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More start-ups to join e-commerce race

Regina Pazvakavambwa
By Regina Pazvakavambwa, ITWeb portals journalist.
Johannesburg, 02 Mar 2015
More new start-ups in SA are entering the e-commerce market, says PayGate's Peter Harvey.
More new start-ups in SA are entering the e-commerce market, says PayGate's Peter Harvey.

2015 will see more new start-ups in SA enter the e-commerce market, as well as continued growth and innovation by the established players.

This is according Peter Harvey, PayGate CEO, who attributes the sluggish job market in traditional corporates ? which is pushing a lot of young people to start their own businesses ? as well as the lower barriers to market entry, as factors driving the rapid growth of e-commerce start-ups.

"The state of South African economy is encouraging entrepreneurship - the youth can no longer rely on the stability of being an employee. South Africans are being forced to think outside of the box and be innovative. In turn, it's driving the start-up business."

Harvey points out online start-ups are agile and have little to lose; so even when these new businesses fail, they're able to adapt and try something else. "Things move fast in this market and we can't predict who the successes will be, but overall, about 10% of them do really well."

Nick Soper, head of digital marketing at Fontera, believes there will be more e-commerce players entering the mix throughout the year.

He explains big e-commerce businesses are here to stay, but there is a gap for entrepreneurs in the market to develop a niche market and build a community around it.

Soper says start-ups that can deliver a unique and personal experience will do well in their respective niches, unlike big e-commerce stores that struggle with giving their customers a personal experience.

"Often the smaller merchant is more hands-on and focus is very much customer-oriented; this makes for a very attractive seller-buyer relationship."

Also, e-commerce start-ups have the advantage of having a data-driven culture from the onset, says Soper. They have an opportunity to use data-driven optimisation techniques that can drive growth and revenue very quickly, he adds.

"They naturally gather, and act on customer data and insights almost immediately to deliver targeted communications."

Start-ups can generally be a lot more flexible in their offering because they are not worried about maintaining a brand identity and they operate on smaller margins as their overheads are lower, says Harvey.

"The e-commerce space is a big playground and there is a lot of space for the start-up as well as the established merchant."

Soper believes e-commerce is about price, product availability and fulfilment; therefore, start-up companies that are making money, or at least the best-funded ones, will continue to grow by being able to deliver 'cheap' products quickly.

The big disruptor is going to be a great strategy, says Soper, adding transacting online isn't going to be enough, but solving customers' problems when and where they need it, will be the key.

"The start-up merchant with a lesser budget will need a defined strategy focused at an identified and contained market. Not only will this ensure the start-up gains maximum exposure, but will also reduce the merchants' exposure to possible online fraud within the initial phase of their business life," says Harvey.

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