Economy / 6 November 2019, 06:00am / Sizwe Dlamini
CAPE TOWN – Online retail is projected to reach 1.4 percent of total retail in South Africa, based on an estimated R1 trillion to be spent via traditional channels in 2018, according to findings of the Online Retail in South Africa 2019 study, conducted by World Wide Worx with the support of Visa and Platinum Seed.
The researchers stated in a report released on Tuesday that the study found that the 2 percent mark was likely to be reached by 2022.
According to the report, forecasts have been beaten as a result of massive investments in online retail, aggressive marketing, and the rapid uptake of new shopping channels such as mobile shopping and Instagram.
However, the study found that a significant impediment to the growth of e-commerce in South Africa was the unwillingness of business to reinvest. Only one in five companies surveyed invested more than 20 percent of their online turnover back into their online store.
Over half invested less than 10 percent back. “This despite a high 71 percent of all online retailers surveyed, who say they are profitable. However, profits in e-commerce are no definite indicator of long-term sustainability.”
With Black Friday around the corner, it remains to be seen how the investment choices made by the retailers will pan out in this era of online shopping.
The experts give their views:
South African retailers have — with good reason — been preparing for Black Friday 2019, since Black Friday 2018. Falling on the 29th of November this year, the day holds massive promise for retailers, and shoppers alike, but are retailers prepared for the volume of traffic their online store could face, asks Grant Morgan, general manager for Cloud at Dimension Data?
PayGate’s tracking of payments for Black Friday 2018 showed the number of transactions doubling every year for the past three years. The company expects Black Friday transactions to grow by 30 percent in 2019. Payment clearing house BankservAfrica, saw a 55 percent growth in transactions in 2018 compared to 2017. Its research revealed that Black Friday proved to be more popular among South Africans in 2018, with 404 594 online transactions, a 55 percent growth from 260 552 in 2017; while for Cyber Monday this was 176 595, a 36 percent growth from 129 458 in 2017.
The bigger online picture
While South Africans may have been initially slower to embrace e-commerce than other countries, local online retail has gone mainstream. In a key finding of the Online Retail in South Africa 2019 study World Wide Worx MD, Arthur Goldstuck, predicted that online retail in South Africa would pass the R14 billion mark in 2018, and would likely reach the 2 percent mark by 2022.
The report revealed that there was a massive investment in online retail, aggressive marketing and a rapid uptake of new shopping channels that combined to produce a 25 percent growth in 2018 over the previous year. Individual retailers saw growth in their online offerings of between 25 percent and 50 percent. Despite these positives, many businesses, however, were unwilling to reinvest in their online stores, with only one in five companies surveyed re-investing more than 20 percent of their online turnover, and over half re-investing less than 10 percent back. This represents a significant impediment to growth of ecommerce in South Africa.
Online retail’s most critical success factor was noted as being customer service, so what happens when things go wrong, and customers no longer feel the love? What damage is done to brands when online stores crash, unable to withstand the high volumes of traffic that is to be expected on Black Friday and Cyber Monday, for example?
Planning for peaks
Online retailers really need to look at their cloud strategy as they head into the holiday shopping-rush. On Black Friday you have an inordinate magnitude of customers coming to your website looking for deals, and you need to make sure your infrastructure can handle that.
It is uneconomical to purchase additional IT infrastructure for that one or two days a year peak The traditional approach to purchasing hardware is not feasible, your strategy needs to shift to Cloud, where you can effectively rent the required capacity for only the hours that you need it.
The challenge is that nobody knows how much traffic they are going to get, so there is a huge amount of uncertainty on the capacity you will require. Planning for that uncertainty with Cloud is advantageous because it has the ability to automatically scale to the capacity required, based on the hits that you’re getting on your website from customers wanting to buy from you. Because it automatically scales, you won’t have the frustrations of outages that can cause a lot of unintentional damage on brands. You cannot afford for your site to be down on the one day a year that customers are coming to see what your website is about.
How retailers can be proactive with their online strategy
The first step is to get your infrastructure into the Cloud, kind of a lift-and-shift approach, and then set up autoscaling on your website. Over the long-term – in order to deal with that unpredictable, high-demand of millions of users – you will need to re-factor or re-platform your application to the microservices architecture that all the Cloud-native application developers and new businesses on the web and mobile are using.
The second step is to engage with a managed services consultant that can help you to assess which architecture environment is right for you. They should be able to assist you in migrating your site; optimising the Cloud environment for you; and showing you how to run your website in a Cloud environment. In addition, they should also be able to guide you in your choice of Cloud venue – such as AWS, Azure, or a local virtual private Cloud.
It is important that you modernise the application to ensure you are using the new microservices architecture that people want, and modernise your database and architecture to be automatically able to scale, and your managed services consultant should be able to do that for you or assist by augmenting your staff who are developing your website.
How to create efficiencies in your daily operations
Once you’ve made the move to Cloud, your next task is to operate your online-store on a daily basis, and that’s where things can get tricky. There are few operational teams today that are familiar with the newer Cloud-related technologies, and they don’t often have the processes that are required to run a Cloud-native based application – such as hyperscalers – inside one of the many platform services offered inside of Azure, for example.
That’s where working with managed service providers that are skilled, not only in the traditional disciplines of running on-premise infrastructure but also the hybrid environment of moving that infrastructure into Cloud to optimise your operational environment in Cloud can create efficiencies in your daily operations.
Look for a provider who already has all the automation built to be able to effectively ensure your applications residing in Cloud are autoscaling; who is leveraging new processes like dead hops, and who is automating the disaster recovery deployment.
What happens when things go wrong?
So, what happens when things go wrong because things do go wrong occasionally? The best way to approach disaster recovery is to approach it proactively. Ensure your managed services provider has an entire automation platform that anticipates what could go wrong and is prepared for it so that your e-commerce store will heal itself in case of failure. Bottlenecks might not always be internal. Your online solution is made up of many components, some of which are outside of your own network. They could be a result of a failure in the banking infrastructure, and cause issues during payment processing for example. Your managed service provider should be looking at your platform end-to-end to see where potential bottlenecks could arise, and hopefully, identify where the weak links are in the chain and try to eliminate those. The ones that can’t be eliminated should be constantly monitored so that reaction times and fixes, should problems arise, can be quick.
How secure is your environment?
Remember that security is a shared responsibility model between you as the customer and your Cloud service provider. The Cloud services providers have got all of the certifications to prove that they are doing their job and keeping up their end of the bargain when it comes to security. Generally, where those vulnerabilities are, is in the client services responsibilities area, so the question will usually be “are you operating Cloud securely?”
A good system integrator and managed security services provider will advise, and assist their customers, and eliminate security vulnerabilities and exposures. They will look at your business requirements, exposures and risks that you're trying to protect against, and the reasons why you’re going into Cloud. They will help you to choose the correct controls to use against an industry-standard framework and recommend the technology that gets applied in that environment, to ensure you as the client are secure. Once you as the client have implemented the right security controls, your managed services provider can proactively respond to an incident on your behalf.