A fascinating picture is beginning to emerge of the trends in Internet growth, electronic banking and e-commerce. ARTHUR GOLDSTUCK pulls together the threads of various research projects.
The first decade of democracy in South Africa has, by pure coincidence, gone hand in hand with the first decade of public Internet access in this country.
What was first a hobby for this writer, counting the number of people going online each year, has inevitably turned into a serious research business, as the 25 000 people with dial-up Internet access in 1994 turned into an overall market of more than 3 million users by 2004.
Today, the Internet pervades our lives, and in the business world has become more or less seamlessly integrated into the background of general business communications and activity. Among the public, however, it remains an expensive option that has to be justified on a budgetary basis ‚ where it can be afforded in the first place ‚ and looms large in the individual consciousness.
Any additional costs associated with Internet use therefore becomes a decision based on experience, trust, and perceptions of improved convenience, efficiency and cost-effectiveness. That is no less than five broad factors that will influence the uptake of the likes of online banking, online retail, and using the Internet as a commercial channel for individuals.
A core mistake made by many online retailers and other operators is to assume that all users arrive on the Internet ready to engage in all forms of activity. They then peg their market size at, say, 3.3-million, and then express shock at just how low the uptake of their particular offering might be.
The truth is, those 3.3-million people do not represent a current target market.
In putting together the findings from three of our surveys, namely Internet Access in SA, Online Banking in SA, and Online Retail in SA, we’ve come up with a few surprising conclusions about one of the market dynamics for e-commerce among the public. That dynamic is the level of experience of the Internet user.
Bear in mind that the Internet user statistics we compile are based on an industry-wide survey, examining the number of people with access, rather than on the more common media studies, which are concerned with the use of the Internet as a media tool, and thus examine usage over, say, the past week or month.
In industry terms, the level of Internet experience is based on length of time with access, rather than the intensity of access. And here is where a fascinating picture emerges. Rather than look at how many people have access to the Internet today, we looked at how many people had access five years ago. That figure would then equate to the number of people with five years experience at the end of 2003. The figure for 1998 was 1.2-million people with Internet access, meaning that at the end of last year 1.2-million people in South Africa had five years experience on the Internet. It is therefore not a great coincidence that the number of online bank accounts in South Africa came close to that amount, namely 1.06-million. However, that number represents probably around 800 000 individual users of online banking. Given that it is unlikely 100% of a target market will take up any service or product, it is a remarkable achievement of South African banks that they have achieved an uptake that is equivalent to about 80% of the experienced user base.
Given these numbers, we can begin to see a close correlation between online access and online banking ‚ as long as we focus on experienced users rather than all users. The banks’ projections for 32% growth in online banking in 2004 suddenly does not sound like dot.com-era hype: the growth in number of Internet users with 5-years experience this year will be no less than 44%.
The next question is what this means for spending online. Firstly, only about half of online banking users also transact within the online banking environment (i.e. not only accessing account information). Using a similar proportional basis, of these 400 000 or so individuals who have gained enough trust in online banking to transact on a banking site, it must be assumed that around half would have gained enough trust in the Internet in general to transact outside a secure banking environment.
Suddenly, we see the real ceiling for online retail: no more than 200 000 online shoppers at the end of 2003. And suddenly, we can understand why even the most successful online stores cannot claim more than around 50 000 individuals actively and regularly shopping on their sites. And we can understand why we do not have Amazons and eBays setting our markets on fire.
But by that very same token, we can also see huge potential in the future. In 2009, on the eve of the World Cup Finals in South Africa (doesn’t it feel good to say that?), we will have three and a half million South Africans with more than five years experience on the Internet. We will have more than two and a half million banking online. And the number of online shoppers will be approaching the million mark.
Which begs one final question: five-year plans, anybody?
***** What’s happening online? ******** For free executive summaries of Internet Access in SA 2004 and Online Banking in SA 2004, send an e-mail with your name and company name, and the subject line ‚Access/Banking‚ , to firstname.lastname@example.org. To receive an executive summary of Online Retail in SA 2004 when it is released shortly, send an e-mail with your name and company name, and the subject line ‚Retail‚ , to email@example.com.
* Arthur Goldstuck is editor-in-chief of Gadget and MD of World Wide Worx, South Africa’s leading independent technology research organisation. He leads World Wide Worx’s research into Internet access, online banking and online retail.
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