Low-cost smartphones herald new market

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 07 Aug 2014
The growing pool of low-cost smartphones will bridge SA's technology gap.
The growing pool of low-cost smartphones will bridge SA's technology gap.

The entry of increasingly more low-cost smartphones in SA heralds both the eventual end of the feature phone - as well as a wider e-commerce market.

This is according to industry observers and comes in the wake of significant growth that has been seen this year in the number of low-cost smartphones coming to market. Just two days ago, Vodacom unveiled a R549 Android smartphone, while rival network MTN introduced its sub-R500 Android handset in January.

Analysts have pointed out that most people in SA access the Internet via smartphones ? which Simon Leps, CEO of Fontera Digital Works, believes has set the wheels in motion for what will ultimately be a "boom" in e-commerce.

He says, currently, the lack of Internet access is largely what is hindering SA's e-commerce industry. Citing the United Nation's 2013 State of Broadband report, he notes that just over a quarter of South African households have Internet access.

Uptake time

Leps concedes it will take a while before new Internet users gain the confidence and experience using online retail sites and become active online shoppers, but says - as Internet access improves and the newer generation plays into the future market ? the number of experienced users will begin to accelerate.

World Wide Worx MD Arthur Goldstuck says it is "wishful thinking" that low-cost smartphones will boost e-commerce anytime in the near future. "Even at the high end, mobile commerce is only just beginning to happen." According to the Digital Participation Curve theory, it takes about five years for new users to become active and consistent ("the five-year gap").

Leps notes that doing research online and making the purchase in-store - as well as doing a click-and-collect purchase ? are all parts of e-commerce. "E-commerce in SA is exponential currently and will be for a while as we're starting from such a low base. SA's online sales are about 1% of total retail sales, [while it is] about 12% in the US and 16% in the UK.

Ovum analyst Richard Hurst sees a huge opportunity in terms of growing e-commerce services "and the smartphone will be central to this, as in many instances the device will be the first departure point for users seeking to gain access to digital services such as e-commerce, information and other services".

Herman Singh, Vodacom's managing executive of mobile commerce, believes Christmas this year will be "transformative". He says SA will see a massive amount of smartphone take-up, and of migration of commerce.

He refers to mobile money technology, such as the recently overhauled M-Pesa service, as "u-commerce" - meaning universal commerce - and says the boundaries between the physical world and the virtual world in payments are starting to dissolve as people realise the value of cashless transactions.

Approaching extinction

Industry observers say the growing pool of low-cost smartphones also spells the end of feature phones. Singh notes Vodacom shipped a million handsets last year Christmas, a quarter of which were smartphones. He estimates this year may see that fraction rise to a half.

Goldstuck says there is no question that feature phones are diminishing rapidly in penetration, while smartphones are rising rapidly. "The key is that the cost of an entry-level smartphone is coming down and, at a certain point, it won't make sense to have a feature phone anymore."

"Feature phones will eventually go the way of the old dial telephone; they will be extinct," says Leps. He says phones are not just telephones anymore - they are communication devices. "It's a worldwide phenomenon."