Big corporations are investing large amounts of funds into e-retail in South Africa, Takealot.com raised more than R1-billion of investment for expansion in the South Africa and sub-Saharan Africa, and Naspers invested R5.6-billion into e-commerce in India with a some funds going into local investments. Traditional physical retail industries like clothing, furniture, grocery and are increasing funds to the cause to have an on online presence or strategy. The South African online ecommerce market is growing for the following reasons.
To increase revenue
The latest results from Naspers, the owner of Kalahari.com – South Africa’s largest online store – said ecommrece revenue had increased 64% to R20.3-billion over the past financial year. The number of people shopping online is increasing steadily. According to technology research company World Wide Worx, South Africa has an e-retail growth rate of between 30% and 40% per annum. This outstrips the growth of the digital sales of the 50 largest global e-retailers, which a study conducted by Deloitte pitched at 29% in 2012. One out of four respondents who had shopped online had done so for the first time in the past year. Almost half of them (45%) had made their first online purchase in the past two years. Out of the 15 countries in the PwC survey, South Africa had the largest percentage of new users.
By 2016, PwC expects that more than 32-million of South Africa’s almost 51-million residents will have internet connectivity via mobile phone. As a result, e-tailers will need to become creative around distribution to get viable business models off the ground. Analysts agree that this might come in the increased popularity of the “click and collect” model: consumers can choose their item and purchase it online, but need to go into a physical store to pick it up. This is largely in line with what consumers are looking for in South Africa right now. When asked in the PwC survey what they wanted their favourite stores to provide by way of technology, the most repeated request was for shoppers to gauge a store’s inventory online. “People want the technology to check in real time what the store’s inventory is like,” said Wilkinson. “We all know the frustration of driving to the shop and finding out that they don’t have the colour or size you wanted.”
Collection points for online shoppers
Another way the distribution challenge could be overcome is by exploring the use of “collection points”, said Salmon. Global retailer Amazon is testing the notion of allowing consumers to buy an item online and then collect it from a central point. Economies of scale would need to be explored. If the traditional e-tail model were to really take off in South Africa, “we probably need one of the distribution companies to step up and become the sole distributor for all online deliveries,” he said. Either way, physical stores in South Africa are not going to be disappearing any time soon. “The majority of South Africans still enjoy shopping at a physical store,” said Wilkinson. “They like the ability to see, touch, feel and try the merchandise. “The online component is really enhancing the ultimate, total shopping experience.”
Kim Reid, chief executive of Takealot.com, says “I personally don’t believe that distribution is the biggest challenge in e-tail”. His company has overcome the obstacle by buying a controlling share in Mr Delivery. What was originally a fast-food delivery business now dispatches takealot.com’s products, Pick n Pay groceries and FNB credit cards as well. Reid says they might consider delivering products for competing e-tailers. Despite its ambitious strategy, takealot.com anticipates turning a profit “somewhere in the medium term”. “We won’t make profits in the near term because we’re building scale,” said Reid. “We are well funded to grow aggressively. Depending on how we go about it, we will be profitable in time.
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