Welcome To The Online Marketplace – It’s A Jungle Out There.
Retail in South Africa is already quite a competitive sphere, but a new battlefront has opened up and is showing some rapid growth: the realm of e-commerce.
The digital marketplace has, for a while now, been a fairly well-known and used space for the Commercial Giants, like the USA, Canada and the UK – but South Africa is beginning to catch up.
There is a massive growth opportunity in the digital commerce sector, and South African businesses have begun to sit up and take notice of the previously untapped well-spring of tech-savvy (and mostly millennial) consumers.
A Market in Infancy
But why is there such huge potential in e-commerce, specifically in South Africa?
Well, there are a few reasons. The first is that we as a society have high mobile penetration (it sounds wrong, we know), meaning that more and more of us are connected, all the time. Another is a rising sense of confidence in consumers with regards to online transactions. One last key factor in the growth of this e-commerce space is the expansion of physical (also called ‘brick and mortar’) retailers into the online space. More and more companies are adopting a multi-channel approach to sales, and it seems to be paying off.
Consumer buying habits are also changing. Shoppers are becoming more savvy, often doing online research before setting foot in a physical store – prices, stock and size checks…now there’s nowhere to hide from the eagle-eyed gaze of a seasoned sale-shopper.
A Market on the Rise
The spike in e-commerce popularity is still a relatively recent occurrence, having only skyrocketed over the past two or three years. The thing that makes online shopping so attractive? Convenience. Simplicity. Accessibility.
Also, people are lazy (if we’re being pretty honest). Not that we’re judging – there’s a certain appeal to being able to buy almost anything without even having to leave your house. Or put pants on.
Customers can be pretty demanding at the best of times, but when it comes to e-commerce, they only really want three things: speed, simplicity, and safety.
Let’s face it, we’re an instant-gratification society. No doubt about it. As soon as we’ve hit that ‘check out’ button, we’re expecting those packages already waiting on our doorsteps. We want things, like, yesterday. And we’re always a little worried that they won’t actually arrive.
This is where the hero of the story comes in – local brands.
Local brands are – like the name states – produced locally and are much more accessible than a lot of international brands that may not be available within South Africa. Ordering items from local brands almost guarantees delivery within less than one business week, as opposed to three or four months from international e-commerce sites like Wish.com and Amazon.
Another appeal of South African brands is a choice of delivery options – most stores will give an option for store collection or delivery via private courier. Unlike international brands (most of which insist on sending items via registered mail), we know that our postal system never works.
(Raise your hand if you have a pet peeve about waiting three to six months for international parcels to arrive because the post office went on strike and no one knew about it.)
The other thing consumers want, possibly more than speed, is safety. Dropping your banking details into the abyss and hoping you don’t wake up with all your life savings mysteriously gone is a real (and valid) fear. The mark of a successful e-commerce site is the implementation of secure payment methods like PayFast, which uses high-level encryption to make sure your private details, stay private.
An Easy Market (Maybe Too Easy?)
Competition within the e-commerce sector is fast and fierce, with more mobile-friendly channels rapidly accelerating the popularity of the platform. Social media is also being used more and more frequently as a ‘digital storefront’, making it easier for smaller brands and businesses to join the e-commerce market with very little barrier to entry.
An example of this would be within the apparel sector. It may be the fastest-growing sector, but it also experiences the highest turnover of businesses. Why is this?
The problem lies within the ease with which a company can set up an online store – especially on social media platforms such as Facebook Marketplace and Instagram’s ‘Shop Now’ feature. The same reasons that enable brands to enter the e-commerce space with little fuss may also be hindering their success. If a business neglects to re-invest in their online stores (favouring short-term monetary gain over longevity) they’re setting themselves up for failure. After all, what you put in, is what you get out.
On the other hand, there are some local brands that are using these social media commerce platforms to their advantage – and great success.
Instagram and E-Commerce
Instagram is just one of many social media platforms allowing brands to enter the e-commerce space through their Shop Now feature.
The process for setting this up is relatively simple: enable a ‘business profile’ on your account, link it to a Facebook page, and you’re good to go. Having a business profile on Instagram allows a user to add tags to their posts which, when tapped, allows a prospective customer to see the name and price of a particular item, and access that item through a link to the retailer’s site.
There are quite a few local South African brands that have been using this function to great success: The Fix, MRP Fashion, indie fashion brand My Scattered Heart, and conscious living brands such as Faithful To Nature and Shop Zero, to name but a few.
The ‘Shop’ feature on these Instagram pages is the definition of convenience shopping – it’s a great blend of social media and retail (and, considering how the target demographic of these stores spends untold hours engrossed in social media, we think it’s a pretty smart business move too). The perk of this form of e-commerce is that it doesn’t disrupt the user’s social media experience.
Despite all of the traction that e-commerce is gaining in a South African context, there’s a little stumbling block lying in the middle of the path to success – the cost of being connected.
Internet access is still very expensive in South Africa, and limits the amount of time that consumers can spend accessing e-commerce sites (if not restricting them from accessing it at all). There has been a large outcry against the inflated prices of both cabled internet and cellular data – and until such a time as the costs drop, we too will be participating in Data Must Fall.
The (Not So Little) Elephant in the Room
There has been a lot of guessing and speculation (and no small amount of thumb-sucking), but we all know it’s happening – Amazon is set to reach South African shores. The American e-commerce giant has been slowly creeping into the South African market for a number of years now, offering cloud computing technology services to large corporate clients such as Pick N Pay and Absa. The question on everyone’s lips has been, what does this mean for South African e-commerce?
The answer isn’t as dire as many think it is.
Technically, the only ones who should be quaking in their boots is Takealot.com – Amazon traditionally targets mass consumer markets looking for good prices, with no set focus on specific niche markets or products. While it’s true that you can find basically anything you’re looking for on Amazon, sometimes consumers just want a more tailored online experience (rather than having to sift through mountains of unrelated content).
Amazon’s entrance into the marketplace may actually boost e-commerce in South Africa. It may introduce an increased level of rivalry between local brands and businesses, each trying to improve their services to pull ahead of such a gigantic competitor. It could also stimulate an even higher growth rate in the local marketplace as more international brands look to South Africa as a viable market opportunity, taking after Amazon’s lead.
Whichever way you shake it, e-commerce is booming in the Rainbow Nation. It may still be in its infancy stages when compared to the rest of digital giants (we see you, America), but there is beauty and excitement in the potential it holds to grow our digital economy, and provide new business opportunities for brands struggling to get a foot in the door.
Viva la digital révolution!