Building resilience and agility is key in South Africa's tough retail environment
War, extreme weather, power cuts, looting, connectivity issues… anyone would think South African retailers had a lot to contend with. And they’d be right.
Several factors have recently culminated in a perfect storm of threats that South African retailers have to defend against, and while most of these events can seldom be predicted or prevented, they do serve as a reminder that retailers must expect the unexpected and be prepared to react with speed.
To this end, bolstering resilience and agility is absolutely key to the retail industry’s survival.
A disruption of operations – whether due to power cuts, extreme weather events, or civil unrest – means that a retailer is not making sales and thus not generating an income.
Indeed, NielsenIQ South Africa, in its State of the Retail Nation analysis released in May, highlights that total annual retail sales at South African retail outlets were at R516 billion, representing a 14.4% annual increase. However, the sector is not yet in the clear and the road to recovery is paved with risk and uncertainty that must be managed effectively.
A recent spate of unexpected events – both local and global – have had a severely negative impact on the sector, serving as a reminder that retail businesses should be prioritising resilience and agility as key investment areas to mitigate risks and foster the ability to react and pivot when the unexpected happens.
For many retailers, the COVID-19-driven transition to online trading was a complete departure from their traditional operating models, which were almost exclusively centred on customers physically transacting at brick and mortar outlets. But those that were bold enough to take the plunge recognised that digitisation would provide them with the agility, flexibility, and resilience to pivot in the face of adversity.
A good example of the effective use of ingenuity and agility to adapt to the new environment was the strategy implemented by fashion retailer Cotton On when much of the globe was placed under hard lockdown in March 2020.
With inventory sitting in closed outlets, the retailer reversed its logistics processes and moved stock back into its warehouses. By centralising its stock into its distribution centres, the retailer was able to switch to online trading and satisfy customer demand through more choice and size depth.
Many retailers have taken the lessons learnt during the pandemic and used them to develop processes and systems that have made their operations more robust.
While the lifting of pandemic-related restrictions gave retailers hope that a return to business as usual was imminent, the sector was hit by an unprecedented wave of violent civil unrest and looting.
Riding out a rough year for retail
The week-long July '22 riots spread across the Gauteng and KwaZulu-Natal provinces and resulted in the damage and destruction of 1,800 stores across 200 malls, wiping R50 billion from the economy.
The Government’s recent reintroduction of load shedding has not only brought about operational challenges, but at Stage 6 – the most severe level of rolling blackouts yet – the prolonged and frequent power outages are estimated to cost the country’s already ailing economy about R6 billion a week.
Additionally, the war in Ukraine has resulted in soaring food and fuel prices – with local petrol and diesel prices shooting up by close to 40% in recent months, and severe flooding in KwaZulu-Natal, a pivotal manufacturing and logistics hub, caused further disruption to supply chains.
South Africa’s unique and challenging trading environment demands that retailers harness strategies and develop strategies and partnerships that deliver the right business continuity and disaster recovery solutions to optimise trading and prevent earnings loss.
The technology to mitigate these risks is readily available and should be a key focus for retailers in the local market. For example, aside from costly backup power supplies and generators that can keep the lights on during load shedding, there are solutions that enable a retailer to remain operational even when they go offline.
Equally important is the need for retailers to address any single point of failure in their systems and build redundancy into their environments, thus ensuring that they can trade even if they lose a critical piece of equipment. Unfortunately, hardware failure is a common side effect of load shedding, as sensitive equipment is frequently subjected to power surges when electricity is abruptly turned off and on.
However, data remains one of a retailer’s most valuable assets – with customer data, inventory data, and unified data being a single source of truth that enables the delivery of an enhanced customer experience. Thus, investing in technologies that support business continuity and disaster recovery should be top of mind for retailers operating in a volatile ecosystem.
In extreme cases, the ability to recover and restore data quickly in the event of an incident can mean the difference between smoothly resuming operations or going out of business.
Technology failures can be expensive and can also result in costly downtime for retailers and their customers that will add to the pain of an already bad situation.
Despite the challenging trading environment, South African retailers should rely on the right technology solutions across their retail operations to mitigate existing market risks and continue operating, selling, and optimising revenue, regardless of disruptive events.
If retailers are to thrive in the current operating environment, they will not only need to increase their focus on enhancing and imbedding the customer experience as part of their offering, but also ensure that they have technological resilience and agility built into their systems.