The real state of ecommerce in South Africa: 9 things you need to know today

Ecommerce in South Africa is still very much in the infant stages by global standards. The rate of growth globally has increased rapidly with large investments being made and new players joining the game constantly. Online retail in the developed world makes up 10-12% of total retail while SA is barely breaking 1% of the total market for consumer goods.

In South Africa there are a few common would-be barriers expressed by potential buyers:

1. The costs involved in delivery

While the postal service has left much to be desired of late, companies operating in this space are creating their own, more reliable options. A myth that store visits are more cost effective is being dispelled by the companies that have a decent delivery infrastructure in place or have partnered with a company that does. For example Pic ‘n Pay home and office deliveries are being made by the newly branded Mr D service. Likewise, Mr D also handles the majority of deliveries for Take-a-lot. The cost carried by an online retailer is a key advantage in attracting online customers and gaining market share.

“Rapid and accurate delivery is key in the ecommerce process and imperative for the adoption thereof. We work on a weighted approach where delivery costs range according to the urgency of delivery, but over a certain spend threshold all standard (i.e. non-urgent) delivery is free no matter the customer location. We adopted this approach to provide great value to our customers and convince them of the benefit of our ecommerce value proposition,” says Anton van Metzinger, Head of the Delivery Platform for Takealot.com

2. An impression that only credit card holders can shop online
Most online stores recognise the restrictions involved in only accepting credit card payments and have included the option to pay via EFT and various additional applications such as PayPal, a contributing attendee of the eCommerce Africa Confex earlier this year. A large portion of our unbanked economy is unfortunately still eliminated from the market, an area the likes of Kenya’s MPESA is making huge waves in and which South Africa could learn from.

3. Worries around security of online payments
This is the twenty first century and online payments are becoming a huge part of everyday life so it’s time to let go of our conservative chains and embrace this movement. Etailers of course have a part to play in upholding their side of the agreement to keep online transactions safe by employing products and services such as Trustwave, also seen at the eCommerce Africa Confex in Cape Town in February.

4. Knowing what you’re getting
There seems to be a need to touch and try items before purchase, the underlying concern being that a return would be near impossible. This is not the case, any self-respecting ecommerce site will have the option for efficient exchanges and returns in the same manner that retail stores do. Spree offers a free try and return policy.

“Spree recognises that some online shoppers may be hesitant to purchase clothing online at the risk that it might not fit perfectly and that this may cause them to resist apparel purchases online altogether,” says Spree brand manager Kim Hawkins. “We offer our customers peace of mind with a 30 day free returns policy – items can be returned easily and at no cost or inconvenience to our customer. We believe this has given our buyers increased confidence when making an online purchase.”

5. Confidence in unknown brands
Better known brick and mortar brands of course have the opportunity to migrate their in-store customers towards their online space, Woolworths and Mr Price being the leaders here. Companies that have engaged in aggressive marketing campaigns over a number of years, such as Kalahari and Takealot, have seen some significant return in the form of brand awareness. Unfortunately few others have been able to create an online experience that incites confidence. Smaller, low budget sites lacking content and UX with half-hearted efforts & budgets have fuelled the spread of negative consumer war-stories, leaving the general public nothing short of disheartened.

6. Internet connection, slow speeds & high costs
Overall online market is a legitimate concern with only 41% of South African households having at least one member with access to the internet at home or elsewhere. This statistic doesn’t sound too bad until you note that only 10% of households have internet access at home.

But while data costs are large in comparison to average salary ranges in South Africa, internet and mobile adoption is never-the-less growing rapidly which indicates that usage is not being affected to any great extent. Ecommerce might well leapfrog right into more mobile-centric shopping, highlighting the need for fully responsive ecommerce websites, so this shouldn’t be a prohibiting factor in the growth of ecommerce.

7. Big boys merging to survive
Online retailers can’t successfully compete against local brick and mortar retailers or foreign companies such as Amazon & Alibaba. This was the reason Kalahari and Takealot gave for their merger, announced towards the end of 2014. This doesn’t evoke much faith in the smaller brands – if the big guys can’t make it then how will the little people survive? But smaller brands are in fact doing incredibly well to service their niche markets effectively and a lot can be learnt from these little companies. Smaller sites doing it very right include Yuppie Chef and Spree, which we recently built a responsive microsite for.

8. A need for innovation
Makro has a clear and innovative strategy to bring the in-store and online experience closer together, with a shopping experience that spans all channels. Users can browse online in their own time and pick up ready-packaged items in store at their convenience, saving a substantial amount of time. They are also in the process of partnering with Sasol fuel stations on a unique new pickup option that will see lockers set up at various Sasol outlets, enabling customers the convenience of collecting ordered items at their nearest service station at any time. Access to the locker is gained via a pin code sent to the receiver’s mobile device by text message. This process, dubbed click and collect, has proven very successful in global markets.

9. Africa
Counterparts in Nigeria include RocketInternet-backed Jumia and Konga, which Naspers recently made a big investment in, resulting in part ownership. Naspers is a South African company, one of the largest in commerce.

It is easy to see that the perceptions are not necessarily true but have done the damage already by delaying growth in the ecommerce sector in South Africa. If we are to follow international trends and local best practices now then we are set for rapid growth as more companies begin seeing the real benefits of moving into this space.

For years we’ve questioned online retail in South Africa and Paul Galatis, of Yuppie Chef, explained it best when he said that people aren’t shopping online in South Africa mostly because there isn’t anywhere to shop. If a number of interesting businesses started getting serious about their online channels and put real thought and budget into these plans, it would revolutionise ecommerce in South Africa.

Important to note as a new entrant into the SA ecommerce game: Conceptualise and design a world class site that is not a generic template but unique to your brand. The aim is convenience and it is not convenient if your website doesn’t perform seamlessly. Talk to a great creative technology supplier that could advise on the best platforms to use.
In short, despite the challenges online trading faces, it is a space that cannot be ignored and companies need to invest in the future or face being left behind.