Lars Veul gives us the rundown of how he and Derk Hoekert have
made a serious change to the way we receive packages in South Africa
When Derk Hoekert and I first started working in South Africa, we were immediately struck by the huge challenges people faced in sending and receiving parcels from the Post Office.
It was only the lucky few who did not run into trouble with packages arriving weeks or months later, or even at all.
People in townships and rural areas were on a hiding to nothing. In these locations, it was not uncommon for Post Offices to remain closed for extended periods due to crime, absent managers or funds simply not being available to keep them operational.
That was really the seed from which our click & collect business grew. As e-commerce and home delivery gained traction in South Africa, we noted that the vast majority of citizens were being left out of the equation.
It was all very well for better-off people to be able to order online and receive their items in the comfort of their own homes, but what about those living in the rural areas who rely on provisions being sent to them by their working children living in the metropoles? How could they be assured of getting their parcels every month?
These were the questions that led us to form Pargo in 2015.
While click & collect, which allows consumers to order goods online and collect them from a designated pickup point, was by no means new globally, very little was known about the model in South Africa at the time. But to us it was the answer that would change everything. We wanted to create access for everyone by having a Pargo Pickup Point within 10 minutes of every South African.
Make no mistake, we were a start-up in every sense of the word. Our offices were at home or whichever coffee shops had space available and we were completely self-funded.
We know that we were extremely fortunate to gain the type of momentum we did so quickly. In only a few months, Freshstop at Caltex gave us the green light to pilot at 14 of their Western Cape stores. By the end of our first year, our pickup points numbered 500 thanks to partnerships with other retailers, and then absolutely soared as we secured a partnership with our largest Pickup Point partner Clicks.
Eight years later, we have over 4 000 Pargo Pickup Points nationwide located in most major retailers including Clicks, Edgars, Lewis stores, The Foschini Group (now Bash), in convenience stores including Freshstop of Caltex and selected Spar supermarkets, and hundreds of smaller stores.
Yet even with this number, what we are most proud of is that we are now reaching the very people we wanted to help in the first place.
While our highest demand in terms of actual orders comes from the big cities, we have noted that a significant percentage of orders go to hard-to-reach locations, including townships and rural areas.
Our access points cover over 87% of the country’s postal codes, and most of these occur in these areas. To say it’s incredibly satisfying is a gross understatement.
For township residents to be able to pick up a parcel while shopping at their favourite convenience store makes a huge difference in their lives. Delivering to these areas traditionally has been extremely challenging because of poor road infrastructure, the presence of opportunistic criminals, and formal street addresses often being absent, meaning that residents have to describe their home to drivers who then get lost.
Additionally, the South African postal code system isn’t specific enough. Often huge areas all fall under one postal code which makes finding an exact location beyond difficult.
With click & collect, however, all these issues are negated.
What’s so encouraging is that more and more township residents are choosing to buy online.
The 2022 South African Township CX Report, which surveyed more than 1 400 townships people living in these areas, found that in the space of a year online purchases grew from 28% in 2021 to 70% in 2022.
This is largely down to younger South Africans in the millennial and Gen-Z spaces having better access to technology like smartphones. Many residents favour fashion, mobile data, and food when it comes to buying online.
The technology upswing is also good for businesses.
One of the big problems township traders face is delivery to customers. Last-mile delivery is the most expensive aspect in the supply chain journey, and it’s not getting any cheaper.
This is where click & collect comes in.
Our Pargo Click & Collect offering is more affordable than traditional delivery methods because our large network of pickup points located in South Africa’s major retailers allows us to offer competitive pricing that makes it ideal for SMEs looking to cut costs.
Another advantage is that because customers can collect their purchases at a time and place that suits them, they’re more likely to buy from a business again in the future, knowing they won’t have to wait around for a delivery.
What we have also found is that retailers hosting our pickup points benefit from greater footfall at their stores, which leads to people buying more items since they are already there to fetch their parcels.
Lastly, this model is more secure than traditional delivery methods. Customers do not have to worry about orders being delayed or going missing, knowing that they are safely stored at the pickup point.
We are acutely aware that saving money is South Africans’ top priority at the moment.
At the same time consumers are increasingly looking for convenience in their shopping experience.
Finding the sweet spot between these two is where we are as a business right now.
We want to mitigate the effects of retailers having to pay exorbitant prices for storage of inventory at distribution centres and spending money on petrol and couriers, as ultimately these costs are passed on to the consumer.
Customers also don’t want to have to spend extra money on fuel or taxi fare, so it makes sense for them to collect an online purchase from a pickup point while out doing their regular grocery shopping.
In addition, they don’t want to waste unnecessary time and money on repeatedly checking to see whether their parcels are ready for collection.
This is one of the main reasons we have invested so heavily in intuitive notification tracking systems, which have become essential for us to speed up delivery times and enhance the logistics experience.
With these systems in place, our customers can receive text messages and email alerts providing real-time updates on the status and location of their parcels throughout the entire order-to-delivery process. This proactive communication ensures that our customers are always informed and allows them to track their parcels conveniently.
It is not a perfect science yet, but we are working every day to offer millions of South Africans a service that makes their lives easier.
We have always stuck to our belief that no one should get left behind as technology plays a greater role in our lives, regardless of where they come from.
By leveraging it to the benefit of all, we can only grow and thrive as a country.
Lars Veul and Derk Hoekert are the co-founders of Pargo, and are the CEO and Chief Product Officer respectively.