SA growth sti­fled

Broad­band costs and se­cu­rity are stum­bling blocks

Finweek English Edition - - Business strategy - CHIMWEMWE MWANZA

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

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