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We are on the verge of an eCommerce revolution

If you have recently spent any time in the United Kingdom or United States, you will no doubt be aware of the vast difference in eCommerce between South Africa and those countries. In statistics, the difference is made clear: In 2010, UK shoppers spent GBP£58.8bn (US$92bn) online, while South Africans did a paltry ZAR2bn (US$254-million). Even accounting for population differences that’s a significant differential. So, why is South Africa so far behind?

It’s certainly not that eCommerce itself is without benefits. In fact, it’s often chosen over traditional retail for three main factors: range, price and convenience. No need for a local store means that the customer can browse a wider range of products, benefit from no rental or staff costs inflating the pricing, and all without the time cost of traveling to the store itself.

The traditional reason for South Africa’s slow adoption has been internet bandwidth. In 2011 however this is no longer the problem it was — undersea cables like SEACOM arriving on our shores have meant that we are not bandwidth-starved as we were in the past, and prices have come down significantly (and continue to do so). Closely linked to this is internet penetration, but this too is changing rapidly. A recent report suggests South Africa now has 8-million active smartphones — in other words, 8-million connected potential customers who have already invested in an online future and likely have the financial means to transact. That’s a significant market for any size retailer to target, and it’s clear that it will continue to grow rapidly.

Another reason given is product delivery. This has some basis in fact – despite their best efforts, the South African Postal Service is a long way in reliability from the Royal Mail. I’d argue though that this is becoming less relevant — specialist courier services are evolving to fulfill this need, and even in the UK such providers are often selected over the default postal option for speed and convenience. In South Africa, the likes of FedEx, RAM, DHL and Berco Express are well established and offer a delivery service that generally arrives a day or two after ordering for most living in the city.

The increased competition has brought down these costs to reasonable levels, in line with overseas norms.

The physical barriers to adoption are largely gone, and we are left with the psychological. For most, purchasing a product using their cellphone is simply an alien experience. This again is likely to change dramatically however, with mobile commerce predicted to grow significantly over the coming years, particularly in Africa. Consider the recent surge in cellphone banking, indicating consumers are ready to transact with their mobiles. Consider also the move towards using your mobile phone as a payment solution — these devices are soon going to become much more closely linked to our bank accounts, and using them to pay for goods or services will become second nature.

All this leads me to believe that we are on the eve of a rapidly maturing local eCommerce market. In terms of existing providers, Kalahari.net will no doubt continue to enjoy growth, as will smaller sites like takealot.co.za and wantitall.co.za. It is, however, time for corporate retailers to take a hard look at their own eCommerce offerings. The imminent arrival of UK heavyweights Topshop and Zara on South African shores mean increased competition in the apparel category, with Woolworths rising to the challenge with its recently revitalised eCommerce site. Other local FMCG corporates are watching closely and are no doubt already implementing their battle plans.

The key to success in this area will be effective marketing driving consumers to a site with a great user experience — in short, textbook stuff, easy to say but tricky to get right. The rewards for being among the first to do so will be appreciable however — with our local progress historically delayed there’s no doubt it’s one of the biggest growth opportunities on offer for retailers today.

  • http://www.ydeveloper.com/kaushalam-ecommerce.html eCommerce

    Definitely. There are more and more technological upgrades, players, features for ecommerce are coming that has no way for online store owner to adopt it and customers also expect to see this changes in their favorite stores.

  • Mweshi

    I believe the problem with eCommerce in South Africa lies mainly with retailers. It’s taken them years to wake up and actually build proper eCommerce websites. With the infrastructure available in South Africa, they could have easily used FedEx, RAM, UPS, etc. for deliveries; simply include a shipping and handling charge. Inventory could have come from their regional depots to reduce S&H charges.

  • http://www.facebook.com/allchorn Ross Allchorn

    Very interesting to read this after having played a significant part in creating a talk for a colleague and creating an infographic on the topic based on Arthur Goldstuck’s report on the same subject. If I’m not out of line to post a link here, check it out – http://www.ecommercesa.co.za/2011/09/29/the-state-of-ecommerce-in-south-africa-infographic/

  • http://twitter.com/craigraw Craig Raw

    Cool infographic Ross – and what serendipitous timing!

  • http://twitter.com/Stronti Dean

    I believe the major hurdles to our slow adoption do not lie with the technology, there have been a number of quality eCommerce sites available locally since the late 90’s.

    The first issue has been with the logistics. As discussed in the article this has improved over the last decade and has given the consumer the confidence to place the order. We also have social differences, E.g. if there’s nobody at home to sign for a delivery the courier wouldn’t leave it outside your electric gate. This may not seem relevant but it does happen in Europe, I ordered a video camera on-line once in the UK and came home to find it on my doorstep.

    The second issue has been confidence in on-line payments. This has been a long slow education process but perceptions are rapidly changing, Paypal is a common on-line payment method in Europe. It’s great to see it officially in SA but it’s a pity that only FNB customers cane make full use of it. We’ve seen a number of mobile payment tools introduced recently which is positive but I believe this could prove to be a future barrier due to the number of different payment methods that need to be catered for (I’m no expert in on-line payments however)

    Lastly, takealot.com’s acquisition of 40% of Mr Delivery Express looks positive and I see great potential there that should certainly shake things up

  • http://www.facebook.com/allchorn Ross Allchorn

    Thanks Craig, it was fun and interesting to create.

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