Online shoppers on the up

Johannesburg - Online retailers dealing with discretionary items are suffering from the muted economic climate - but the overall online retail market is growing, albeit at a slower pace.

This is according to Arthur Goldstuck, MD of technology research company World Wide Worx, who adds that in areas such as book sales and certain electronic goods categories there is "dramatic growth".

Digital Mall, a 10-year-old online shopping site which sells appliances, electronics and DVDs online, says sales have grown by 100% over the last year.

"People find it safer to shop online these days - there is more propensity to buy online because generally the price is much better, as you can do comparative shopping," Digital Mall CEO Yaron Assabi todl Fin24.com. "We don't know if we can attribute this growth to the difficult economic times."

Assabi said products with low-volume metrics such as CDs and DVDs are cost-effective to deliver and it is cheaper to buy them online than in stores. He says electronic and IT equipment, DVDs, CDs and software have the highest sales growth.

Assabi says the people who shop online are usually more well-off and the average basket tends to be higher online than in stores. "People have been on the internet a lot longer and are becoming more comfortable with giving their credit card details. We've seen huge growth in the amount of people that come to Digital Mall and buy.

"There are also repeat purchases because of the maturity level," says Assabi.

About 6% of South Africans shop online, a low number in comparison to the United States or the United Kingdom, Assabi said. "Apart from the internet not being as widely available as in the US and UK because of bandwidth availability and costs, we also have a low credit card penetration. There are a lot of alternative payment methods," said Assabi.

Five-year comfort zone

In early 2008, Nielsen's global online survey on internet shopping habits reported that sales volumes were up by 40% for 2006 to 2007. This trend is on the rise as there are more products and connection options such as cellphone internet to choose from.

Consumers no longer have flexible schedules and time is of the essence. Holidays and big events that require gifts like Valentine's Day, Easter and Christmas are when consumers spend more money, said Assabi.

Goldstuck says people are moving many of their traditional shopping into the online space and that is what's keeping online shopping growing. "We will still see substantial growth over the next few years as people continue to move conventional shopping into the online space," said Goldstuck.

"Last year we saw 25% growth and the overall market reached about R1.2bn in traditional retail products spent online, excluding car sales and airline tickets.

"The experience curve shows that people need to have been online for five years or more before they become comfortable enough with the environment to go shopping online. We will continue to see growth over the next few years because the experience curve shot up quite dramatically from 2001 to 2006; this means it will continue to fuel growth from 2006 to 2011," said Goldstuck.

Said Assabi: "We are forecasting huge growth within the next five years as there are increasingly more mobile payment options available; there are a lot more solutions to connectivity and credit card penetration challenges."

- Fin24.com