SA growth stifled
Broadband costs and security are stumbling blocks
MAJOR ATTRACTIONS to online shopping include the ease and convenience of purchasing goods from home or office, yet local consumers remain unimpressed.
SA boasts some of the world’s most technologically sophisticated consumers, but they have mainly remained apathetic regarding online retail.
Compared with developed markets such as the US, online shopping is still at an embryonic stage in SA. According to research house comScore Networks, 2006 online retail spending in the US reached a record $102bn (R734bn), a 24% increase over 2005.
Although growth of 20% is expected when research house World Wide Worx releases local figures for the year ended 2006, total spend on online retail goods in SA (excluding airline ticket sales) rose to R514m in 2005 from R428m in 2004.
The local online retail market is dominated by 10 sites, which between them account for most sales. They are the two major malls, MWEB ShopZone and Digital Mall; the two largest online grocers, Pick ’n Pay home shopping and Woolworths; the two largest online book retail- ers, Kalahari.net and Exclusive books; the largest online florist, NetFlorist; the largest online wine retailer, Cybercellar; the largest online electronics store, Digital planet; and the largest beauty store, Ascot Direct.
None of these retailers would provide details of revenue from their online operations, but consensus among industry executives was that slow Internet speeds and, more specifically, lack of affordable access to broadband, were stifling growth.
Pick ’n Pay operations manager Jason Brits says: “Unless affordable broadband is made available to potential consumers in the lower income group as well, SA will continue to lag far behind competing markets.
“SA’s mass market – the main constituent of which is the lower income group – has
the potential to galvanise rapid adoption of online retail trade but for the lack of broadband.”
To strategically enhance its brand visibility and simplify consumer online shopping, Pick ’n Pay home shopping is redesigning its website.
Brits says the key to galvanising shoppers into adopting online shopping is to entice them into a first-hand experience. “It’s therefore important that we don’t fail them in their maiden attempt. Once the consumer has experienced the benefits of online shopping, chances are he or she will be hooked.”
With St Valentine’s Day just past, Ryan Bacher, MD of online florist and gift specialist NetFlorist, says business would have been a lot better if more potential customers had access to broadband. Although his company buys a considerable amount of radio time to advertise its online services, Bacher says that as well as the high broadband cost, perceptions regarding credit card fraud are a stumbling block. “Stakeholders in the online retail trade have a duty to convince potential clients of the safety of their credit
“Business would have been a lot better if more potential customers had
access to broadband.”
card details when it comes to online trading,” says Bacher.
According to World Wide Worx managing executive Arthur Goldstuck, the “touch and feel factor” is limiting consumers’ options.
“Let’s face it, there’s only so much a consumer can buy without actually touching that particular product; unfortunately, that’s the culture among consumers. Although a consumer would trust Woolworths to deliver on order, fresh vegetables, some consumers would rather walk into the shop and physically inspect their vegetables before purchase,” says Goldstuck. Despite suggestions that the “touch and feel factor” could affect its online trading platform, Woolworths management says online sales have consistently increased over the past years and that it has well over 123 000 registered shoppers.
Electronic appliance chain Incredible Connection has suspended its online retail service, but Digital Planet has moved swiftly to fill the vacuum.
Perceptions about credit card fraud are a stumbling block. Ryan Bacher