SA's e-commerce players must raise game

2011-08-01 15:51
Johannesburg -, a subsidiary of US-based multinational electronic commerce company Amazon, has a 365-day return policy for any product it sells online that includes free shipping for the return. If customers call its contact centre to look for a product it cannot source itself, the company searches competitors' sites and refers them to someone who can help.

This is just one of the benchmarks that set international online retailers, leaps and bounds ahead of local counterparts.

With people becoming more digitally aware and happy to pay for convenience, research from World Wide Worx has found that South Africans spent more than R2bn online in 2010 - excluding air tickets and accommodation - up 40% over the previous year, and the market is expected to grow at 30% again in 2011, with plenty of headroom for growth in the years to come.

Massive potential exists in the South African e-commerce market as more consumers move online, and those that already have internet access become more comfortable transacting online. But companies that want to compete in this space need to be world class and offer some unique local value to stay ahead of their offshore peers.

Catching-up to do

According to Kevin Meltzer, co-founder of a self-service solutions provider Consology, SA's biggest brands have yet to catch up with the expectations and needs of their consumers in the online space.

The challenge that lies ahead for local companies is to raise their online service levels in terms of user experience, functionality, customer service and back-end efficiency.

"Few local e-commerce operations can compete with these companies, who are simply a click away from their customers. The South African e-commerce market will soon pass the tipping point and we can expect it to gather massive momentum in the years to come, but most local companies are not geared up to deliver the sort of online experience that their customers will demand from them in a globalised marketplace," Meltzer said.

Fierce competition ahead

Although it isn't always cost-effective for consumers to import physical goods bought from an international online retailer into South Africa, international competition for local online retailers is set to get much fiercer as foreign companies move into the local market, and as we see mainstream acceptance of digital goods such as e-books.

In recent months, Groupon had made a play for the South African market through its deal with Twangoo and international hedge fund company Tiger Global Management has moved into the market by acquiring online retailer Take 2.

Wal-Mart, no slouch in the e-commerce space, may also look to revamp Massmart's (MSM) online presence.

Last month, Massmart CE Grant Pattison said the online experience was much deeper and more complicated "than just giving someone a button to press and a credit card to enter and the product is ready to be delivered at home”.

"It's a process not an event, we need to build our capabilities and enable acquisition and delivery - we will get there though, absolutely," Pattison said.

Wal-Mart, who bought a 51% stake in Massmart for R16.5bn, will provide the company with global expertise as it ventures into areas outside its traditional trading formats.

In June, as part of its online strategy, Wal-Mart signed an agreement with the Shanghai government to set up e-commerce headquarters in the city - this came fresh off the back of its plan to buy a minority stake in Chinese online retailer Yihaodian for an undisclosed sum.

Young digital consumers

Online sales in China, the world's largest web market, hit $684bn in 2010, and the hub will be Wal-Mart's second in the world after its one in New York.

Meltzer said that companies who sold goods that could be turned into virtual products - like movies, books, music and software - were especially threatened by international e-commerce giants.

"There is a whole emerging group of young consumers who are entering the world of e-commerce for the first time by buying songs from iTunes and apps from the Android store - South African companies must think about how they will turn them into their customers.

"Perhaps most importantly, companies need to be harvesting customer data and using it for a competitive edge. They also need to plan for emerging trends such as location-based services and mobile commerce," Meltzer said.

Read more on:    sa  |  e-commerce

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