South African online retailers are experiencing explosive growth in the market. However, some individual companies are finding it harder than expected to stay afloat in the industry, according to both analysts and the e-tailers themselves.
In anticipation of a World Wide Worx report detailing online retail figures, MD Arthur Goldstuck says the industry has shown 35% growth in 2007. The 2006 figure represented 688 million transactions, excluding cars, air-travel and accommodation bookings.
"The market is growing; there is a big turnaround because users are showing an increase in experience," he says.
NetFlorist MD Ryan Bacher agrees, and attributes the growth to the increasing popularity of online consumerism and improved Internet bandwidth, which has sharply increased the company's ability to receive and process orders.
The company this week delivered its 500 000th floral arrangement amid the recent upsurge in online consumerism.
Bacher says NetFlorist has shown a 43% growth in this financial year, up from last year's figure of 36%. This translates into around 11 000 flower and gift deliveries per month, outside of special occasions such as Valentine's Day.
Kalahari.net is also growing steadily, as Gary Hadfield, CEO, says it is experiencing in excess of 30% year-on-year growth.
Bad seeds
However, according to Goldstuck, not all companies are doing well. "Twenty percent of all e-tailers close each year, because managing an online business is more difficult than most individuals anticipate. Infrastructure needs and costs are generally higher than most people would expect."
ITWeb reported last month that another possible reason for e-tailers' failure was the lack of insight into the end-user. For some businesses, this led to a high proportion of visitors to transactional sites abandoning their baskets during the checkout process, often because of the complexity of the transaction procedure.
Although many companies are experiencing significant revenue, this does not equate to profit, says Goldstuck. "Many companies are losing money because, despite high revenue, the costs to run an online retailer are not what they expected."
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