Some e-commerce providers say Christmas was a big bonus, with revenue skyrocketing as customers turned to the Web in search of bargains. Others say December was a slow month. Site administrators say consumers are becoming more accustomed to Internet buying, but are still concerned about the security of online transactions.
How much actual profit is being derived online is anyone`s guess.
M-Web, which opened its Shopzone mall only four weeks before Christmas, says big-ticket items were popular, with an average purchase price of around R540. M-Web Business Solutions manager Eddie van Rensburg says this average is higher than expected, buoyed in part by large purchases of computer equipment. The site claims sales of over R2 million for the month of December. Topping M-Web`s sales list was perfume, followed by flowers, golf and computer accessories.
But Van Rensburg says Shopzone has seen an increase of at least 30% in transactions during January. "We didn`t see a Christmas bubble, we just saw e-commerce doing what it does."
ECnet says December saw an increase of more than 600% in the number of transactions concluded, beating expectations of 400% growth. That is just about double the 331% it reported for the 1998 season. "The greater than expected increase can be attributed to South African consumers becoming more confident in purchasing goods over the Internet," says marketing director Paddy Gray. ECnet`s shoppers preferred sport and leisure items, followed by flowers, books, wine and electronic goods.
The average ECnet transaction was worth R233, lower than the approximately R300 the company reported last year. "We have an even broader range of products this year," Gray notes. Some transactions had values as low as R10. "High-volume, low-value business drove the average down."
Lourens Botha, MD of McCarthy Online, has a different story to tell. The Megashopper site his company runs has had a 30% average month-on-month growth since its launch in the middle of last year, he says. "Up to 15 December we saw business similar to other months. Then it just slumped."
Investigation revealed two reasons for the sudden decline in business. One was the large-scale exodus of Gautengers to the beaches - without their PCs. The other was wives. "We interviewed females who told us this is the only time of the year they can take their husbands to the stores," says Botha.
TheShoppingMatrix, which specialises in DVDs, saw a 207% increase in revenue from November to December, says MD Andro Engelbrecht, but the number of products sold increased by more than 85%. The average purchase was R225, similar to that of ECnet. "We did not have a massive advertising campaign," Engelbrecht explains, "and the people who come to the site are interested buyers who like the products and service." The interesting thing, he says, is the growth in registered buyers. In the 10 months preceding November, the site had 600 registered users. In November and December 2 000 more were added.
Bug? What bug?
Y2K worries seem to have played no big part in online buying patterns.
"We have certainly had no anecdotal reports of customers being worried about Y2K," says ECnet`s Gray. "But I do think there would have been more businesses online and a bigger choice had it not been for Y2K."
"[Y2K] probably did have an influence, but we did not feel it," says Van Rensburg. A lot of his merchants opted for basic catalogue systems, with very little back-end integration and transactions concluded offline. This, he believes, may be attributable to Y2K concerns.
International trends
Jupiter Communications estimates that consumers spent $7 billion online between the beginning of November and the end of December.
Giant America Online saw its members spend more than twice as much online compared to the 1998 season. The company says members coughed up for $2.5 billion worth of merchandise this year, up from $1.2 billion last year. Average spend was in the region of $300, about R1 500 more than the M-Web average.
Amazon.com reported a 150% increase in its fourth quarter sales, with $650 million recorded. Amazon concluded only $610 million in sales for the whole of 1998.
The danger of not fulfilling orders was brought home by a lawsuit filed by a disgruntled American mother. When Toys "R" Us did not deliver the toys Kimberly Alguard had ordered, she took the store to court. The basis of the suit is fraud, as Toys "R" Us did not deliver in the three to six days guaranteed when the order was placed.
Not only the numbers count
Research by Andersen Consulting shows almost half of those who shopped online experienced problems of some kind. Yet 73% of the respondents to a survey said shopping online still beats the brick-and-mortar alternative.
"Shopping on High Street isn`t painless," comments Calum Russell, Microsoft South Africa business marketing manager and ITWeb columnist. "Traditional retailers also suffer from stock problems, while long queues and chaotic parking lots result in unpleasant shopping experiences." He says customer service remains the key to keeping customers happy and coming back for more.
According to the Andersen research, 35% of those who suffered at the hands of one online store simply turned to another.
Security first
Merchants believe consumers are still worried about the safety of their credit card information on the Web.
"We certainly believe there are security concerns," says ECnet`s Gray. She puts this down to a simple lack of knowledge about how well the cardholder is protected. "As soon as you explain to them that it is actually the seller taking the risk, you can see the veil lift from them."
"Consumer confidence is on the up," says M-Web`s Van Rensburg, "but there were a few nasty incidents with sites defaced that caused concern." He notes that the widely reported cracking of the Computicket and Johannesburg Stock Exchange sites were equated with a lack of security in general. "People point to that and say that their information is not safe."
Megashopper says its customers show absolutely no concern about security - because the business does not conclude transactions online. "Most customers don`t leave their details on the site," Botha explains. "They send through their order and one of our operators phones them back." He has doubts about the benefits of a fully integrated back-end system, although he admits human intervention is expensive. "People feel more comfortable speaking to a person." And it nicely sidesteps security concerns.
Security is not a big issue for TheShoppingMatrix either. Engelbrecht says the site does not rely on credit card transactions only, but allows direct deposits as payment method. "Some 40% of our transactions are not done by credit card," he says. "People don`t have to use credit cards, so they aren`t worried."
Jaco Grobler, manager, Global Risk Management Solutions, PriceWaterhouseCoopers (PWC), says perception can be a big problem. "Often proper security is in place, but merchants don`t communicate that to consumers." Not that all sites are fully secured; he believes there are often holes that still need plugging, and management of any security system is important. "It doesn`t help that the average customer is illiterate in terms of security."
Consumers seemed to have become more educated about the risks involved in online transactions, if not the measures provided by merchants. Grobler says the media is also to blame for poor customer confidence. "They are quick to jump on a story when a Web site is compromised, only highlighting the negative and destroying all customer confidence."
One solution Grobler proposes is seals of approval such as WebTrust or the PWC BetterWeb. He says these seals need to be underwritten by a well-known authority such as an audit firm to have real value. With these associated with both security and privacy assurances, buyers may be more inclined to shell out without fear.
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