that one option and then your courier tries to deliver it, but you’re not at home. On average, companies need to make 2.3 delivery attempts for every successful delivery.
When you think about delivery, there are a few options you can use, but I think the first big decision you have to make is to choose between home delivery and Click & Collect.
I would advise you guys that when you start, start simple and start with one, but at the end of the day, it’s also about flexibility. It’s about giving people options. So you don’t have to choose one, you can choose two. I guess when you’re smaller, you have to make a bit of a decision.
With home delivery, you are dealing with somebody’s address, but it can also be a work address and through Click & Collect you deliver to a pickup point where customers can collect. With home delivery, you can choose between working with a courier company and an on-demand company.
So you have to choose if you work with a business like FedEx, CourierIt or Ram or if you work with a company like Pickup or Onecard. Those kinds of on-demand delivery companies have nationwide coverage, but typically when you use them, it doesn’t go through as quickly. And then on-demand is mostly in the main cities and it’s a bit faster, but you also have to inflect options. And then there’s allowing the consumer to get their parcel at individual pickup points or something that we just launched, a drive-through pickup point where people can actually just go to the drive-through, put the parcel in their boot and that’s it.
The difference between these options is really speed, cost and convenience. So most courier companies will give you a reasonable rate. However, pickup points are typically seen as cheaper because you can consolidate deliveries and you can go anywhere in the country for lower costs and drive.
The bigger point is obviously because of convenience. So it’s really up to you to make a decision on what you want. And there are many different companies out there that can give you these solutions, then just some practical things to think about in terms of setting up your logistics and your last-mile deliveries.
And that is three things that I’ve put in here. I think there’s much more to think about, but for now, I’m you going to stick to three things and that is cost, warehousing and integration. So I’m going to go through costs, but let me just start with warehousing and integration.
So, are you going to use warehousing? How are you going to do that? Where are your parcels going to go for the big businesses? When I say big businesses, I mean companies like Clicks, The Foschini Group, Takealot and OneDayOnly. All these big companies, they have proper big warehousing systems. As a small business, you can pay for that, but there are companies out there like Parcel Ninja that offer warehousing solutions for small businesses. Or do you fulfil from your own garage or store?
So that’s one thing you have to think about. Two is integrations.
You have to think about how you integrate. Do you want it to be a manual process? Do you want it to be a fully integrated process? One of the big challenges is unreliability. The reality is that many courier companies in the country are not the best in terms of tech integrations. They’re good at taking it from A to B, but to have a proper integrated solution is not always easy. So think about that as well. Think about how you’re going to get integrated. But most importantly, think about the cost.
One very practical thing everybody should think about is how does costing work and how do you calculate it? And how do you make sure that your costing makes sense?
So cost is based on two things. It’s based on where you are sending your parcel to, and the size and weight of the parcel. Obviously, a delivery to Sandton is cheaper than a delivery to Pofadder. So the further away you go, the more expensive it becomes.
There is something that has always irritated and pissed me off a little and that is whenever you guys go and speak to courier companies, you will get a rate table and they’ll give you the cost that you know, but then there are some hidden point surcharges. Be careful about surcharges.
What they basically do is they break up the cost into so many different elements at the end of the day when you deliver. And what they’ll do is they’ll come to you and they’ll pitch that a local delivery is going to be R25. But what they don’t tell you is that there’s a surcharge for every other little thing you do and you end up paying much more. So be careful of that.
The simple way of explaining it is that almost all couriers will give you different rates for different areas. Most of them are either main centre or regional.
So local is Cape Town to Cape Town. That’s cheaper than Cape Town to Johannesburg. Cape Town and Johannesburg we see has a main centre rate. They’ll have different costs. So look at that and be careful about those costs.
And then the other one is size and weight that’s super important, right? The bigger your parcel, the more it’s going to cost you. So how does one calculate weight? What all couriers do is that they have something that they call a volume metric rate. So your parcel is one kilogram in terms of actual weight or in terms of volumetric weight.
Most of ecommerce goods, most products will have an average weight of about five kilograms and most companies use five kilograms as a base number. It starts from five kilograms and you pay more for every kilogram thereafter.
So again, look at that when you sign up with a courier company. But remember it’s about the volume metric weight.
To calculate the volumetric weight, the formula is the width times the height times the length of a parcel in centimetres and dividing that by either factor 4,000 or 5,000. So as an example, if you have a parcel that is 25 centimetres wide, 30 centimetres high and 25 centimetres long, you have to multiply those things together and divide it by 4,000. That parcel would be 4.69 kilograms in terms of volumetric weight.
And that’s important because again, the base rates that you’ve negotiated is probably going to be five kilograms. So if it goes a little bit over, you’re going to have to pay the rate for an extra cost per kilogram. So I think it’s important to just keep this in mind when you’re signing up with a courier company.
To wrap up, logistics is not easy. It’s probably the number one reason why somebody will not come back to your ecommerce website because something went wrong in this department.
Make sure that you choose the right partners. Think about things like speed. Think about things like geography. Think about size and cost. Make sure that your end-user has options. Allow them to choose a home delivery service or pickup points. I think it’s all about creating a convenient service for your end-user.
Workshop transcribed from the Selling Online Workshop: Showcasing Selling & Shipping Products | UK South Africa Tech Hub held on the 17th of November, 2020.