Featured Story: eCommerce in South Africa
Why step outside, sit in traffic and browse through shopping aisles when you could just turn on your computer, purchase groceries from Pick N Pay Online, kitchen tools from Yuppiechef, a Masterchef DVD from Kalahari.com and a trendy new chef apron from Takealot? eCommerce in South Africa is picking up and with just a couple of clicks online and an overnight delivery service, all of these items and more could be delivered straight to your door.
I decided to have an in-depth look at South Africa’s eCommerce industry, noting many of the positives and negatives along the way. With the help of Effective Measure and IAB South Africa’s “South African eCommerce Report 2014,” I was able to dig up some interesting insights to share with you.
What Is It?
Simply put, electronic commerce (eCommerce) is the trading of goods and services using the Internet. The process usually occurs as a customer logs into a website, browses through items for sale, adds desired items to a virtual e-cart and then checks out with an electronic funds transfer system, such as credit card, EFT or 3rd party payment (eg: PayPal). Once the payment has been processed, the user can expect delivery of their merchandise or service in a specified timeframe that may range from same-day delivery all the way to a couple of months (depending on the location of the user and logistics available for delivery).
There are a variety of different eCommerce platforms that a user may utilize.
- The first and most common is the “etailer,” such as Amazon, which appears as a virtual storefront for users to browse through catalogues and make purchases as described above. Etailing services include flower delivery, food, DVD and book sales, pharmacy and even travel and banking services.
- The second platform is the sale of “online goods and services,” which operates in much the same way as the first, except for the fact that the product is usually something digital and intangible that can be downloaded immediately, such as ebooks (eg: Amazon), computer software (eg: Adobe), movies / series (eg: Netflix) or music (eg: Beatport).
- The third is slightly different and is known as an “online marketplace,” such as eBay. In this online marketplace, the website facilitates trade between customers and multiple third party sellers who list their items on the website. The website assists in the payment process, however, the supplier is entirely responsible for the shipping and delivery process (the cost of which is usually included in the final amount paid by the customer). Because of the website’s lack of control in the delivery process, there are usually a number of terms and conditions that protect the user from merchandise that doesn’t arrive. Additionally, a user rating service is usually available to rate the reliability of a seller and give written feedback, which will affect where the seller is ranked and if future buyers trust the seller. Marketplace services also include advertising, auctions, comparison shopping, social commerce (through social networks) and trading communities (such as Gumtree or Craigslist).
- The final eCommerce platform that I’ll be looking at is that of mobile commerce (mCommerce), whereby a user performs many of the abovementioned tasks, from the convenience of a mobile device, such as a smartphone or tablet.
Is It Taking Off?
In many first world countries, the simple answer to this would be yes. The U.S.A. has seen exponential growth in ecommerce ever since the turn of the millennium. More recently, the infographic below from Baynote shows the predicted rise of eCommerce in U.S.A. from 2011 to 2016, with a 15% increase in online shoppers and an estimated expenditure of 44% more. U.S.A. eCommerce is reported to have accounted for 4,7% of GDP in 2010, with a prediction of 5,4% by 2016.
Similarly, the European eCommerce market shows many signs of growth. The Europe B2C eCommerce Report 2013 shows that EU eCommerce contributes 3,5% to GDP in 2012, and is expected to double by 2016.
With all those numbers crunched, let’s consider the most frequently purchased goods and services in eCommerce. Shifting our attention back to U.S.A. for a second, we can see in the infographic below (via Profit Sense Innovations) that electronics, video / music media, clothing and office supplies are among the leading eCommerce categories in the U.S.A.
How Does South Africa Shape Up?
South Africa’s eCommerce infrastructure is growing fast, with many new online retailers and eCommerce systems that are on par with the rest of the world. Additionally, eCommerce awareness doesn’t seem to be a problem, as South Africans grow more and more familiar with online transactions.
However, while many 1st world countries have seen a rapid growth in eCommerce adoption, South Africa (and many other developing nations) seem to be lagging behind due to a number of issues that are holding back eCommerce penetration. Compared to 1st world countries such as U.S.A. and Europe, South Africa’s eCommerce contribution to GDP was reported to be as little as 1,9% in 2010 and is predicted to climb to only 2,5% by 2016.
Below are a number of the most important reasons for this, according to the South African eCommerce Report 2014.
- Touch, Feel, Purchase: Interestingly, the most pertinent reason for SA users not purchasing online, is the inability to touch or feel items in person before purchasing.
- Payment Trust: Secondly, the trust of online transactions among South African consumers seems to be a hindering issue that prevents many from purchasing online.
- Looks Are Deceiving: Thirdly, the lack of confidence in items being different to what was expected upon arrival, is a large issue (this is particularly true for clothing sizes and styles).
- Seller Trust: Trust becomes an issue once again, but this time is attributed to the trust issues that consumers have with SA etailers.
- Where’s My Package?: A final issue to take into account is the logistical issue of long delivery times and items that simply do not arrive.
In order to combat the abovementioned issues, it’s important for SA etailers to work on improving product visibility on their websites (3D views are helpful!), familiarize consumers with payment security, provide return or exchange policies, build trust through positive interaction and brand building and to ensure safe, trackable and timeous delivery of merchandise. Additionally, a flip-side to these issues presents a number of opportunities where SA eCommerce has a prospect to grow – listed below are some of the key drivers of online purchases among South Africans.
- Beating The Price: With competitive pricing compared to brick & mortar stores, etailers attract many customers on the basis of price and convenience.
- Quality Is Everything: As it is difficult to ascertain the quality of a product by seeing a picture of it online, there is a risk of disappointed customers. However, if etailers turn this around and provide products that meet and exceed customer expectations, then we’ve got ourselves a winner.
- Payment Trust: This familiar point pops up again, and with a trustworthy and familiar payment system, etailers can combat shopping cart abandonment and ensure a complete check-out process.
- Variety Saves The Day: It seems that online customers want both quality and quantity. With a wide variety of products and deep assortment of brands, etailers can be sure to provide users with what they want.
- Speedy Delivery: By offering same-day, overnight or express delivery options, consumers will be able to get their products faster.
With eCommerce in South Africa at a bit of a go-slow, there are some definite product and service categories that have proved to be popular amongst SA consumers. Airline tickets, books, hotel reservations and event tickets come out on top.
How Can We Speed Up eCommerce In SA?
Aside from the opportunities identified above, there are a number of ways in which SA etailers can speed up eCommerce penetration and adoption in SA. Below are 4 of my key ideas.
- Embrace mCommerce: With SA’s high mobile penetration and the familiarity of SA consumers with searching prices and comparing products online, there is ample space for eCommerce retailers to step into the mobile domain.
- Provide 2nd To None Delivery: Product delivery in South Africa is a major issue and the SA Postal Service is far from the most efficient. If etailers are able to develop their own courier services or outsource to an efficient and timeous third-party courier – SA consumers will be able to get their purchases in time.
- Build An eCommerce Community: While there is a lot of competition in SA’s eCommerce industry all fighting for the small amount of market-share, it is important for etailers to see their competitors as a community that can work together to raise awareness, educate consumers and convert them to purchasing online. A collective eCommerce community could see the eCommerce market-share rise rapidly.
- 3D Secure Compatability: As online transaction security requirements become ever more stringent, South Africa will see the inclusion of 3D Secure transaction requirements for eCommerce websites through the duration of 2014. Websites that meet the requirements will serve as an indication to consumers that their financial information and transactions are safe and secure.
- Return and Exchange Policies, Putting The Customer First: Returning and exchanging products through eCommerce infrastructure can be a tedious and expensive process. But for the consumer, resolving this issue could mean the difference between a satisfied and returning customer or a disappointed anti-eCommerce boycotter.
Let’s go forth and see what the future of South African eCommerce holds. Happy online shopping!