Humankind has come a long way since we “shopped” for goods by bartering with our neighbours. “Here’s a fish in exchange for a bunch of carrots and a cabbage” evolved into “here’s 50 cowrie shells for a chicken”. Then came the first coin in the form of the Mesopotamian shekel, and some 5 000 years later, it is the digital age, and we shop and pay not with cash but with clicks.
The COVID-19 crisis fuelled unprecedented growth in e-commerce. According to a McKinsey report on “The future of work after COVID-19”, e-commerce has grown five times faster than before the pandemic in some countries. In the United Kingdom, for example, it shot up fivefold.
In its Global Review on COVID-19 and E-Commerce, UNCTAD (United Nations Conference on Trade and Development) noted that the world’s top 13 e-firms enjoyed a more than 20 per cent increase in their sales in 2020. This excludes ride-hailing and travel platforms, which suffered as a result of the pandemic. “The big winners include Shopify, whose gains rose more than 95 per cent in 2020, and Walmart (up 72.4 per cent). Online business-to-consumer sales for the world’s top 13 companies stood at USD2.9 trillion in 2020,” UNCTAD said in the report.
The organisation contends that the e-commerce boom driven by the pandemic will continue beyond the COVID-19 crisis. In South Africa, e-retailers have annual sales of R30-billion, according to technology market research organisation World Wide Worx. Deloitte Africa estimates that online sales in South Africa are higher than this, exceeding R40-billion in 2019 and growing at 13% per year since. Deloitte predicts that the number of online shoppers in South Africa will grow to 32 million by 2024.
This should be good news for both e-commerce companies and increasingly demanding consumers. It may not be, according to Tonya Lamb, business development executive of SAPICS, The Professional Body for Supply Chain Management in Southern Africa. In a compelling SAPICS webinar entitled “The Perfect Imperfection of Online Shopping”, Lamb and the SAPICS supply chain community discussed e-commerce challenges, including high returns and sustainability.
“Consumers today want a lot. They want personalised retail experiences, but also convenience, speed and efficiency. They want cheaper prices and faster shipping but are also willing to pay more for brands they identify with. They want sustainably sourced, environmentally friendly products, but they should not cost the earth and they must get them without delay. The famous Queen lyrics, ‘I want it all, I want it all, I want it all, and I want it now’ could have been penned for today’s shoppers. They may believe that e-commerce ticks all the boxes, but it is not perfect. They may want to consider the downsides of e-commerce before putting all their eggs into one online shopping basket, so to speak,” Lamb said.
“E-commerce has disadvantages over shopping in bricks and mortar stores. It may not be a cheaper, more environmentally friendly way to shop. One downside is the cost of returns. Up to 40 per cent of goods purchased online end up being returned. This is substantially higher than in-store returns, where shoppers return just five to 10 per cent of their purchases.
“The high rate of returns in e-commerce means that 20 per cent more space and labour is needed for reverse logistics. Reverse logistics encompasses all the activities associated with a returned product or product components that are effectively moving backwards through the supply chain,” Lamb explained. “Reverse logistics can add as much as 59 per cent to the selling price.
“In the next few years, as e-commerce grows globally, the number of returns is going to be over a trillion dollars a year. Who pays for this? The consumer.”
Lamb asserted that the planet is also paying. “It is estimated that returns produce more than two billion kilograms of waste in landfills annually, because not all returns can be successfully discounted and sold.
“A study from the Massachusetts Institute of Technology (MIT) found that online shopping could create a smaller carbon footprint compared to in-person shopping. However, this depends on factors like customer location (cities versus suburbs), choice of transportation and the speed at which packages are delivered. A CBS News report noted that retail giant Amazon’s free one-day shipping is ‘heating up the planet’.
“CBS News reported that ‘the rush toward ever-faster shipping is creating the need for more truck trips, undoing the ecological benefits of shopping online’. Another environmental issue with e-commerce is that as its popularity grows, so does the packaging waste that it generates. E-commerce packaging was at an all-time high during the COVID-19 pandemic. According to market and consumer data experts Statista, in 2019, e-commerce plastic packaging waste was more than one billion kilograms worldwide. Statista predicts that e-commerce plastic packaging use will continue to grow in the coming years, reaching an estimated two billion kilograms by 2025.
“E-retailers and supply chain managers will have to meet these growing challenges. The MIT study concluded that if online retailers commit to optimising their supply chains and packaging, their services could actually benefit the environment more than brick-and-mortar stores.
“To optimise supply chains, supply chain roles must be filled by people with the requisite knowledge, skills and qualifications, including in reverse logistics,” Lamb stressed. SAPICS ensures that supply chain professionals are equipped with fit-for-purpose education, training, knowledge and know-how. SAPICS is the South African custodian of a variety of internationally recognised supply chain management certifications. They encompass planning and inventory management, logistics, transportation, distribution and reverse logistics. SAPICS is spearheading the drive to professionalise the supply chain management profession in Africa and this process is now well underway, with the first designations awarded.
By professionally designating individuals, SAPICS will increase supply chain management competence, knowledge and skills, and industry professionals will have prescribed values and ethics to uphold. Until now, the supply chain field has been unregulated in terms of levels of competence, skills and ethics. The ongoing professional development required to maintain designations will ensure that African supply chain management keeps pace with global best practice. “This will benefit every sector that the broad and diverse supply chain management profession touches, from e-commerce to healthcare, where lives depend on the supply chain specialists who get medicines to where they are needed, when they are needed,” Lamb concluded.