Barry Williams
When we talk about product, this refers to the range of goods and services your customers are looking to buy. As a retailer, your job is to stock those that will satisfy the customer’s needs, wants and desires, while also delivering a profit to your business. Your profit is largely influenced by the price you set. How much you charge per item needs to be consistent across the whole marketing and sales mix, and it also needs to make financial sense (i.e., present value) to both the buyer and seller. Next, a retailer needs to provide a space where customers can purchase their products. Typically, this is a physical store, however, as more people gain access to the internet, and as global events like the COVID-19 pandemic drives the uptake of eCommerce, retailers across the world are adopting online marketplaces to supplement how they sell their goods. Finally, once all this has been determined, it is up to the marketing team to start promoting the offering.
Except, things do not end there. Once a customer has been convinced of the product, price, placement and promotion, the final hurdle is payment – specifically, the process and experience through which money is transferred from the hands of the consumer to the retailer.
In foreign markets where consumers have more disposable income and where spending habits are more informed by desire than necessity, the payments process is often sidelined as a supplementary issue. But in South Africa, where some 30-million people (or 55% of the population) live below the upper poverty line[i], and where large groups of society do not have access to traditional financial services, consumer spending depends on the customer’s ability to transact in a way that is both affordable and accessible.
Now, this is important because at the end of the day, a retailer’s goal is to drive traffic to their store and maximize basket sizes. This can be achieved by manipulating the principles of product, price, placement, and promotion – except, this all means little if the customer is not financially or functionally able to make that final payment. South African retailers must then consider how different payments methods can help bridge this gap between buyer and seller.
It is because of this gap that Africa has experienced a fintech revolution. Across the continent, new and innovative ways for consumers to transact and handle their money are always emerging – from solutions like Zapper and SnapScan, which allow the continent’s mobile-first population to pay for goods using QR codes on their smartphones, to one-stop apps like those of Capitec Bank, eWallets by First National Bank, and transnational remittance startups like Hello Paisa and Mukuru. These companies offer retailers myriad new ways to service their customers, however, the vast variety of options available can often leave retailers unsure of which to adopt.
It is for this reason that payment aggregators like Pay@ have emerged. These organisations group various payment channels together, and in doing so, do not only take the pressure off of retailers to independently integrate a never-ending range of options, but also ensures they do not lose out on potential customer transactions. But like the fintech’s they support, payment aggregators are constantly changing to meet the needs of both retailers and end-customers. This is specifically in the area of bill-payments, as retailers have looked to provide an in-store alternative for customers looking to pay for traffic fines or television subscriptions. This all goes back to the founding principles of retail and is a deliberate move to incentivize more foot-fall and bigger basket sizes. In response to this, aggregators are now integrating billers and merchants into their offerings, and in doing so, are evolving into payments platforms.
The beauty of a payments platform is its ability to not only digitise payments in physical retail spaces but also drive traffic to retailers' digital platforms. Throughout the pandemic, the going consensus was that – thanks to restrictions on movement – the online retail industry boomed. This is true; eCommerce witnessed the sharpest growth in its history, as more and more consumers recorded their first online transactions. This was beneficial for businesses too, who could use this uptake in online shopping to generate customer data and better align their four ‘P’s.
But what the conversation often ignores is that this did not equate to the end of in-store retail. Rather, their status as an ‘essential service’ meant that operations went on mostly as normal (baring the face masks, sanitisers and longer queues). At the same time, unable to see friends and family, consumers relied on retail to practice some sense of community. This trend persists in the post-pandemic world, with industry insights showing that, despite the widespread foray into the digital world, consumers still prefer the brick-and-mortar experience[ii].
These findings are especially true in smaller and underserviced towns in South Africa, where online access is constrained and where citizens prefer a community-based shopping experience. Combined with less income to spend and little trust for digital systems, retail continues to dominate these areas, with consumers simply more accustomed to transacting in person via a human teller. With inflation, rising fuel prices, and ongoing loadshedding putting additional pressure on households' limited incomes, community-based retailers can expect to see consistent traffic at their physical stores in 2023 and beyond due to their ease of access. But higher prices will not only be a concern for consumers. For retailers, inflation can wreak havoc on their product strategies, and it is for this reason that we are likely to see more uptake of payments aggregators and platforms over the coming months. This is because, by grouping together various methods of transacting, aggregators and platforms unlock bargaining power for retailers, whereby payments are grouped and do not incur the fees linked to administration, staffing, and customer service, among others. As such, the adoption of these services gives retailers another tool in their box when finding cheaper suppliers or transferring the higher costs on to the end-consumer is not an option.
These are just some of the predictions we can expect to see unfold in the retail payments landscape over the course of the year. However, considering that the industry is so intrinsically linked to movements in the national and international markets, it is also worthwhile pointing out that the situation can change at any given moment. This can make it increasingly difficult for businesses to predict the future and align their four ‘P’s accordingly. But one thing is clear: by adding payments aggregators and platforms to the mix, retailers are better equipped to deal with the worst, and capitalise on the best.
by Barry Williams, Head of Sales & Retail Relations at Pay@.