The Internet has created what retailers surely see as their own two-headed monster — the never-satisfied consumer. Not only do online retailers have to provide quality, cost-effective customer service, they also have to provide goods at a competitive price, protect customer privacy and ensure a secure online transacting environment.
And they have to do all this without the physical infrastructure supporting traditional retailers. Clearly, they have their work cut out for them.
“My gut tells me there is loads of promise for online retail if we can get the security concern put to bed, streamline the buying process and speed up delivery. Prices probably need a little work too,” agrees Neal Farrell, general manager for publisher Ramsay, Son & Parker’s (RS&P) digital division. Farrell runs MagsatHome. co.za, a website selling RS&P’s own and other publishers’ subscriptions, as well as the wine-selling site Wine-mail.co.za, among others.
Farrell tells how he recently visited a large online retailer to cash in some rewards, only to be faced with a delivery period of 30 days. “Needless to say I got in my car and went shopping,” says Farrell. “Just one bad experience and you could lose a consumer to online retail all together.” Which is why he believes the industry needs to set some minimum level of service that is acceptable to customers.
So just how many South Africans are shopping online?
In the online retail environment the major players are wary of giving out numbers, which means it is difficult to come up with realistic figures for online retail transactions. Hein Pretorius, CEO of Kalahari.net, estimates that between 500 000 and 600 000 South Africans are transacting online. His own site has about 160 000 users. Arthur Goldstuck, MD of research house World Wide Worx, has a more conservative estimate of about 400 000 users transacting online.
Goldstuck, who also leads research into the online retail environment, says consumer spend has risen from R82-million in 2000 to about R350-million last year.
He forecasts further growth of 33% to about R470-million by the end of this year. This sounds great, of course, until you look at the broader e-commerce scene in this country, where sites such as Kulula.com and McCarthy Online equal or surpass the combined revenue of the entire online consumer retail industry.
Bear in mind that the traditional retail environment in this country is worth more than R200-billion a year, which should put the size of online retail into some perspective.
Goldstuck’s most recent research suggests that the leading sales category of online retail is groceries (food and beverages) led by sites Pick ‘n Pay Home Shopping, Woolworths Online and Megashopper. Books and stationery follow, led by Kalahari.net and Exclusive Books. Flowers and gifts come in at third place, led by NetFlorist and Woolworths, and are followed by music, DVDs and videos, headed up again by Kalahari.net, but with sites such as Musica and Look & Listen also in play.
Computer hardware and software are excluded from these figures because of the number of direct suppliers doing business online, which skews the figures towards wholesale. Travel, cars and property sales and financial services are also excluded, falling under the broader umbrella of consumer electronic commerce rather than retail per se.
The fact that groceries are leading the pack suggests, says Goldstuck, a conversion of existing buying behavi-our from the offline to the online environment. The Internet is thus basically a new channel for existing consumer behaviour.
The e-retailing market has changed considerably since the mid-1990s, when it took off in South Africa. “It is now a much more stable, competitive environment as many of the start-up, fly-by-nights have closed down, which has brought back a lot more sanity to the market,” says Pretorius.
“This has allowed various operations to build the required trust with their respective consumer bases and brought competition to a mature business level where we compete on elements such as product, service and customer loyalty.”
Neil Watson, a director at Digital Planet, thinks bank initiatives such as Ican, Autopay and eBucks have lent a lot of credibility to online shopping. “People who have purchased online generally find that the online retailers are particularly sensitive to a good customer experience, as they have been forced to calculate the real cost of an [unsatisfied] customer.”
While security remains a concern for consumers, Leon de Lange, general manager of Pick ‘n Pay Home Shopping, believes lifestyle and demographics are other reasons for the slow take-up of e-retail. “It is in my mind simply a case of there not being a compelling reason for people to go online,” he says.
“This means that the customers’ lifestyle is not of such a nature that they are time-starved … or that there is no significant saving in cost when dealing online. It can be overcome only through adding enough value to your product.” Pick ‘n Pay Home Shopping has 101 937 registered users, of whom 16 508 have shopped at the site more than once.
There is no research on local customer satisfaction levels with regards to e-retail, other than anecdotal evidence such as that provided by Farrell. But in the United States the annual American Customer Satisfaction Index (ACSI) report found that e-commerce continues to rate higher than other industries, while also outpacing the US national average of all the measured groups.
“In the latest ACSI findings, expectations continued to climb, but at a somewhat slower pace than in previous years, so a shifting focus of demands may emerge as a challenge equal to or greater than purely rising expectations; continually addressing the total experience becomes the imperative,” said Larry Freed, president and CEO of ForeSee Results, who helped produce the report.
“E-commerce companies have generally been good at rounding out the customer experience so that as one aspect of the experience meets expectations they move on to the next thing. Of course it isn’t simply sequential, and e-commerce companies, like any company, must keep a lot of balls in the air.”
While e-retailers face many challenges, including growing the online consumer base, many are already profitable and have been for several years. Retailers, like most other businesses trading online, are realising that technology is a great facilitator, but not a replacement for communicating with consumers. Consumers might be hard to please, but as the ACSI report showed, most e-retailers are doing a good job meeting and managing expectations.
Online consumers meanwhile are starting to adapt their buying behaviour to include Internet shopping. A little incentive — hint, hint (who hasn’t received a Kalahari.net voucher yet?) — will surely help us along.
Web guide
Digital Planet: www.digitalplanet.co.za
Exclusive Books: www.exclusivebooks.com
Kalahari.net: www.kalahari.net
Look & Listen: www.lookandlisten.co.za
Musica: www.musica.co.za
NetFlorist: www.netflorist.co.za
Pick ‘n Pay Home Shopping: www.pnp.co.za
Winemail: www.winemail.co.za
Woolworths Online: www.woolworths.co.za