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Scepticism about the online retail business is understandable, given the bloody aftermath of the burst of the dotcom bubble a decade ago. This time around the online market is better understood, easily accessed and grounded on profitable models working in developed economies. Small-scale online retailers are thriving but those stores where South Africans spend the biggest chunks of their disposable income remain aloof about online.
Online retail in SA isn’t on any level comparable to those of sophistication and depth seen in the United States and European Union markets, where US$521,4bn was spent in e-trade last year alone. Back home, online shopping is a minuscule – almost statistically insignificant – 0,36% of the total spent by consumers last year, according to the World Wide Worx 2011 Survey on the subject. Nevertheless, e-tail in SA had a total turnover of R2bn last year. And the trend is up.
The World Wide Worx (WWW) survey found the rate of growth in local online retail to be 40% last year, more than 10 times as fast as growth rates in traditional retail and far outstripping those of our more developed contemporaries. The survey reported online shopping growth this year will match those of 2010.
“Since 2008 – for the first time since the Nineties – we’ve been seeing a sustained increase in the rate of growth of the number of Internet users in SA,” says WWW head Arthur Goldstuck, who lists three main reasons for the trend: increased penetration of smart phones, growth in ADSL connections and the “explosion” of new Internet service providers.
Goldstuck has circled 2013 as the year when digital participation will reach a watershed point. “All those who began coming on board in 2008 will become fully engaged with it from 2013 onwards. And that will mark the beginning of the most sustained acceleration in digital participation we’ve yet seen,” he says.
The bottom line is clear: anyone indulging in leisurely navel-gazing where their Internet strategy is concerned has two years to get it together.
“The reason why retailers haven’t invested in their online strategy is simply because they’ve been doing so well in the traditional forms of retail,” says Syd Vianello, retail analyst at Nedcor Securities. The consumer boom, which peaked in credit frenzy in 2007, was all about expansion. Retailers responded to the armies of new consumer classes marching towards shopping centres armed with shiny new credit cards by opening outlets in previously underserviced areas. E-tailing was out of favour and mostly ignored following a handful of expensive disasters.
Gary Hadfield, a past CEO of book and music online retailer Kalahari.net who now heads loot.co.za, says the disparity between the bricks and the clicks that has widened over the past few years is all about organisational strategy. “There are certain decisions in both types of retailing that are the same – such as buying and planning of merchandise,” says Hadfield. “Visual displays, distribution and marketing in online have a very different DNA.”
Experts say the problem is big scale retailers have failed to embrace online as a strategy, opting to delegate that task to their IT departments that are traditionally – and rather outdatedly – seen as the domain for all technology related endeavours.
Says Goldstuck: “When you have that kind of thinking it’s very difficult to invest and leverage the power of the organisation.”
The above is true for most but not all: Woolworths and Pick n Pay are two early pioneers of online retail of food products. Pick n Pay e-tailing GM Lyndsay Webster-Rozon says demand for the service is growing and the company is improving its website and extending its range of available products.
Woolies’ inthebag online food shop was one of the earliest entrants in the market and recently added homeware to the mix. Paula Disberry, group director of clothing and GM planning, says new customers were being added “all the time” – with a particular trend in businesses using the service on a daily basis to buy meals and beverages to consume in the office.
The strategic gap Goldstuck refers to is glaringly obvious when you consider the silence emanating from clothing and furniture retailers. For example, Truworths’ website offers customers a token number of items online: more of a symbolic gesture than any coherent evidence of an online presence.
Clothing currently makes up a massive portion of the US’s online shopping spend, says Robert Grossman, a partner at Deloitte consulting in New York. The US online market looked much like ours before it took off in a big way, which indicates the massive opportunity for growth in that retail channel.
The WWW survey reported two-thirds of the 250 retailers polled said they spent between 0% and 20% of their 2010 turnover on investment in their website. When the question turns to the current year, almost half of the respondents said the amount they were spending on their online strategy was “confidential”. You can get smoke and mirrors about it or you can just go with Goldstuck’s somewhat simpler explanation: “They just don’t know what to do.”
One of the biggest misconceptions about e-tailing is that it’s shops versus website, when the reality – as evidenced by experience overseas – indicates a complementary function between the two.
Vianello refers to research conducted by French furniture retailer Conforama, acquired by JSE-listed Steinhoff earlier this year, which found the majority of buying at an online store was preceded by a visit to the physical store to “get a feel for the item”.
However, Grossman says US retailers have found ways of integrating online retailing with their conventional brick-and-mortar outlets. “For example, some stores allow you to measure yourself in a booth that then stores your information on the retailer’s servers to use for online shopping.”
Some experts call that a multi-channel strategy and it’s one Pick n Pay has noticed, with buyers doing a big monthly shop online and stocking up on perishables in store. Multi-channel is also the way the Clicks Group is planning its assault on the web, with high-end items – such as perfumes, which aren’t available at all physical outlets – sold in an online store.
Goldstuck has a stark warning: “If South African organisations aren’t ready to serve their clients online by 2013 their clients will find organisations that are.”
How it’s done
SOUTH AFRICA’S major retail chains may be stalling on their online strategies but the same doesn’t apply to small-scale web entrepreneurs. The majority of new developments in online retail in SA fall within three key trends, says World Wide Worx’s Arthur Goldstuck. And these mirror the progression of the sector in more developed markets.
Trend 1: Group buying
Group buying is all about strength in numbers. Websites such as Groupon.com offer subscribers the opportunity to buy anything, from manicures to weekends away at heady discounts in the region of 70% – provided a minimum number of buyers accept a particular deal. Goldstuck says that’s the biggest trend in online shopping worldwide and an excellent opportunity to give small businesses exposure to the web market. There are around 25 group-buying websites in SA alone.
Trend 2: Premium specialty goods
This online shopping trend is geared to the consumer who spends his lunch break ogling the Valentine’s Day limited edition Le Creuset range online and lamenting the fact that no shops near him have been foresighted enough to stock it. An example is the yuppiechef.co.za, but this trend is by no means limited to the gastronomically inclined.
Trend 3: Consumer electronics
There are no prizes for guessing shiny gadgets and online shopping go together: it was one of the biggest categories in a recent survey in the US of e-shopping habits. Websites such as have2have.co.za, wantitall.co.za and take2.co.za are successful on a similar premise. They source and aggregate orders in the US, and are often able to undercut prices offered at physical consumer electronics stores.
Online retail in SA isn’t on any level comparable to those of sophistication and depth seen in the United States and European Union markets, where US$521,4bn was spent in e-trade last year alone. Back home, online shopping is a minuscule – almost statistically insignificant – 0,36% of the total spent by consumers last year, according to the World Wide Worx 2011 Survey on the subject. Nevertheless, e-tail in SA had a total turnover of R2bn last year. And the trend is up.
The World Wide Worx (WWW) survey found the rate of growth in local online retail to be 40% last year, more than 10 times as fast as growth rates in traditional retail and far outstripping those of our more developed contemporaries. The survey reported online shopping growth this year will match those of 2010.
“Since 2008 – for the first time since the Nineties – we’ve been seeing a sustained increase in the rate of growth of the number of Internet users in SA,” says WWW head Arthur Goldstuck, who lists three main reasons for the trend: increased penetration of smart phones, growth in ADSL connections and the “explosion” of new Internet service providers.
Goldstuck has circled 2013 as the year when digital participation will reach a watershed point. “All those who began coming on board in 2008 will become fully engaged with it from 2013 onwards. And that will mark the beginning of the most sustained acceleration in digital participation we’ve yet seen,” he says.
The bottom line is clear: anyone indulging in leisurely navel-gazing where their Internet strategy is concerned has two years to get it together.
“The reason why retailers haven’t invested in their online strategy is simply because they’ve been doing so well in the traditional forms of retail,” says Syd Vianello, retail analyst at Nedcor Securities. The consumer boom, which peaked in credit frenzy in 2007, was all about expansion. Retailers responded to the armies of new consumer classes marching towards shopping centres armed with shiny new credit cards by opening outlets in previously underserviced areas. E-tailing was out of favour and mostly ignored following a handful of expensive disasters.
Gary Hadfield, a past CEO of book and music online retailer Kalahari.net who now heads loot.co.za, says the disparity between the bricks and the clicks that has widened over the past few years is all about organisational strategy. “There are certain decisions in both types of retailing that are the same – such as buying and planning of merchandise,” says Hadfield. “Visual displays, distribution and marketing in online have a very different DNA.”
Experts say the problem is big scale retailers have failed to embrace online as a strategy, opting to delegate that task to their IT departments that are traditionally – and rather outdatedly – seen as the domain for all technology related endeavours.
Says Goldstuck: “When you have that kind of thinking it’s very difficult to invest and leverage the power of the organisation.”
The above is true for most but not all: Woolworths and Pick n Pay are two early pioneers of online retail of food products. Pick n Pay e-tailing GM Lyndsay Webster-Rozon says demand for the service is growing and the company is improving its website and extending its range of available products.
Woolies’ inthebag online food shop was one of the earliest entrants in the market and recently added homeware to the mix. Paula Disberry, group director of clothing and GM planning, says new customers were being added “all the time” – with a particular trend in businesses using the service on a daily basis to buy meals and beverages to consume in the office.
The strategic gap Goldstuck refers to is glaringly obvious when you consider the silence emanating from clothing and furniture retailers. For example, Truworths’ website offers customers a token number of items online: more of a symbolic gesture than any coherent evidence of an online presence.
Clothing currently makes up a massive portion of the US’s online shopping spend, says Robert Grossman, a partner at Deloitte consulting in New York. The US online market looked much like ours before it took off in a big way, which indicates the massive opportunity for growth in that retail channel.
The WWW survey reported two-thirds of the 250 retailers polled said they spent between 0% and 20% of their 2010 turnover on investment in their website. When the question turns to the current year, almost half of the respondents said the amount they were spending on their online strategy was “confidential”. You can get smoke and mirrors about it or you can just go with Goldstuck’s somewhat simpler explanation: “They just don’t know what to do.”
One of the biggest misconceptions about e-tailing is that it’s shops versus website, when the reality – as evidenced by experience overseas – indicates a complementary function between the two.
Vianello refers to research conducted by French furniture retailer Conforama, acquired by JSE-listed Steinhoff earlier this year, which found the majority of buying at an online store was preceded by a visit to the physical store to “get a feel for the item”.
However, Grossman says US retailers have found ways of integrating online retailing with their conventional brick-and-mortar outlets. “For example, some stores allow you to measure yourself in a booth that then stores your information on the retailer’s servers to use for online shopping.”
Some experts call that a multi-channel strategy and it’s one Pick n Pay has noticed, with buyers doing a big monthly shop online and stocking up on perishables in store. Multi-channel is also the way the Clicks Group is planning its assault on the web, with high-end items – such as perfumes, which aren’t available at all physical outlets – sold in an online store.
Goldstuck has a stark warning: “If South African organisations aren’t ready to serve their clients online by 2013 their clients will find organisations that are.”
How it’s done
SOUTH AFRICA’S major retail chains may be stalling on their online strategies but the same doesn’t apply to small-scale web entrepreneurs. The majority of new developments in online retail in SA fall within three key trends, says World Wide Worx’s Arthur Goldstuck. And these mirror the progression of the sector in more developed markets.
Trend 1: Group buying
Group buying is all about strength in numbers. Websites such as Groupon.com offer subscribers the opportunity to buy anything, from manicures to weekends away at heady discounts in the region of 70% – provided a minimum number of buyers accept a particular deal. Goldstuck says that’s the biggest trend in online shopping worldwide and an excellent opportunity to give small businesses exposure to the web market. There are around 25 group-buying websites in SA alone.
Trend 2: Premium specialty goods
This online shopping trend is geared to the consumer who spends his lunch break ogling the Valentine’s Day limited edition Le Creuset range online and lamenting the fact that no shops near him have been foresighted enough to stock it. An example is the yuppiechef.co.za, but this trend is by no means limited to the gastronomically inclined.
Trend 3: Consumer electronics
There are no prizes for guessing shiny gadgets and online shopping go together: it was one of the biggest categories in a recent survey in the US of e-shopping habits. Websites such as have2have.co.za, wantitall.co.za and take2.co.za are successful on a similar premise. They source and aggregate orders in the US, and are often able to undercut prices offered at physical consumer electronics stores.
