While the number of e-tailers is growing in South Africa, there are still a number of hurdles that need to be overcome before these companies can start enjoying sustainable returns, writes KEVIN TUCKER, CEO of PriceCheck.
This year, online retail in South Africa will reach 1% of overall retail for the first time. While the number appears small, it marks a significant milestone for a sector that is attracting robust investment from both established and new players in the retail game. It underscores that online retail is now gathering momentum in South Africa, having maintained a growth rate of above 20% for several years, according to the World Wide Worx Online Retail in South Africa 2016 report. The report revealed that in 2015, the rate of growth was 26%, taking online retail to the R7.5 billion mark. This year, growth in Rand terms is expected to remain the same as in 2015, taking the total to above R9 billion.
However, while these figures are encouraging for the country’s growing number of e-tailers, payment gateways and online merchants, there are undoubtedly still many hurdles to overcome before they can enjoy sustainable returns. Compared to traditional retail, the profits are still paltry and the number of online shoppers spending regularly remains low. The majority of South Africans spend between R250 and R1000 when making a purchase online, and 33% of those surveyed made 10 or more purchases online per year.*
Limited Range, Limited Appeal
The most commonly cited challenge for local online retail is that South Africans remain hesitant to transact online, and are afraid to hand their banking details to payment gateways plagued by fraud.
Although online security is indeed a factor, it is less of an issue than the quality of what South Africans are presented with online. Indeed, the primary challenge is in fact the dearth of innovative business models and – as a direct result – the availability of products online (or the lack thereof).
As several reports have illustrated, most local e-tailers – both established names and newcomers – have a very limited range of products listed online, which deters potential customers and drives them into physical stores in order to enjoy the wide range of choices they have naturally become accustomed to. Lacking confidence in what they can find online, local shoppers will be less inclined to spend time looking, leading to less time spent overall on various e-commerce sites. This is a psychological barrier that e-tailers will need to work at overcoming. But as it stands, for various reasons, local merchants and brands have sparse product ranges listed online – which is often coupled with poor or unreliable delivery. As such, many local shoppers only hop online to research price points and find favourable deals, at which point they then travel to physical stores to complete the purchasing process.
For South Africans to move online and actually spend significant amounts (on a regular basis), they need to be presented with better quality products, and more of them. As it stands, local e-tailers are expecting to simply win on price, but it is arguably diversity and quality that will both differentiate them and drive the growth of South African e-commerce.
Showcasing the Standouts
The good news is that there are an increasing number of new players entering into this space that are experimenting with and pioneering different models. As mentioned above, infrastructure and delivery remain difficult, and there are psychological barriers to overcome before local online retail can reach its critical tipping point. The upcoming PriceCheck Tech & E-Commerce Awards will draw attention to some of the strides being made by individuals and companies, and will also highlight where some of the weaknesses lie.
Looking ahead, there are infinite opportunities for South Africa’s emerging e-commerce players – both established and entrepreneurial – but the key to long term success will surely lie in providing consumers with far more than what the local mall can offer.
* 2015 South African eCommerce Awards survey
Welcome to world of 2099
The world of 2099 will be unrecognisable from the world of today, but it can be predicted, says one visionary. ARTHUR GOLDSTUCK met him in Singapore.
Futuristic structures tower over the landscape. Giant, alien-looking trees light up with dazzling colours amid the hundreds of plant species that grow up their trunks. Cosmetic stores sell their wares via public touch-screens, with products delivered instantly in drawers below the screens.
This is not a vision of the future. It is a sample of Singapore today. But it is also an inkling of the world we may all experience in the future.
Singapore was the venue, last week, of the World Cities Summit, where engineers, politicians, investors and visionaries rubbed shoulders as they talked about the strategies and policies that would enhance urban living in the future.
As part of the Summit, global payment technologies leader Mastercard hosted a small media briefing by one of Singapore’s leading thinkers about the future, Dr Damian Tan, managing director of Vickers Venture Partners. The company’s slogan “We invest in the extraordinary,” offers a small clue to Tan’s perspective.
“We look as far forward as 2099 because, as a venture capital firm, we invest in the long term,” he tells a group of journalists from Africa and the Middle East. “Companies explode in growth because there is value in the future. If there is no growth, they won’t explode.”
The big question that the Smart Cities Summit and Mastercard are trying to help answer is, what will cities look like in the year 2099? Tan can’t give an exact answer, but he offers a framework that helps one approach the question.
“If you want to look at 81 years into the future, and understand the change that will come, you need to double that amount and look into the past. That takes us to 1856. The difference between then and now is the difference you can expect between now and 2099.”
- Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter on @art2gee and on YouTube
Use the page links below to continue reading about Tan’s visions.
Win a Poster Heater with Gadget and Takealot.com
This winter Gadget and Takealot.com are giving away three Poster Heaters, which look like posters but become heaters when you plug them in.
Three Gadget readers will each win a unit, valued at R550 each. To enter, follow @GadgetZA and @Takealot on Twitter and tell us on the @GadgetZA account how many Watts the heater consumes.
What’s the big deal about these heaters? Many of us are struggling to keep the balance between soaring electricity costs and the need to keep warm this winter.
However, the recently launched Poster Heater by EasyHeat and distributed in South Africa by Takealot.com is not only one of the most cost effective electric heaters currently on the market, it is also easy to setup and use.
As the name indicates, it is a poster similar to one you would hang on a wall. But, plug it in and it turns into a 300 Watt heater. The Poster Heater isn’t designed to heat hallways or large rooms, but rather smaller ones like a bedroom or a baby’s nursery or a dressing room.
It uses radiant heating, which means that it heats up in a couple of minutes and the heat is directed at the objects or people around it, quickly taking the chill out of the air and providing a comfortable ambient temperature.
The other advantage of radiant heating is that it doesn’t dry out the air like infrared or gas heaters. Users also don’t have to worry about their children or pets getting too close to it because, even though it gets hot, it can be touched.
To enter the competition follow the steps below:
Competition entry details:
3. The competition closes on 31 July 2018.
4. Winners will be notified via Twitter on 1 August and Takealot.com will be in touch to organise delivery.
5. The competition is only open to South African residents.