E-commerce is broken, but fixable
It’s deeply ironic that South Africa’s biggest retailers tend to have a dismal presence online. The leaders in e-tailing in this country are often the online-only or “pure-play” e-commerce businesses that have not needed to integrate groaning old systems, complex inventory and creaking company structures.
Overall growth of online retail in South Africa is healthy, registering a massive 35% leap in 2014, compared to 7.5% for traditional retail. However, it continues to come off a low base, reaching just R6-billion, according to World Wide Worx data released this month. That sounds high, but it’s a mere 0.8% of total retail, which was expected to reach R750-billion last year.
This is despite massive investments made by the likes of the Tiger Group, with R1-billion pumped into Takealot.com, the intensive marketing campaigns of Netflorist and OLX, and the presence of global players in Gumtree (US-based eBay), Zandos (Germany’s Rocket Internet) and Groupon (US-headquartered).
Part of the problem lies in the concept of the digital participation curve, a model developed by World Wide Worx to show how long it takes for new internet users to become comfortable enough with the digital world to start shopping online. Typically, it takes users an average of five years online. It means that, of the 16.2-million South Africans online at the end of last year, only 5.3-million were ready to shop online. And that only means they had the propensity to shop online. This propensity still has to be converted into shopping behaviour.
According to data gathered by Ask Afrika’s TGI, 3.225-million South Africans were shopping online in 2014. In other words, only 60% of those who are willing to shop online have been convinced to make the leap.
What will it take not only to convert the rest, but also shorten the curve and grow the user base more rapidly?
The answers are fairly obvious, but easier said than done: provide an indisputable value proposition, meaning pricing and service that makes online shopping the obvious route; provide a seamless, smooth and even enjoyable experience; understand customers’ needs and desires before, during and after the purchase; and appreciate that the website is part of an ecosystem that goes beyond just the buyer and seller.
The first one is easy: daily discount and social deal sites have traded heavily on just that comcept. However, their focus has been on price to the exclusion of most other factors, and they have come down to earth after initially growing stratospherically. For big companies, the rest is exceptionally difficult – but only if they choose to make it difficult.
E-commerce platforms and tools have been in place for more than a decade, led by the likes of Magento, Shopify and IBM’s WebSphere. In many cases, however, these still result in much painful trial and error.
The crucial piece of the puzzle: Analytics
Even when they do get the implementation right, they find that these platforms don’t facilitate the creation of an e-commerce ecosystem. They tend to miss a crucial piece of the puzzle: data analytics that allow for an understanding not only of shopping behaviour, but also of the customer experience. That understanding must begin long before the customer arrives on the site, and not end when the transaction is completed.
At the IBM Amplify e-commerce conference in San Diego last week, the software and services giant unveiled two new tools that approach the customer experience as a journey. Crucially in this journey, analytics becomes not only a data gathering exercise, but also a means of turning data into action. Site appearance, product mixes and promotions, and personally tailored offerings, can be amended on the fly.
The first of the new products, Journey Designer, is described as “a virtual whiteboard where practitioners on multiple teams within an organisation can collaborate with a single view of a customer’s journey to make more informed decisions”. Essentially, it should mean an end to silo-based e-commerce design, where one division or department decides how a site should function, and other sections of a company are frozen out of the process even where they are critical components of the customer experience.
The second product, Journey Analytics, allows marketing and sales teams to “visualise and quantify actual customer journeys”. The idea is that the data gathered from and about the customer and the broader ecosystem should help the retailer deliver more relevant experiences, based on anything from behaviour on the site to the emotions of customers, thereby increasing conversion and building brand loyalty.
Both of these are geared towards an emerging understanding of “omni-channel retail”, which is distinct from “multi-channel retail” in that it is not about having a range of channels, but about having all these channels seamlessly integrated.
That is precisely where e-commerce in South Africa is broken. In particular at large retailers, the online presence is regarded not only as a separate business, but often as a competing business that is cannibalising physical stores. That concept is completely alien in the world of omni-channel shopping. The idea of pitting divisions against each other may work at a General Electric, where the Destroy Your Business strategy evolved into Grow Your Business. But retailers often don’t have the luxury of the long-term vision that made that strategy possible.
At the same time, they can no longer afford to operate in silos that pretend the internet is something out there beyond the realms of customer engagement.
In his keynote address at the Amplify conference, Deepak Advani, general manager of IBM Commerce, put out a simple question that is most revealing when a retailer can’t answer it: “How is your customer feeling today?”
“When you start putting different kinds of data together, you start to get a feel for what customers are doing, how they are doing it and, most important, why they are doing it,” he said. “We need personal, relevant and in-context conversations on that journey.”
Later, he elaborated in an interview: “A lot of people talk about social and about engagement. But sometimes they use aggressive marketing tactics from the old world and use the new medium and expect it to work the same way. If you’re engaging in social, you have to be authentic. You’re still marketing to individuals, but instead of going with aggressive sales offers, you have more success if you understand what makes the customer tick.”
This is the problem that a conventional e-commerce platform cannot solve. It is even more challenging when one considers the key factor behind social-driven shopping:
“People are more and more relying on word of mouth and putting far more emphasis on someone they trust,” said Advani. “Instead of a brand doing aggressive sales tactics, the more that brands are authentic in engagements with consumers, the more effective they are going to be in selling.”