Click and Collect can reshape African E-commerce, Grit Real Estate says
Click and collect has the potential to reduce last-mile delivery costs of e-commerce and so produce a viable rental stream for African property investors, Grit Real Estate Chief Strategy Officer Darren Veenhuis tells The Africa Report.
Grit, an African property investor which trades on the London stock exchange, plans to adapt shopping malls in Zambia and Mozambique to allow click and collect shopping, says Veenhuis. COVID-19 travel restrictions are slowing the plans, which need country visits to implement, but Veenhuis hopes the plans will be carried out within 18 months.
Grit’s tenants have to pay their rents in hard currency. For the company’s blue-chip multinationals, that’s not a problem. Grit doesn’t hedge on currencies due to the cost, and retail – which makes up about 25% of the portfolio – is the only sector where currency risk is borne by the tenant. That makes finding more profitable ways of using retail space a strategic priority.
Whether click and collect is profitable will in part depend on whether customers will pay in advance. Last-mile delivery costs and customer resistance to paying until they see the goods are obstacles for African e-commerce retailers such as Jumia, which has yet to make a profit. Grit’s strategy is betting that a person who comes to a pick-up point at a mall is more likely to complete a purchase than someone who has simply browsed and clicked at home.
- The cost of trying to find customers in the absence of formal address systems is avoided.
- Veenhuis says that even if the click and collect purchase is not collected, the goods are now at a central point which is already receiving footfall and from which they can be sold without further cost.
- The plan is to redeploy land adjacent to shopping malls for warehouses where purchases can be collected.
COVID-19 has highlighted the need to change the African retail space use, says Veenhuis. The purely retail mall concept “can’t work” in Africa, which was already oversupplied with malls before COVID-19, he argues.
- The click and collect model, he says, is the “hybrid stepping stone” that African retail needs before it can progress to full e-commerce.
- “Final-mile delivery doesn’t work yet,” says Veenhuis. “The solution hasn’t yet been found.”
- Only minor capital expenditure for will be needed for the repurposing, he adds.
Publication: The Africa Report (Published Article)