South African shoppers are expected to spend R340-million online this year.
Arthur Goldstuck, managing director of World Wide Worx (an independent technology research organisation) says it is hard to say who is shopping online this Christmas. If one considers the amount of people who are online, or who have internet access, one gets a sense of the potential market.
There are 3,28-million people in South Africa with internet access, he says. Of those, between 500 000 and one million use the internet to bank, and the potential market for online shopping lies there, with an expected 250 000 people likely to shop online.
In 2001, R162-million was spent online. Last year was expected to show a 50% increase on this figure, with a 40% increase expected in 2003.
Goldstuck expects these figures to continue increasing dramatically each year. This is due to an influx of new players and aggressive marketing strategies.
“People are social creatures; they use the net for convenience. Online banking is far more secure than convenient banking. If you know what you want, online makes more sense. You have to look at the specific context of the purchase.”
Profitability depends on individual strategies, he says.
“You have to take it company by company. Some run at a loss and some are profitable.”
Pick ‘n Pay online and Kalahari.net account for more than half of the total retail internet spending, he says.
Leon de Lange, general manager for the Home Shopping division of Pick ‘n Pay, says while sales traditionally drop over Christmas, as it is a quiet period, so far it has had sales that are 10% above the rest of the year.
The decline over Christmas can be attributed to the number of people going on holiday — many do not shop online because they have no access to the internet. This year December sales are up by 60% from last year, indicating that many people have delayed their holidays, he says.
Sales overall are up 50% from last year but the portal is still running at a loss. This is due to the view that Home Shopping will “do it well or not at all”. According to its five-year business plan it expects to halve losses each year and it anticipates being profitable by the end of next year.
Kalahari.net has seen a significant increase on last year, says chief executive officer Hein Pretorius. The Christmas rush happened in the last week of November.
“Most customers understand the delivery period and don’t leave it to the last minute.”
Kalahari.net provides for the leisure and entertainment industry and has recently opened a Makro option.
Sales this year are up 60% from last year and the customer base has grown from 9 000 customers two years ago to 160 000 customers currently, spending on average R350 per basket.
While sales are good, they could always be better, he says.
“The regulatory environment only allows for the haves, not the have-nots … we are not including everyone who can take advantage of it.”
Pretorius says internet regulations are stifling the economy.
“Online is a niche within the economy, it’s a very important part of the economy. It allows for productivity gain and convenience and is sustainable.”
Another retailer that has shown a growth is Nogapgifts.com. Started in 1999, it has seen an increase in online sales, says Benje du Toit, chief executive officer of Nogap Gifts. Sales doubled in 2002 from 2001 and so far, there has been a 50% growth compared with last year.
While it is covering costs, it is still not making “big money” as it ploughs its earnings back into the business. One area of investment is a physical store, in which consumers will be educated about the conveniences of online shopping.
“People need help with the first order, and if it’s successful they will use e-commerce for the rest of their life”.
The store, which is expected to open on January 16 in the Lifestyle Garden Centre in Randburg, Gauteng, will combine retail purchases with internet terminals. It will also allow customers to view the quality of products and purchase cheaper items that are not economically viable to sell online.
Du Toit says there is a fear of using the internet because of recent scares about online security. He says people prefer to browse online, phone in and place orders and deposit the money directly into Nogap’s account.
“The South African market is more telephone- and fax-oriented; they are still scared of online transactions. Direct debits are very popular.”
He says there is a huge cost involved in setting up an internet venture. Deliveries are made to the customer’s door with a personalised message and this has been so successful that the site has seen 80% repeat business.
The benefits of online shopping are numerous. It’s available 24/7 and there are no regional barriers. South Africa is part of the global economy and has access to products across the globe.
The internet is allowing for more freedom, Du Toit says.
“We are seeing greater empowerment on the net.”
The African market generally considers an order placed telephonically but browsed on the Internet to be its first form of internet transaction and shows an acceptance of technology, he says.
Absa could not indicate whether there has been a surge in shopping or not, but Absa spokesperson Errol Smith says that since the recent internet banking scares, its online banking facility has shown noticeable growth.
“The vast majority of our customers are pleased with our security features.”