The Road Ahead for SA E-Tailing

[09 February 2001] – What does the South African online consumer look like? What does the future hold for the South African e-tailer? What issues need to be addressed to ensure a profitable and enjoyable online e-tailing experience? These and other issues come under scrutiny in the Ernst & Young Global E-Tailing report, released last month.

The authors surveyed 4,400 surfers in 12 countries (including South Africa), with 74 companies being interviewed telephonically.

According to the report, compiled October/November 2000, the average person buying online in South Africa is 34 years old (younger than any other country surveyed except Israel and Germany; in the USA the average buyer is 42 years old), probably married and most likely male. His household income is an average of US$41,300 (roughly R330,400). 48% have bought online in the last 12 months, 88% plan to buy online in the next 12 months.

The majority chose websites to purchase from a convenience point of view, followed by competitive pricing and then product availability. Buyers limited their purchases to 4 sites, on average; this may emphasize trust developed through prior experience and the overlapping offers of different sites. 59% have bought from sites outside the country.

When asked whether for reasons they wouldn’t buy online in the next 12 months, the largest group of surfers cited a lack of credit cards (54%), while 39% said they were uncomfortable using credit cards online.

This indicate that alternative payment methods may be needed to drive e-tailing, e.g. American Expresss temporary credit card numbers, Fundamo’s payment approval via a mobile phone technology or icanonlines online account offering that, unlike a credit card, is available to those 16 years or older.

The report also cites a high need to physically handle goods before purchase, with 43% giving this as a reason not to buy online. Broadband access and streaming media is believed help push online sales of “high touch” items in the future, however, displaying these goods in a manner familiar to consumers.

Many were also concerned about high shipping costs, with most abandoned shopping carts resulting for this reason. This may give an advantage to local sites in the SA market that are able to ship goods cheaper to local customers.

The report believes that by 2005, global e-tail would account for 10-12% of sales in the categories of apparel, toys and accessories; 20-25% of sales in categories like books, music and software may be through e-tail. Given SAs demographics, local figures will no doubt be much lower.

The report does not think well of either pure-plays or only-real stores, delivering the opinion that multi-channel retailing is the path to future profits. This brings into question the practice of separating the management of online and offline sections of the business, carried out by all the South African companies interviewed.

According to the EY report, two-thirds of SA companies expect to profitable by 2003, all expect to profitable by 2005. The report gives the major obstacles to e-tailing success as cultural, lingual, tax- and fulfillment resolution.

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