Enabling capabilities and the performance of SME e-retailers in South Africa
The continuous evolution of the retailing industry, consumer behaviour and the advent of the Fourth Industrial Revolution have resulted in a shift towards electronic retailing (e-retailing). Although the South African e-retail sector is in its nascent phase, multiple retail Small and Micro Enterprises (SMEs) have embraced the digital economy through e-retailing. This research explores the fundamental capabilities required to enable SME e-retailers for the purposes of informing South African SME e-retailers, the State and current academic literature. SMEs steer economic development in South Africa, majority of the early-stage entrepreneurs in South Africa who operate SMEs are found within the wholesale and retail sector. These wholesale/retail SMEs provide employment and generally improve the livelihoods of South African citizens through their contributions. The high failure rate of SMEs is to the detriment of the South African economy and the livelihoods of its citizens. SMEs are said to fail because of funding and access to markets, e-retailing provides a cost-effective solution for these SMEs. This research aims to aid retail SMEs that have embraced or are embracing the digital economy by providing insights into e-retailing, ensuring their sustainability. The main research question that will be addressed: “What are the enabling capabilities that lead to a successful e-retail SME in South Africa?” Purpose and aim of the study: the aim of this study is to identify enabling capabilities that lead to SME e-retailing success. The purpose of this study is to assist retailers embarking on their e-retail journey by providing key insights on which capabilities are essential and those that could require additional resources allocated them to ensure their venture is a success. This study also aims to provide State policymakers with insights on areas which require additional support when developing policies and State interventions for SMEs, especially e-retail SMEs. This study utilised a post-positivism paradigm, and the research is quantitative. A cross-sectional methodological approach was deployed through a closed question survey, and the study collected primary data from e-retail SMEs within South Africa. The main findings that were deciphered from the study, a negative relationship is demonstrated between operational capabilities and the financial performance of SME e-retailers. Marketing capabilities and technological capabilities exhibited a positive relationship however the relationship was not significant. E-retailers should elect an e-marketplace approach to e-retailing instead of establishing an online storefront in silos because e-marketplaces provide significantly better financial rewards. Social commerce takes precedence in South Africas e-retail market due to the high level of mobile penetration in South Africa. The main inhibitors of growth for the e-retail market in South Africa are access to funding, infrastructure (financial technology and Information and Communications Technology -ICT-), lack of innovation, logistical issues (high delivery costs, geographical dispersion and many other issues) and the digital divide (caused by affordability, digital literacy and accessibility of ICT devices). The sustainability of an e-retail SME is dependent on consistently providing exceptional customer experiences. Therefore, to ensure consistency, e-retail SMEs should invest in capabilities that integrate well into their e-retail ecosystem. The South African government has to address issues related to e-retailing laws, taxation, infrastructure, funding and international trade to improve the South African e-retail ecosystem in order for e-retailing to become profitable in South Africa. E-retailing offers a solution that could alleviate many socio-economic issues through the employment opportunities it provides and its economic contributions. E-retailing could also mitigate the high failure rate of retail SMEs resulting in more significant economic development. This research provides practical solutions that will support South African SME e-retailers and aid in ensuring their sustainability.
A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management in Entrepreneurship and New Venture Creation