The rapid evolution of technology that has led to the industry’s latest buzz phrase, digital transformation, is having a massive impact on small and medium enterprises (SMEs) in South Africa – but many are not even aware of it.
This sector remains vitally important to the SA economy, so it is critical to understand how digitally prepared these entities are, and whether they are keeping pace with change, or whether many are being left behind.
One of the key aims of SME Survey 2018, in partnership with Intuit QuickBooks, is to establish the digital readiness of SMEs. SME Survey is the original and largest representative survey of SMEs in South Africa and has contributed ground-breaking research into the forces shaping SME competitiveness since 2003.
Wendy Walker, Global Expansion Intuit QuickBooks, says being digitally astute has the power to transform business life and encourages small business and self-employed to make the transition now so they have a head start into the new year.
“Technology brings new opportunity to the business world – especially when it comes to online accounting. Successful businesses are driven by owners who really know their numbers; and the power of digitally based resources makes this more accessible for all businesses. With the ability to view business data anytime, anywhere and on any device, owners can make smarter, more informed business decisions based on real-time insights.”
Arthur Goldstuck, MD of World Wide Worx and principal researcher for SME Survey, explains that for the purposes of the survey, digitalisation is defined as the integration of digital technology into all systems and processes in the business.
“Businesses across all industries are beginning to see the massive competitive advantage to be gained from digital processes,” he says. “This goes far beyond simply electronic scans of documents, encompassing everything from online accounting to digital sales processes. We aim to find out whether SMEs have also realised the benefits of such an approach and are preparing to digitalise their businesses, or whether ‘digital transformation’ remains a term that mystifies, rather than simplifies.
“Naturally, SME Survey will look not just at how ready these businesses are for digital transformation, but also at the tools and services SMEs currently use that can be defined as being digital, and whether it is viewed by them as a threat or an opportunity.”
He adds that the survey will also take an in-depth look at the future of the accounting function and the role the accountant plays for these businesses. Goldstuck suggests that this is a role that is evolving rapidly, driven by the rise of online accounting functionality, which enables SMEs to produce for themselves many of the financial documents for which they previously relied on their accountant.
“Online accounting through the cloud is designed to increase efficiencies for accountants and SMEs,” says Wendy Walker. “It enables easy collaboration between all parties involved in managing the financial health of a business. With the access to free trials, online resources and training it’s never been easier to work together.”
“We will also pay close attention to some of the latest technology trends, such as artificial intelligence (AI), Big Data, Blockchain and the Internet of Things (IoT), in order to discover whether this sector understands these advanced technologies and whether it is making plans to begin adopting some of these. Naturally, this ties back to the main focus, as adoption of any of these technologies would be a clear indicator that these businesses are preparing to transform.”
The 2018 survey will also focus on those issues that keep SME owners awake at night. In the past, this has encompassed issues ranging from crime to load shedding to road conditions. “This year, we are interested in assessing the impact that fraud, corruption and state capture are having on this sector.”
Goldstuck says that the previous few surveys have kept tabs on the impact of cloud on the SME segment, and the expectation is that, this year, cloud adoption will have passed the 50% mark. There is also anticipation of significant growth in fibre as the connectivity solution of choice.
“Since fibre and cloud are both key factors in effective digital transformation, significant increases in the former two will suggest a good foundation has been laid for the latter to take place. Therefore, while the new survey will only be investigating the early stages of such transformation in the SME space, we hope that we will be able to report that the digital shift in this market has begun.”
Online retail gets real
After decades of experience in selling online, retailers still seek out the secret of reaching the digital consumer, writes ARTHUR GOLDSTUCK.
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 South Africa 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 was seen in 2017. At this rate, it is clear that 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. Over 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 would not 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 so important for long-term sustainability that Amazon reinvest all its revenues in customer systems, that it could not afford to look for short-term profits.
According to the South African 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 South Africa online still make up a small proportion of overall retail, but for the first time we see the promise of a broader range of businesses in terms of category, size, turnover and employee numbers. This is a sign that our local market is beginning to mature.
Clothing and apparel is the fastest growing sector, but is also the sector with the highest turnover of businesses. It illustrates the dangers of a low barrier to entry: the survival rate of online stores in this sector is probably directly opposite to the ease of setting up an online apparel store.
A fast-growing category that was fairly low on the agenda in the past, alcohol, tobacco and vaping, has benefited from the increased online supply of vapes, juices and accessories. It also suggests that smoking bans, and the change in the legal status of marijuana during the survey, may have boosted demand.
In the coming weeks, we can expect online retail to fall under the spotlight as never before. Black Friday, a shopping tradition imported “wholesale” from the United States, is expected to become the biggest online shopping day of the year in South Africa, as it is in the USA.
Initially, it was just a gimmick in South Africa, attempting to cash in on what was a purely American tradition of insane sales on the Friday after Thanksgiving Day, which occurs on the third Thursday of November every year. It is followed by Cyber Monday, making the entire weekend one of major promotions and great bargains.
It has grown every year in South Africa since its first introduction about six years ago, and last year it broke into the mainstream, with numerous high profile retailers embracing it, and many consumers experiencing it for the first time.
It is now positioned as the prime bargain day of the year for consumers, and many wait in anticipation for it, as they do in the USA. Along with Cyber Monday, it provides an excuse for retailers to go all out in their marketing, and for consumers to storm the display shelves or web pages. South African shoppers, clearly, are easily enticed by bargains.
Word of mouth around Black Friday has also grown massively in the past two years, driven by both media and shoppers who have found ridiculous bargains. As news spreads that the most ridiculous of the bargains are to be had online, even those who were reticent of digital shopping will be tempted to convert.
The Online Retail in SA 2019 report has shown over the years that, as people become more experienced in using the Internet, their propensity to shop online increases. This is part of the World Wide Worx model known as the Digital Participation Curve. The key missing factor in the Curve is that most retailers do not know how to convert that propensity into actual online shopping behaviour. Black Friday will be one of the keys to conversion.
Carry on reading to find out about the online retailers of the year.
Reliable satellite Internet?
MzansiSat, a satellite-Internet business, aims to beam Internet connections to places in South Africa which don’t have access to cabled and mobile network infrastructure, writes BRYAN TURNER.
Stellenbosch-based MzansiSat promises to provide cheap wholesale Internet to Internet Service Providers for as little as R25 per Gigabyte. Providers who offer more expensive Internet services could benefit greatly from partnering with MzansiSat, says the company.
“Using MzansiSat, we hope that we can carry over cost-savings benefits to the consumer,” says Victor Stephanopoli, MzansiSat chief operating officer.
The company, which has been spun off from StellSat, has been looking to increase its investor portfolio while it waits for spectrum approval. The additional investment will allow MzansiSat’s satellite to operate in more regions across Africa.
The MzansiSat satellite is being built by Thales Alenia Space, a French company which is also acting as technical partner to MzansiSat. In addition to building the satellite, Thales Alenia Space will also be assisting MzansiSat in coordinating the launch. The company intends to launch the satellite into the 56°E orbital slot in a geostationary orbit, which enables communication almost anywhere in Africa. The launch is expected to happen in 2022.
The satellite will have 76 transponders, 48 of which will be Ku-band and 28 C-band. Ku-band is all about high-speed performance, while C-band deals with weather-resistance. The design intention is for customers of MzansiSat to choose between very cheap, reliable data and very fast, power-efficient data.
C-band is an older technology, which makes bandwidth cheaper and almost never affected by rain but requires bigger dishes and slower bandwidth compared to Ku-band connections. On the other hand, Ku-band is faster, experiences less microwave interference, and requires less power to run – but is less reliable with bad weather conditions.
MzansiSat’s potential military applications are significant, due to the nature of the military being mobile and possibly in remote areas without connectivity. Connectivity everywhere would be potentially be life-saving.
Consumers in remote areas will benefit, even though satellite is higher in latency than fibre and LTE connections. While this level of latency is high (a fifth of a second in theory), satellite connections are still adequate for browsing the Internet and watching online content.
The Internet of Things (IoT) may see the benefits of satellite Internet before consumers do. The applications of IoT in agriculture are vast, from hydration sensors to soil nutrient testers, and can be realised with an Internet connection which is available in a remote area.
Stephanopoli says that e-learning in remote areas can also benefit from MzansiSat’s presence, as many school resources are becoming readily available online.
“Through our network, the learning experience can be beamed into classrooms across the country to substitute or complement local resources within the South African schooling system.”