eCommerce in South Africa is beginning to grow at a rapid pace. South Africans are steadily getting more and more comfortable transacting online, whether it is online shopping or doing your banking online. There is a lot of convenience for those who adopt eCommerce, and a lot of opportunities for businesses that leverage eCommerce.
What Is eCommerce?
eCommerce is the activity of buying or selling of products online through the internet. The electronic aspect can cover part of the transaction life cycle, or the entire life cycle. An example of the partial aspect is products made by hand and then sold through online store. Information products such as online course are examples where the entire life cycle is electronic. All forms can benefit greatly from eCommerce.
For a long time, South African users have either been uninformed about online buying or they do not trust it. There is a lot of organic growth in the adoption of eCommerce in South Africa. What we are anticipating is a critical point when a mass adoption occurs and eCommerce becomes as commonplace to the regular South African.
How We Got Here
A big part of the growth of the online economy in South Africa stems from a great reduction in data costs that has happened in recent years.
Thanks to market changing efforts like those by Telkom in reducing data prices, a large number of people who previously did not have access to affordable broadband internet can no surf affordable and enter the eCommerce market as clients. To reinforce the appetite of South Africans for data, Telkom Mobile is still low in terms of market share but they are the fastest growing in the mobile scene, so much so that they have directed their efforts to the mobile division over the wired internet.
A run-on effect of this is that as people gain access and become more savvy with online buying, the market has grown, and where the consumer goes, business will eventually follow if they are to remain in the market. Even though the ecommerce market is not as developed as elsewhere, things are definitely headed in that direction.
Views On eCommerce In South Africa
You can look at eCommerce from two perspectives: industrial and domestic or small scale. On the small scale end, it reduces a lot of the start up costs and overheads that were once needed to get into the business of selling. On the industrial side, it makes the buying process a lot more efficient and saves costs. There is also the added benefit of analytics. If you have a large volume of old data, that data can be leveraged to build a profile for the products you sell as well as for the different buyers.
For example, for a specific product, you can pull data to determine the client profile in a statistical manner. You can also have data on customers to build a customer profile. With this, you can have specific products that are likely to meet the customer’s wants and needs. This all happens through an automated process and can have massive benefits such as targeted marketing for specific new products, as well as customer/client retention because you can often give the customer what they need before they even ask for it.
Online Payment Solutions
Another change that has contributed to the wider adoption of online transacting by South Africans is the improvement in the ability to make payments online. Previously, you needed a credit card to do any form of online transaction. This presented barriers like having to apply for a credit card, which has relatively stringent requirements like formal employment and the credit application process that depends on one’s credit profile.
An additional issue was the risk factor of using a credit card. If information was lost, you stood to lose more money than you actually had as someone could clean out your credit limit. Today we have various payment options that have given users better options for both international and local payment.
For international payments we have access to global payment systems like PayPal and Payoneer, and you can also use your debit card to make payments to merchants outside of South Africa. Locally, you have the option of debit card and secure payment gateways. If you are averse to inputting your information online, many online stores allow you to pay via EFT, or direct deposit to the account with a reference number. As customers become more accustomed to eCommerce transactions, they will try out other methods of payment and will be less worried about using online stores in general.
What The Data Says on eCommerce in South Africa
A study by World Wide Worx illustrates this growth in eCommerce in South Africa. According to the study, toward the end of 2018, eCommerce accounted for 1.4% of total retail revenue in South Africa. Growth rates observed for online retail are as high as between 25% and 50%. The blight on these returns is that businesses that see returns from online investment do not reinvest that money back into the eCommerce, with only one in five of surveyed retail companies reinvesting more than 20% of online turnover back into their online business.
Reinvesting Into eCommerce
Looking at some of the biggest online retailers in the world, reinvestment into eCommerce is a significant part of their strategy. Amazon, for example reinvests a great deal of turnover into the Amazon Associates program, which is an affiliate program that allows people to gain commissions from referring buyers to the retail store. While this requires significant margins to fund, it affords these companies a large pool of marketing resources through publishers and individuals who drive buyers to these stores in large numbers.
Walmart, the largest retailer in the world, also has such an affiliate program. The idea behind this is prioritizing growth over profit-taking. Amazon for example, is never highly profitable but has grown to a point where it appears set to overtake Walmart as the biggest retail company in the world. It is sacrificing the short term for the long term and has benefited Amazon greatly. In South Africa, retailers are a bit behind the curve, which none of the major retailers, online or offline investing in such marketing methods. Locally, there is not much evidence of such reinvesting, with the large retailers only dipping their toes into the eCommerce pool. The focus is more on interface and very little on marketing efforts aimed a growth. There are, however, a few companies who are investing this type of digital marketing, with Zando being the largest one in South Africa.
The product categories that are seeing the most representation are in the clothing industries. This is both at a large company level, and at the entry level small business scale. Two clothing stores, Zando and Superbalist, are two of the biggest online stores in South Africa. This is due to the low barriers to entry, as well as the amenability of these products to the marketing that takes place on social media platforms.
People who are preparing now will reap a lot in the near future. Takealot, for example has experienced a lot of growth over the last few years. This opens up the market for smaller businesses to tap into eCommerce as customers at large, become more comfortable with it. Businesses are putting more marketing efforts into digital platforms like social media. Instagram and Facebook, have seen an aggressive increase in the amount of digital advertising that is presented to consumers inside their viewing feeds.
The business world is changing rapidly because of the internet. This can be seen by the technological changes that are being adopted by savvy and forward-thinking business. FNB, for example, is making a great push toward online banking. They have introduced new features to their FNB online banking app such as the nav which streamlines the banking process. You can apply for a mortgage, get car financing and do general banking from your phone.
On the customer side it can be seen by Telkom mobile’s explosive growth and campaigns such as data must fall leading to ICASA rulings on the rollover of data. The demand for data and the use of digital services is growing at a breakneck pace. On the business side, the supply is no meeting that demand. eCommerce and digital services is still very small in South Africa.
Search Engine Optimization
The fact that it is so small in South Africa presents opportunity, especially for individuals as creators of content. A lot of eCommerce and affiliate revenue is fueled by search engine data. Where business or seasoned platforms do not meet the demand for digital services and products, individual creators and innovators can find a market. If you have compelling content it allows you to compete with large companies that have not dedicated their efforts yet, through the merit of your content
If you have an established business and you are looking to increase
your online presence look, you can implement SEO Marketing to gain new customers and increase the visibility of your business beyond a geographical border.
If you don’t have an established business and are looking to claim your own space in the online space you can start an online business and easily compete with established businesses through creating superior content.
Opportunities In eCommerce in South Africa
Because of the relatively low adoption rate in South Africa, a vast amount of markets or niches have very low competition. The way search engines work is that the longer your website has been around and provided quality content, the more trust it receives from the search engines. The more trust, the higher the ranking and, as a result, the high the amount of traffic the website receives. Over time your website gains a cumulative advantage and becomes what is called an authority site.
Thanks to the infancy of your eCommerce landscape, authority websites are not as prevalent as in other places in the world and this means that you can stake your claim one a piece of search engine real estate and the traffic that comes with it. With eCommerce only destined to boom, in South Africa we are in a pre-gold rush stage. Those that are savvy enough to set up online business in these low competition markets are enjoying an almost unfettered bounty on the fruits of an underdeveloped market.
Brick and Mortar Businesses
If you have a brick and mortar business you must, can no longer use the same marketing methods as those of days past. As the generational change occurs, more and more consumers get most of their information on products and services that they are interested in from Google. The explosive growth of online marketplaces like Takealot, and the adoption of ecommerce sales methods by our local blue chip retailers like Pick n Pay and Game Stores is telling. Fewer and fewer people watch conventional TV and instead use streaming services and other live services.
Ads and promotional campaigns have made a greater shift toward social media and other similar applications. Those customers who buy shows through the online app have to come from somewhere and businesses must adapt with the rapidly changing business environment. With time things change and the only entities that remain are those that evolve to adapt to the changes that take place.
Benefits of eCommerce
Lower Costs – By design, eCommerce is a much more cost-effective model than regular retail. A lot of the overhead costs of conventional retail, such as rental are often absent, and others like inventory management and logistical costs are greatly reduced because you can transact with customers remotely.
Reduced Geographical Limitations – Because of the ability to transact remotely, you can reach customers who you otherwise you would not be able to reach. A customer in Cape Town can find a product from a business in Johannesburg and complete the whole purchase cycle without leaving one location.
Increased Efficiency – Travel time and costs are reduced for both the business and the consumer. You can reach your store of choice with a few taps on a touch screen. No need to travel to a location.
Always Open For Business – An online business is always open. Customers can browse through your catalog and buy your products at any hour of the day. This means that a customer can make the purchase at the moment they feel the need, including impulse-buys, which leads to increased order numbers.
Analytics For Targeted Marketing – With enough data history, a profile is drawn of your different customers. The profile can be on an individual level or through demographics. This means you can target customers based on their probable specific needs. This means higher conversions on marketing efforts and increased revenue.
The key to success and growth in eCommerce is customer centricity. Your offering that you make must make the customer’s life easier. Like any worthwhile venture, it can take some upfront investment off efforts with the returns not being realized for some time. But over the long term, it makes providing the customer with services and products a lot more efficient and much cheaper.
Are you utilizing eCommerce for your business? What are the advantages and obstacles you have seen from eCommerce?