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.