SA`s online retailers are looking forward to a better holiday season than ever, with around 25% year-on-year growth on average and holiday sales spikes of up to 65% over the usual monthly sales.
Andy Higgins, MD of online auction site bidorbuy.co.za, says his site "has seen an amazing year", with metrics such as turnover, number of unique visitors and number of page impressions doubling.
"We had a record month in October exceeding R2 million in turnover from over 5 700 transactions traded through our site. We therefore expect a great Christmas period exceeding R6 million in trade goods for the three-month period from October to December," says Higgins.
During the same period last year, transactions conducted on the site totalled R2.3 million.
Higgins feels the market is starting to mature, with some South Africans now willing to invest in costly items online. For example, he says, one of the most valuable items sold on the site recently was a six-carat tanzanite gem, which sold for R57 000.
Warren Moss, GM of Digital Planet, also sees "tremendous growth" in the local e-tail market this year.
"Consumer confidence has grown in e-commerce and security is much less of an issue. Bandwidth and connection problems are on the decline and this, coupled with good online deals, is driving this growth," he says.
Digital Planet has seen an 80% increase in the number of orders placed on the site over last year, and Moss is confident this growth rate will continue into next year. Site traffic has increased by 150%.
Moss says the holiday season comes early for e-tailers and peaks around the end of November and early December. "Last year orders increased by 65% and this year we are expecting similar numbers."
E-tailer failures
However, these growth figures are exceptions, says Arthur Goldstuck, MD of World Wide Worx, which will release its Online Retail in South Africa 2005 report next week.
"Our research indicates an average growth rate for online retail of around 25% for the past two years. Bearing in mind that this comes off a very low base - about R341 million in 2003 and R430 million in 2004, it tells us just how tough it still is to build a large standalone online retail business. Around a quarter of this revenue is generated during the build-up to the holiday season."
Goldstuck says the numbers from non-traditional online retailers, whose products are not regarded as retail products in the physical world, dwarf the traditional retailers.
"Kulula.com and SAA each by themselves generate more online revenue than all the traditional retailers put together. The secret lies in the product and its appropriateness to online purchasing. Buying an airline ticket requires merely that you be issued with a reference number, and that the seller ensures its entire network is updated with that reference number.
"Any physical product requires a logistics chain, and in SA the logistics for low-cost items are simply not financially viable. The more complex that product, such as groceries instead of books, the less viable it is to sell it online."
The consequence is that a third of the 750 or so retailers operating online in 2004 have closed down their Web sites. Despite this, says Goldstuck, this year`s research indicates that even more new sites have come online, suggesting the appetite for selling online has not diminished.
New players
In addition to established e-tailers, several new players have come online in recent months, and most say the holiday season outlook is good.
Shop365.co.za, which focuses on digital devices and launched in May, is expecting a surge in customers over the holiday season. Ivor Ingwane, owner and manager of IJI Trading, which trades as Shop365.co.za, says he feels e-commerce has shown significant growth in SA.
Onlineshopping.co.za, an e-commerce hub linking to up to 150 merchants, is also growing strongly since its launch a year ago. Owner Dale Maxwell says the company started with only seven merchants and four categories of goods, but has seen a great deal of growth in the past four or five months.
He says smaller, less expensive items such as DVDs, CDs, small gifts and flowers are still the major money-spinners in online sales.
"I honestly feel the South African market still likes to feel and touch expensive items such as digital cameras and laptops.
"Also, I think online shopping is very new in SA and people are still very sceptical of ordering online. I think they still like the human element, but I reckon in the next two years, it`s going to explode."
Critical mass
However, the Online Retail in South Africa report is expected to indicate a critical mass of online shoppers arriving only by 2009. This, says Goldstuck, is as a result of a phenomenon his company calls "the experience curve". This shows Internet users must be online for at least five years before they are comfortable with the security and convenience offered by online banking, and that online shopping typically follows only once online banking has been mastered.
"Those online retailers that hang in until then will benefit from being ready and having worked all the bugs out of the system," says Goldstuck.
"The newcomers that arrive then will be facing established brands, mature users and streamlined operations, but at least they won`t have to be puzzled about the absence of online shoppers, which is the situation many retailers face today."
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