R200-million in Internet-generated spending in South Africa has been directly measured in a new survey on online commerce. This is a more than ten-fold increase on the figure for 1996, according to "Birth of the virtual market: The 1998 South African Web Commerce Survey", to be released this month. The research, conducted by Internet specialists Arthur Goldstuck and Cathy Stadler for Media Africa, indicates a sharp rise from only R6-million in 1996, and projects a market worth up to a billion rand in 1998. These figures refute a stream of opinion over the past year that online spending was a non-starter in South Africa. "Those who are skeptical about Web-based commerce on the basis of low initial figures are like people who doubted the potential of the telephone based on how many calls were made on the first day of Alexander Graham Bell`s invention," says Arthur Goldstuck. "The telecommunications industry is now worth billions, and we will see online spending growing to similar proportions, only much faster. The trend is clear." The primary motivation for the research was the widespread belief that South Africans were completely unwilling to spend money online. Anecdotal evidence had suggested this perception to be false, as several companies had already advised the researchers of great strides in online selling. "Media Africa`s survey of dial-up users last year showed that the market had reached a critical mass, and this obviously had a direct impact on online sales," says Cathy Stadler. "Online retailers almost unanimously agreed that South Africans were ready for online spending, but in most cases retailers had not yet adequately addressed the online marketplace or security concerns. Businesses that took part in the survey had an enormously positive expectation of the Internet in 1998." Two-thirds of companies expected to make a profit from their Internet presence, and most expected to more than double their Internet-based turnover. The figure of R200-million in online spending in 1998 was accounted for by a mere 80 companies. When this figure is extrapolated to the broader commercial web environment, it points to R500-million spent in 1997, and an expected expenditure of R1-billion in 1998. Business-to-business commerce will far exceed this number. On the negative side, many companies report a loss or a low return on investment, despite high levels of spending. In many cases, this was as a result of high expenditure on development of Internet infrastructure. Security demands will keep such costs relatively high, but "out-of-the-box" solutions will attract many small traders to the Web. The arrival of widely accepted transaction security systems and the growing understanding of electronic commerce will see online shopping entering the mainstream in the course of 1998. Failure to effect adequate strategies will, however, limit the returns for many retailers. Despite higher figures than expected, it is clear from the research that 1997 saw the birth of an online spending culture in South Africa, and that 1998 will see that culture being extended to a far more broad-based retail and consumer market. Internet-based business-to-business transactions will become a major market factor. Clearly, this virtual market is about to take off dramatically from a low base. We have merely seen the birth of this marketplace in 1997. To purchase the full 60-page report, contact Tania Loftus on 083 449-6038
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