Integrating Africa’s Offline and Online Retail Channels

If you are a business operator in Africa, COVID-19 has probably taught you that staying offline is not enough to entice more customers to purchase your products and services within and outside the continent. Africa’s active e-commerce purchasers have grown by 56% (334 million) in 2021 and are estimated to rise above 518 million by 2025. Yet, transiting from offline selling to a blend of online and offline selling presents unprecedented challenges in Africa. Consider the case of Slot Systems Limited, Nigeria. After 20 years of growing to own 75 offline retail stores, the company introduced its online store in 2015. At first, SLOT ran its offline and online stores separately but later discovered that enhancing the shopper experience by integrating both channels made more sense. Businesses blending the two tracks face daunting, confusing, and often conflicting arrays of options that require careful strategic thinking. How can business operators successfully integrate offline and online sales channels in Africa?  Insights from experts at a virtual conference on the topic hosted by the Africa Retail Academy reveal three practices that hinder successful integration.

Confusing multi-channel with omnichannel strategies: Operators within Africa focus on adding online channels to their existing portfolio of offline channels or vice versa. This approach is very different from selecting a blend of offline and online media seamlessly linked to delivering a superior shopping experience to the customer. The former is a multichannel strategy, while the latter is called omnichannel. Multi-channel strategies attract customers in the short term, but omnichannel strategies retain customers in the long run.

Ignoring how customers want to buy: The common practice when designing distribution channels is to focus exclusively on the supply side without thinking carefully about buyer preferences. Customers in Africa do not engage online media in the same way. Some buyers place a higher premium on trust when interacting with purchase channels. According to Ismail Badjie, who spoke at the conference, “customers in The Gambia and other parts of Africa are unforgiving to retailers who breach trust”.  Other customers in East Africa value convenience, speed of delivery, and safety assurances, as stated by Angela Ambitho, the CEO of Infotrak in Nairobi.  The sequence for engaging offline and online channels varies during the shopping journey. Data from an online travel company in Nigeria suggests that 25% of Nigerians start and finish their shopping journey online.  Another 25% form the journey online but complete offline due to trust concerns.  Fifty per cent start the purchase journey offline but complete it online.  These dynamics imply that channel integration cannot happen without understanding how and when customers want to buy offline and online.

Miscalculating cost implications: Channel integration can harm the profitability of a business when operators make erroneous cost calculations. Companies often lose sight of the cost structure needed to promote channel integration. According to Brian Makwaiba of Vuleka,  “costs in South Africa and other parts of the continent include logistics, security, marketing costs, customer acquisition and human capital expenses that are sometimes outside a firm’s control”. Some distribution channels are more expensive to maintain than others, which varies across industries and geographies. A superficial understanding of the cost implications predisposes operators to take on unexpected risks and threatens business survival.

So, what does the roadmap to success look like? Here are five steps that enable successful channel integration in Africa.

  1. Clearly define your strategic vision: What does your business stand for? What is your growth aspiration, and how does your route to market fit into the ambition? Finding compelling answers to these difficult questions is the starting point of clarity in strategic visioning. Understanding how each distribution channel positions your business and differentiates it from other competitors is necessary. Deciding on the strategic vision behind your channel integration can quell the anxiety about adopting online channels just because other competitors are doing so. You don’t have to sell online if it doesn’t align with your strategic vision.
  2. Align Buyer Preferences with Service Outputs of Each Channel: Not all distribution channels serve buyer preferences. Vanessa Burgal emphasises that “WhatsApp is a prominent purchase channel for some Nigerian and South African products, but high-end offerings may not sell via that channel”. You need to understand what online channels can do and what they cannot deliver for your customers. According to Ismail Badjie, “technology has given customers more options and power than ever, leading to a choice revolution”. Buyers in Africa are far more discerning and sophisticated than before. Therefore, do not detach buyer preferences from the service outputs of your distribution channels. The case of Godrej Consumer Products Limited in Nigeria offers an interesting illustration. After some initial difficulties with channel integration, the firm understood that its e-commerce platform is better suited for launching and promoting new products. Its offline channels sold already existing products in its portfolio. Buyer preferences vary at each touchpoint in the purchase journey, and channel integration cannot succeed without matching preferences with the proper distribution channels.
  3. Select and Develop the Right Team to Manage Channel Integrations: Transitioning to an omnichannel business requires significant upskilling, relearning, and unlearning. It would help if you found out whether you have the right team to drive the integration you desire. Employees overseeing channel integration require analytical, insight generation, cost management, emotional intelligence and trust-building skills. For example, a study shows that bridging this skills gap is a crossroad facing post-pandemic businesses in effectively achieving a viable omnichannel strategy. During the conference, Nnamdi Ezeigbo, the Founder & CEO of Slot Systems Limited, Nigeria, reiterated that retail organisations intending to venture into omnichannel must ensure that they employ and retain human resources with the requisite knowledge and functional skills to drive the system.
  4. Review your pricing strategy: The wrong pricing can mess up your channel integration. Make sure you review your pricing strategy before venturing into an omnichannel strategy. It is not enough for your pricing to ensure cost efficiency across distribution channels. The pricing structure must consider how the buyer’s willingness to pay varies across channels and product or service categories. Expert views from Infotrak suggest that Kenyan shoppers spend on average 10 USD for items purchased via e-commerce and pay 1 to 5 US dollars for delivery. On the other hand, the margins on computer accessories, fashion products, electronics and phones appear higher on e-commerce platforms than food items sold in Africa. According to Sam Eje of GB Supermarket Nigeria, “The logistics costs for delivering drinking water to shoppers who purchase online outweigh the drinking water price itself”. Uniform or arbitrary pricing may be a challenge for an omnichannel business. Before adopting an omnichannel strategy, ensure that you are sensitive to pricing dynamics across channels, including unit economics and profit margin.
  5. Deploy the right technology: You need the right technology to drive channel integration. Search for an integrated IT architecture that can deliver a seamless experience to customers, with a personalised 360-degree front end and a back end to handle customers’ requests. Enterprise Resource Planning (ERP) will also help your business manage inventory, company financials, supply chain, operations, systematic reporting, and human resource activities across channels. Some solution providers include oracle retail omnichannel suite and Accenture, which integrates e-commerce, POS, customer relationships, order management, and loss prevention systems.

As Angela said at the conference, “the bumpiest roads sometimes lead to the most beautiful destinations”. Channel integration in Africa may be daunting, but business operators who succeed have higher chances of achieving their growth aspirations.

 

Authors

Uchenna Uzo, Faculty and Academic Director, Africa Retail Academy, Lagos Business School, Pan-Atlantic University, Nigeria

Ephraim Nwokporo, Lagos Business School, Pan-Atlantic University, Nigeria

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Uchenna Uzo and Ephraim Nwokporo

Uchenna Uzo and Ephraim Nwokporo

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Get To Know Uchenna Uzo

Uchenna Uzo

Dr Uchenna Uzo joined LBS in February 2002. He received his B.Sc and M.Sc in Sociology from the University of Lagos, and his Masters of Research in Management as well as Ph.D. in Management from the IESE Business School, Barcelona.

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