As global eCommerce evolves into a $500 billion (R6.5 trillion) industry in 2018, online transactions in South Africa are still at about 1 percent of total retail value. Can the local market transition to 5 percent in what has traditionally been a bastion of brick-and-mortar retail?
eCommerce experts believe this is possible if a few key elements are put in place in a short space of time.
The reality is that local online shopping is undergoing a positive shift. Increased choice, courtesy of easier cross-border purchases and a continued rise in smartphone penetration, is enabling this. In contrast, the cost of data, product delivery and access to the internet are holding the industry back.
Industry heavyweights have highlighted three areas that can pivot local eCommerce closer to its British counterpart at about 15 percent of total retail. Central to the solution is the role played by mobile purchases in extending reach and immersion.
Getting fundamentals right
According to Google SA head Luke Mckend, technical proficiency is where South African eCommerce will be won or lost. Better websites, platforms and customer journeys will unlock the missing mobile piece.
Mike Cotterell, Pick n Pay’s head of online, maintains that getting the fundamentals right will drive the necessary demand. “It’s about quality products in a quality online environment that works every time.” This sentiment is echoed by Woolworths’ head of digital, Liz Hillock, who believes that demand will increase as we do things better, whether on mobile or desktop.
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Uber, the poster child for mobile disruption, grew to the force it is today because the product solved a significant pain point: city folk needed more convenient urban transport. Getting the fundamentals of their offer right allowed the company to follow the seemingly counter-intuitive model of increasing supply first, to grow demand second. South Africa was the first country outside the United States where Uber operated in three different cities. This is a clear indication that old-world necessities still underpin the online world.
Merging of two worlds
Another area touted to spur growth in the local market is to blur the boundaries of online and offline shopping in an attempt to match the online and in-store experience. We already turn to our mobile phones in retail moments when reviewing and comparing.
According to Google SA, smartphone searches will rise 50 percent year on year by December this year. This bodes well for retailers, because in-store mobile browsing increases the likelihood of a purchase by a multiple of three. Connecting the physical with the digital world is likely to propel the industry forward, according to experts. From Makro’s click-and-collect Lockers at forecourts to PPC Cement’s direct-to-public eCommerce offering to preserve margins, efforts are being made to innovate.
Some merchants are turning to collaboration. “We are seeing a consolidation of offerings and partnerships of online and offline merchants,” Karen Nadasen, the chief executive of online payment gateway PayU, says. “Merchants that are online are starting to partner with offline businesses by offering package deals. For example, you can purchase a movie ticket online, together with your dinner bill.”
Seamless, secure payment
Another key area is ensuring that payments are seamless and secure. In truth, it is already safe to purchase online; more people just need to experience this for themselves. This tide already seems to be turning as charge-backs - a transaction reversal meant to serve as a form of consumer protection from fraudulent activity - are decreasing.
Nadasen says: “Overall, there has been a 74 percent decrease in the average charge-back rate, and a 72 percent decrease in the number of charge-backs across our merchants. The main reason for this is the implementation of 3D Secure, coupled with stronger anti-fraud management.”
South Africa’s eCommerce climb up the rung, from 1 percent to 5 percent, is inevitable. Get the fundamentals right, and let innovation and disruption guide the way.
Chad Fichardt is a financial services and technology communications consultant.