The State of Logistics in South Africa

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The South African logistics sector has long been plagued by consistently high costs and the 7th State of Logistics Survey shows no signs of the trend abating. The survey released on Tuesday 8 March by the Council for Scientific and Industrial Research (CSIR), IMPERIAL Logistics and Stellenbosch University found that between 2008 and 2009 total cost of logistics decreased by just 1.2%, from 14.7% to 13.5% of Gross Domestic Product (GDP).

These figures are considerably lower than forecasts estimated and indicate an under performing logistics sector. Considering the declining nature of the price of diesel and inflation, the two leading cost drivers, a drop closer to 12.5% could’ve been expected.

There was also a drop in total tonnage as well as ton/km of 4% and 3.7% respectively and less freight was transported in 2009.

On the environmental side, 23 million tons of greenhouse gasses were emitted due to land freight transport activities, 20.3 million tons of which was due to road freight.

The survey found that approximately one third of transport activity in South Africa is outsourced and also stated that growth opportunities were to be found in growth in outsourcing and not among available outsourced freight.
A call has been made for further collaboration between the private and public sectors to enhance the economic infrastructure and promote economic growth and job creation. In addition, it is noted that a move away from mediocrity and strive for world-class standards to ensure the envisaged 7% economic growth annually, for the next 20 years.

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A few weeks ago I wrote about the Bottom of the Pyramid and the importance of catering to that sector specifically. Whilst it is true that South Africa’s Bottom of the Pyramid is very large, there is another sector that is growing at an increasing rate and cannot be overlooked, urbanites. An article I recently read dubbed them; Citysumers.

The article defines them as: “The hundreds of millions of experienced and sophisticated urbanites, from San Francisco to Shanghai to São Paulo, who are ever more demanding and more open-minded, but also more proud, more connected, more spontaneous and more try-out-prone, eagerly snapping up a whole host of new urban goods, services, experiences, campaigns and conversations.”

These citysumers present a host of new challenges for retailers. Their loyalty does not lie with a particular brand, but rather they look for brands that “challenge, thrill, titillate, or even shock.” In addition, each city has its own unique citysumers, meaning that a campaign that has swept Cape Town might crash and burn in Johnannesburg or Bloemfontein. City specific marketing is essential. They’re eager for new experiences and not shy to spend a little bit extra to find them.

A recent UNICEF report showed that in 2008 61% of the South African population was urbanized and growing at a rate of 2.1% annually. This is a massive portion of the population, many of whom have considerable disposable income, but not somewhere to spend it.

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A customer is the most important asset a retailer has and they should therefore be at the centre of the retailer’s universe. Every retailer has a clear and expressive “customer centric policy” or a “customer satisfaction strategy” that is presented by executives at every opportunity. Putting it on paper is easy but turning it into a reality is something entirely different.

South African retailers have a sophisticated store infrastructure in place that is modern, well-run and aesthetically pleasing. European shoppers would find it difficult to believe that they were on the Southern Tip of Africa. It is clear that our retailers spend a great deal of time and money on the “hardware” aspect of the customer experience but neglect the “software” or personal aspect.

A retailer’s only direct contact with its customers is through the store’s floor staff. They have a powerful impact on the customer’s in-store experience, whether it’s positive or negative. Every shopper has a customer service story to tell and the vast majority of them are negative. That is something that needs to change. Most consumer goods can be bought at a competitor’s store for very close to the same price. This makes it near impossible to generate shopper loyalty based on price.

A great in-store experience is worth as much as a quality product. I believe retailers need to place more effort on the development, education and training of their floor staff to ensure that they deliver the best service to every customer, at every opportunity. It is crucial that staff realize their integral role in the retail experience and the influence they have on customer experience.

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