Hi there,

Got inflammation? Then your liver might be driving you to hang out on social media more. (Especially if you’re middle-aged or in college, this weird new study says.)

In this Open Letter:

• In fashion: SA’s Chinese dress connection.

• Steal-free solar, remote tax & SA’s big Halaal thumbs-up.

• Free-to-Paid: 4 Conversion rates compared.

• Trouble with SEO: The poll results are in.

• Startup ideas: Refer friends and get juicy opportunities.

TRENDING NOW

When that Little Chinese Dress Hits SA

Oh oh. Remember when we said Takealot’s revenue growth has slowed over the years? Well, their online fashion arm Superbalist has just issued retrenchment notices. This is maybe the first time since their merger with Spree in 2018 that they seem under so much pressure.

The local competition

Superbalist’s original founders, though, seemed to have just waited out their non-compete with Takealot to team up with The Foschini Group (TFG) and launch Bash. An e-commerce platform consolidating all of TFG (think Sportscene, Markham, @home, Jet, etc.) into one super-shopping app.

And Bash recently flexed its muscle with stats showing how they outrank Superbalist on search, employ innovative lean logistics, and use TFG’s network of ±3000 stores as distribution centres. Seems they really want to take the fight to Superbalist (the Takealot group).

The bigger challenge

But now Superbalist faces even stiffer competition from overseas. Chinese fashion giant Shein started gaining popularity in SA back in 2020, during Covid. And it’s been rocketing ever since…

No surprise then that Shein South Africa is doing extremely well, with their app consistently being in the Top 3 downloaded apps on SA’s Google Play Store. But they’re making waves worldwide.

It’s become a global fast-fashion powerhouse becoming the 2nd largest manufacturer of clothing worldwide. And, slowly but surely, is starting to encroach on the world’s largest name in online fashion, Zara (Inditex), in a few chillingly key ways (if you are building an e-commerce store, take notes):

• Shein’s catalogue features ±2.7m items, 225 times Zara’s ±12k. Important if you want to prevent acquisition costs from turning into losses when people don’t find what they’re looking for (not to mention so much more to upsell and differentiate on later…) — When a customer hits your site, it was likely expensive. Do what you must to close the sale. Shein does so by offering variety, but you can also do it with sound targeting.

• Shein updates products daily vs Zara only every two weeks — Keep it fresh for returning users. Nothing creates drop-off like “Oh I’ve seen this before.”

• Shein is on average 50% cheaper than Zara — Well, they do have a Chinese labour force to help them here, but kudos for building the scale that can get this right.

• And, most importantly, Shein’s average delivery is 5–7 days, virtually anywhere, which is exactly half of Zara’s 10–15 days — Whilst the obvious benefit here is customer experience, what it also does is reduce warehousing costs which, at that scale, it makes a massive difference.

So, if Shein’s performing like this compared to the global player, where’s the opportunity for local entrepreneurs?

Work with ‘em

Look, we all know the SA Post Office has its struggles, now imagine the headaches of import and export. And, yet, it seems inevitable that international e-commerce companies will come to our shores to make a big impact. Their tech, manufacturing and operations might scale well globally and get run remotely, but when it comes to getting the parcel to your door, they need local partners.

That’s where locally registered BUFFALO International Logistics saw an opportunity.

Seeing what Shein, and perhaps some other Chinese brands (such as Alibaba) can achieve in SA, they set up and leverage a local footprint to streamline the process between Chinese e-commerce stores and South African consumers.

Granted, the reviews on Hellopeter aren’t great. But spot interviews with customers say most of their orders come through customs in good time and without unexpected taxes.

And that just might change the game.

The Last-Mile opportunity

With Amazon’s imminent e-commerce launch in SA, this space is set to light up like never before. And whilst these giants' tech and products can scale to meet SA demand, it's the last mile that will most likely keep relying on local players.

The local opportunity here is, if the global giants are inevitable in SA, why can’t SA founders develop the mechanisms they use to reach and deliver to customers? We have the local domain experience, it seems only fair that we help make it work (and build a couple of big businesses off the back of it).

Find those gaps, and fasten your seatbelts – e-commerce might just take off for good.

OVER TO YOU

IN SHORT

☀️ Dodgy Panels. As solar sales continue to rise in South Africa, so has solar equipment theft. But one innovative Eastern European manufacturer has started producing solar panels specifically for the SA market. The panels look damaged, with broken glass and missing corners – but still work perfectly, and look less attractive to sticky fingers.

💰 Mobile Money. Mastercard has agreed to take a minority stake in MTN’s R100 billion fin-tech business, with the signing on the dotted line set to happen soon-soon. MTN’s mobile money business had over 290 million subscribers by the end of July 2023, with transactions in the first half of this year surpassing $8.3 billion.

🥩 Beefy Exports. The Saudi Food and Drug Authority has lifted the ban on the import of meat and red products from South Africa. This after passing the inspection of local abattoirs and feedlots for market access protocol compliance and Halaal certification in the Kingdom.

🤓 Remote Tax. SARS is proposing a bill that would see changes to tax law that would (among other things) tighten up the tax requirements for remote workers to include employers (even non-South African ones) to deduct PAYE tax from SA-based remote workers.

🇷🇺 Moon “Landing”. Last week we shared how the Russian and Indian space agencies were in a race to land on the moon. Well, Russia got there first. Sorta. Its Luna-25 spacecraft crashed into the surface of the moon over the weekend after spinning out of control. And then there was one: India’s Chandrayaan-3 is set to touch down on Wednesday.

­BUILDER’S CORNER

4 Free-to-Paid Conversion Strategies Compared

Freemium, free trial or reverse. It’s not only for SaaS. These days almost every business type has some form of sales funnel that seeks to get people aware and testing your product, with an eventual (percentage of total new users) sale in sight.

The question is: Which one will work for what you’re building?

And the answer is… way more complicated than you think (obviously). Because companies don’t just publish their internal conversion info. HOWEVER, good boys Kyle Poyar And Lenny Rachitsky (from Lenny’s Podcast) did us all a solid and collected some data on US companies’ conversion rates (percentage of new users converted to paid).

Here’s what we learnt…

What delivers the highest conversion rate

1. Free Trial: 8–25%
   This is when you offer free access to your full product for a limited time (14 to 30 days), and when it expires, the person has to actually start paying or stop using the product (lose access).

2. Reverse Trial: 7–21%
   When you give users access to your top-tier product for a limited time (14 to 30 days), after which they can either pay or revert or a low-tier free version.

3. Sales-Assisted Freemium: 5–15%
   Freemium is the classic SaaS model where you have various pricing models, one free (with limited features) and then tiered paid options (with more features). Importantly, Sales-Assisted Freemium is where you are guided by (and often even HAVE to interact with) a sales team or real people to purchase the higher tier.
   

4. Self-Serve Freemium: 3–8%

   This is the same thing, but the entire onboarding and up-tiering process is automated. Users almost never have to speak to another human to use the product and upgrade etc.

Note: This is obviously US data, so it might be different here in SA. But still worth noting that the all-or-nothing Free Trial is so powerful.

Which one is right for your product?

Turns out it depends on who you’re selling to. Since more people complicate decision-making (including purchases), companies tend to take longer to convert and do so at a lower rate (interesting insight for those in SA being told to go B2B, no?).

Conversion rate based on size:

• Individuals and very small businesses: 5–25%

• SMEs: 4–20%

• Larger companies: 4–18%

Got a conversion strategy that worked for you or need some conversion-hacking help? Hit reply and let us know…

THE RESULTS

Oh, dear, we asked how your SEO is doing last week. And most of us don’t know what an SEO strategy is, are trying, or spending too much.

🟨🟨🟨🟨⬜️⬜️ 🏆 Always be Number 1, baby (21%)
🟨🟨🟨🟨⬜️⬜️ 😖 Try and try but never get anywhere (21%)
🟨🟨🟨🟨⬜️⬜️ 💲 Paying a fortune in ads, can't keep it up (21%)
🟩🟩🟩🟩🟩🟩 🤷 What is an “SEO strategy”? (31%)

Wow, OK, that’s actually something we can help with, like, right now. Hit reply and tell us your SEO needs and we’ll hook you up…

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PARTNER WITH US

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Hit reply and tell us you are interested and we can share the details.