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Humanity has come a long way since we “purchased” goods by bartering with our neighbors. “Here is a fish in exchange for a bunch of carrots and a cabbage” turned into “here is 50 cowries for a chicken”. Then came the first coin in the form of the Mesopotamian shekel, and some 5,000 years later, it’s the digital age, and we buy and pay not with money but with clicks.
The COVID-19 crisis has fueled unprecedented growth in e-commerce. According to a McKinsey report on “The Future of Work Post-COVID-19,” e-commerce has grown five times faster than before the pandemic in some countries. In the UK, for example, it has quintupled.
In its Global Review on COVID-19 and e-commerce, UNCTAD (United Nations Conference on Trade and Development) noted that the world’s 13 largest online companies saw an increase of more than 20% in their sales in 2020. This excludes the ride-hail and travel platforms, which have suffered from the pandemic. “The big winners are Shopify, whose earnings are up over 95% in 2020, and Walmart (up 72.4%). Online business-to-consumer sales for the world’s 13 largest companies amounted to $2.9 trillion in 2020,” UNCTAD said in the report.
The organization argues that the pandemic-driven e-commerce boom will continue beyond the COVID-19 crisis. In South Africa, e-tailers generate annual sales of R30 billion, according to technology market research organization World Wide Worx. Deloitte Africa estimates online sales in South Africa to be higher than that, topping R40 billion in 2019 and growing 13% a 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 businesses and increasingly discerning consumers. That may not be the case, according to Tonya Lamb, business development manager of SAPICS, the professional body for supply chain management in Southern Africa. In an engaging SAPICS webinar titled “The Perfect Imperfection of Online Shopping,” Lamb and the SAPICS supply chain community discussed the challenges of e-commerce, including high returns and sustainability.
“Consumers today want a lot. They want personalized 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 sustainable and eco-friendly products, but they must not cost the earth and they must obtain them without delay. Queen’s famous lyrics, “I want it all, I want it all, I want it all, and I want it now” could have been written for today’s shoppers. They may believe that e-commerce ticks all the boxes, but it’s not perfect. They may want to consider the downsides of e-commerce before putting all their eggs in one online basket, so to speak,” Lamb said.
“E-commerce has disadvantages compared to shopping in physical stores. It may not be a cheaper and greener way to shop. One disadvantage is the cost of returns. Up to 40% of goods purchased online end up getting returned.This is significantly higher than in-store returns, where shoppers only return 5-10% of their purchases.
“The high rate of returns in e-commerce means that 20% more space and labor is needed for reverse logistics. Reverse logistics encompasses all activities associated with returned product or product components moving effectively back through the supply chain,” Lamb explained. “Reverse logistics can add up to 59% to the selling price.
“Over the next few years, as e-commerce grows globally, the number of returns will exceed one trillion dollars per year. Who pays for this? The consumer.”
Lamb said the planet pays too. “Returns are estimated to drive more than two billion kilograms of waste to landfill each year, as not all returns can be discounted and successfully sold.
“A Massachusetts Institute of Technology (MIT) study found that shopping online can create a lower carbon footprint than shopping in person. However, this depends on factors such as the location of the customer (cities or suburbs), the choice of transport and the speed at which the packages are delivered. A CBS News report noted that retail giant Amazon’s free one-day shipping is “heating the planet.”
“CBS News reported that “the rush for ever-faster shipping is creating the need for more truck travel, negating the green benefits of online shopping.” Another environmental issue with e-commerce is that as its popularity is increasing, the packaging waste it generates is also increasing. E-commerce packaging has reached an all-time high during the COVID-19 pandemic. According to market and consumer data experts Statista, in 2019, waste of plastic packaging in e-commerce accounted for more than one billion kilograms worldwide Statista predicts that the use of plastic packaging in e-commerce will continue to grow in the coming years, reaching approximately two billion kilograms of by 2025.
“E-merchants and supply chain managers will need to address these growing challenges. The MIT study concluded that if online retailers were committed to optimizing their supply chains and packaging, their services could actually benefit the environment more than physical stores.
“To optimize supply chains, supply chain roles must be filled by people with the required knowledge, skills and qualifications, including in reverse logistics,” Lamb emphasized. SAPICS ensures that supply chain professionals have the right education, training, knowledge and skills. SAPICS is the South African repository of a variety of internationally recognized supply chain management certifications. They encompass inventory planning and management, logistics, transportation, distribution and reverse logistics. SAPICS is spearheading the professionalization of the supply chain management profession in Africa and this process is now well underway, with the first designations awarded.
By designating individuals professionally, SAPICS will increase supply chain management skills, knowledge and competencies, and industry professionals will have prescribed values and ethics to uphold. Until now, the supply chain field was unregulated in terms of skill levels, skills and ethics. The continuous professional development required to maintain designations will ensure that African supply chain management keeps pace with global best practices. “This will benefit all sectors affected by the vast and diverse profession of supply chain management, from e-commerce to healthcare, where lives depend on the supply chain specialists who get medicines to where they need to be. are needed, when they are needed,” Lamb concluded.