Business-to-consumer (B2C) e-commerce has become synonymous with the purchase of apparel, books, flowers, gifts and groceries through the Internet. Although not limited to these goods, online shopping has provided consumers with interactive shopping experiences enabled by advances in e-commerce technology over the past few years.
Recent research by World Wide Worx indicates that there was R341 million in online sales in the South African retail sector during 2003. Although this was only 0.14% of the total South African retail market, it is nonetheless a significant market share when compared to the 3.5 million users (7.1% of the total population) of South Africans online for the same period. The expected e-commerce figures for 2004 predicated a steady growth in online sales despite a telecommunications infrastructure hampering consumer access to high-speed bandwidth.
What are the likely e-commerce trends in 2005?
The South African e-commerce market, according to James Flower, MD of ShopDirect, is poised for growth in 2005. ShopDirect is geared toward South African companies, in particular SMEs, that wish to use the online channel to promote and sell their goods to grow their businesses on the Internet – both locally and internationally.
Flower sees software solutions like ShopDirect enabling companies to position themselves to benefit from e-commerce. “If you stimulate Internet e-commerce more people will buy using this channel. The net gain is: more sales efficiency for retailers, increasing service benefits to consumers, and a lowering of transaction costs for both parties.”
“There are a number of reasons for the renewed optimism in e-commerce in South Africa,” says Flower. One of the most important is that we now have a telecommunication infrastructure that enables e-commerce more so than even during the heydays of the Internet revolution. Consumers now have access to more bandwidth in their homes and businesses due to the introduction of ADSL and wireless Internet service. This is a far cry from the constraints and costs of dial-up connectivity.”
“And due to the liberalisation of telecommunications, the deployment of an e-commerce solutions is made more affordable to SMEs as the cost of bandwidth is driven down.”
A further factor stimulating e-commerce in South Africa is that there is virtually a zero-rate for the fraudulent online purchases. This, says Flower, “demonstrates positive consumer behaviour reinforced by a regulated environment in which financial security is matched by secure e-commerce technologies facilitating online payment.”
Consumers themselves have matured over the years. They have become more technology-savvy, are seeking ways to save themselves time in making purchasing decisions, and are open to the use of online transactions to purchase goods. These purchases are usually informed buying decisions due to the availability of product and pricing information on the Internet. The increasing consumer demand for online services is reflected in World Wide Worx’s South African 2004 Online Retail Report that found that web retail sites have increased from 215 in 2001 to nearly 720 in 2003.
Flower however does note that some businesses are more ‘e-commerce ready’ than others. “Those companies that sell products to consumers who have computers should look to e-commerce marketing as the logical extension of their existing sales effort.”
“An online presence enables customers to locate a business – in many cases, new customers that a company may never find on its own – and many consumers are using the Internet rather than the Yellow Pages to find the business that meets their needs.”
The Internet provides an additional channel for companies to access markets and make products more accessible to a global marketplace.
There is perception among retail storeowners that e-commerce solutions are costly and requires additional investment in IT infrastructure. ShopDirect’s Application Service Provider (ASP) model demonstrates that this is not the case.
“The increase in ASP hosted e-commerce solutions means that the technology becomes affordable. This lowers the barrier to market entry for companies wishing to provide online shopping facilities. The ASP hosting model means that a business does not need to make a large initial investment in IT nor offset their IT costs by increasing the cost to consumer of goods and services.”
An ASP model offers a low month-on-month service fee to companies for the use of an e-commerce solution. This pricing model is directly related to the bandwidth usage, disk storage space, and the licensing of the software required to support an e-commerce service.
“Today, people are more confident online, the barriers to entry for companies have been lowered, and online shopping has been seen to bring tangible benefits to both retailers and customers through advances in ASP solutions. The mix of these factors will result in an increase in the uptake of e-commerce in South Africa.”