Online retail gets real
BLACK FRIDAY: PRIME BARGAIN DAY OF THE YEAR FOR CONSUMERS
Study shows the single most critical factor in the success of online retail activities is customer service.
It’s been 23 years since the first pizza and the first bunch of flowers was sold online. One would think, after all this time, that retailers would know exactly what works and exactly how the digital consumer thinks.
Yet, in shopping-mad South Africa, only 4% of adults regularly shop online. One could blame high data costs, low levels of tech-savviness, or lack of trust. However, that doesn’t explain why a population where more than a quarter of people have a debit or credit card and almost 40% of people use the internet is staying away.
The new Online Retail in SA 2019 study, conducted by World Wide Worx with the support of Visa and Platinum Seed, reveals that growth is, in fact, healthy, but is still coming off a low base. This year, the total sale of retail products online is expected to pass the R14 billion mark, making up 1.4% of total retail.
This figure represents 25% growth over 2017 and comes after the same rate of growth in 2016. At this rate, it is clear online retail is going mainstream, driven by aggressive marketing and new shopping channels like mobile shopping.
But it is equally clear that not all retailers are getting it right.
According to the study, the unwillingness of business to reinvest revenue in developing their online presence is one of the main barriers to long-term success. Only one in five companies surveyed invested more than 20% of their online turnover back into their online store. More than half invested less than 10% back.
On the surface, the industry looks healthy, as a surprisingly high 71% of online retailers surveyed say they are profitable. But this brings to mind the early days of Amazon.com, in 1996, when founder Jeff Bezos was asked when it would become profitable.
He declared that it wouldn’t be profitable for at least another five years. And if it did, he said, it would be in big trouble. He meant that it was important for longterm sustainability that Amazon reinvest all its revenues in customer systems, that it couldn’t afford to look for short-term profits.
According to the study, the single most critical factor in the success of online retail activities is customer service. A vast majority, 98% of respondents, regarded it as important. This positions customer service as the very heart of online retail.
For Amazon, investment back into systems that would streamline customer service became the key to the world’s digital wallets.
In SA, online still makes up