Online retail / etail

The landscape in South Africa at the end of 2014
The recent news of Kalahari and Takealot.com’s merging prompted Bookmark to take a quick look at the online retail landscape in South Africa at the moment.
Derek Wiggill, MD of mobile payment solutions company Zap Group, notes in an article on Itweb.co.za recently that the merger indicates a gradually maturing market as more South African shoppers turn their attention “from bricks and mortar to clicks and mortar”. He adds that the logistics of after-sales services, including delivery of goods, remains a challenge locally, “but joining forces helps overcome the challenge”.

The Digital Participation Curve
Bonnie Tubbs, Telecoms editor for Itweb.co.za, wrote in another article that “the momentum of the force of Internet history has taken hold of e-commerce in South Africa”.
According to World Wide Worx, the past nine years have seen the local e-commerce industry growing (albeit from a low base) by 30% to 35% – with a peak of 40% in 2011. Largely spurring this growth, says World Wide Worx MD Arthur Goldstuck, is the “digital participation curve” – the premise that the average Internet user will engage actively with high-level applications like online retail and interactive applications after about five years of being online.
With the number of Internet users having accelerated from 2008, the number of experienced users started accelerating significantly in 2013. Goldstuck says the digital participation curve will climb fast from now until the end of the decade, but this is just the beginning.
Africa offers enormous growth potential for e-retailers given that online shopping is in its infancy here. This is according to Sumesh Rahavendra, head of marketing for DHL Express Sub-Saharan Africa, who says the recently released ‘Shop the World’ report by DHL reveals that emerging markets offer the highest growth potential for the eCommerce industry.

Big growth, little value
Goldstuck notes that the lower tier emerging markets, where e-commerce growth is coming from a base of next to 0%, is where we will see “spectacular percentage growths”. He notes, however, the value of the growth at this early stage is “rather unspectacular”.
A recent report by McKinsey & Company also revealed that eCommerce could account for 10% of retail sales in the African continent’s largest economies by 2025. (In comparison, online retail in the U.S. already accounts for around 9% of total retail sales).

Direct selling
One outcome of the move towards online selling is an increase in B2C selling.
The latest forecasts by eMarketer claim that worldwide business-to-consumer (B2C) e-commerce sales will increase by 20,1% this year to hit a mindboggling $1 500 trillion. A quick glance at some of the bigger South African publishers websites confirms that locally, there are no moves to direct-selling just yet – books are listed, with reviews, ISBN’s, and covers, but Penguinbooks.co.za, and NB.co.za refers customers to online booksellers. Following the links from Penguinbooks.co.za to “buy” a specific book on four different sites, the variance in price was quite significant – Kalahari came in the lowest at R192, Loot at R229, Takealot at R195, and Exclus1ves at R302. Other sites that list the same book include Graffiti Books – R295 plus an extra R120 for courier fees, Van Schaik – R293, and CNA – R299.
One gets an idea of which online booksellers take online selling seriously within the first few seconds of being on their website – while some are user-friendly, beautifully designed and offer good search functionality, serious security and a proper “shopping cart” facility, others fail to engage the customer by being clunky, difficult to navigate and often outdated.
When considering why some are not yet taking the move to online seriously, one can think of many reasons not to invest in a proper online presence – internet access is still limited in most areas, slow and prohibitively expensive for most of our population. This brings Mobile retail into the picture – “M-commerce” is being drummed up as an answer to making online retail available to a wider audience.

Mobile shopping
The 2014 Mobile Media Consumption report by InMobi, which includes data from 14,000 users across 14 countries, including Nigeria, Kenya and South Africa, predicted that 83% of consumers plan to conduct mobile commerce in the next 12 months, up 15% from the current figure.
“As technology continues to evolve in the respective African countries, as will the levels of online shopping. It is of our opinion that many African businesses will start to skip the traditional ‘bricks and mortar’ formal retail environment, and instead move straight into online shopping space due to the rise in mobile and internet services within Africa,” concludes Rahavendra.
But the power of mobile connectivity has further potential for retail. Smartphones are an important research tool when people are thinking about what to buy, how much to pay for it, and where to get it. Studies by Millward Brown show that 88% of consumers use their phones to research products before they go shopping, compared to 48% on their PCs. In fact South Africans spend an average of an hour-and-a-half engaging in research before shopping, the bulk of this on their mobiles. This webrooming behaviour is a feature of South African shopping habits, outstripping US consumers with how long we spend researching before going shopping.
According to Jarrod Payne, Account Director Millward Brown South Africa, once a person gets to a store, mobile usage doesn’t slow down. On a typical shopping trip, a South African consumer is likely use their phone almost five times. Consumers use their phones while shopping to look for more and more information on their potential choices (reading book reviews at the click of a button? Or accessing the GoodReads app to check if your friends have read the book?), a function that may have been the role of a knowledgeable friend in the past. Now while shopping consumers can check pricing, reviews and deals in an instant.
It is this behaviour that leads to a staggering 74% of people abandoning purchases they were about to make because of information they viewed on their mobile phone. This is driven primarily by price, with 57% of people finding the same product cheaper elsewhere, but negative reviews, and even product switching – based on finding “better” or cheaper products online and on social media, are also commonplace.
According to the study, not everyone shops on their mobile phones (29% of people claim to not want to) and several barriers still exist, primarily the risk of crime while shopping on the mobile web. A survey conducted by Kaspersky Lab and B2B International, has found that 64% of internet users in South Africa felt vulnerable while shopping online or making online transactions, and 63% of users would utilise online payment systems more often if they felt they were protected from cyber fraud.
The survey shows that 77% of users in South Africa fear financial fraud on the internet, and the data uncovered numerous examples of consumer uneasiness. For example, 45% of those who make payments online are sure that even the official mobile applications offered by financial companies require more protection before they’re truly secure. In addition, 48% of users locally report terminating a financial operation in the middle of the process because they were unsure about the security of the transaction.
Fears about identity theft, lack of delivery, scams and fake products are the cause of a full third of mobile shopping rejectors. Concerns also arise from the payment options available, with people preferring the “safety” of cash or not having access to credit and debit cards to make online purchases. The fact that many online retailers offer a COD option shows how entrenched this perception is and how much misinformation is present.
The way that people shop is changing, a situation that carries with it both risk and opportunity for South African booksellers. The threat of people using stores to try a product but actually buying it cheaper online is an increasing reality, but a new report from Merchant Warehouse has melded together information from several research reports and surveys to show the prominence of a counter trend: webrooming.
Showrooming describes consumers who price shop online after visiting physical stores. Webrooming refers to the process of researching products online and then visiting a store to make a purchase.
An interesting finding is that about 36% of all consumers with smartphones ask stores to price-match, and in most cases, stores comply with their requests. Are we being held ransom by clued up customers tapping away on their iPhones? Or should we celebrate the new dawn of retail and bookselling in South Africa? The coming year will see many booksellers venture into their first online selling attempts, and many more taking another look at their online offering. The important thing is not to sit back and relax – time, in today’s internet-everywhere world, will not tell. Rather, actions – experimenting, trying and testing – will.

• Online transactions make users feel vulnerable
• Webrooming – a retailers guide, By Merchant Warehouse
• Shop the World! Survey, by DHL
• Mobile and the retail revolution, by MILLWARD BROWN
• SA e-commerce growth unabated, by Bonnie Tubbs
• African e-commerce: major growth, minor value, by Bonnie Tubbs
• Consumer Attitudes and Online Retail Development in South Africa, 2013-2018
• World Wide Worxx report