Pure-play retailers and international retail giants like Amazon are making inroads into the South African market as local consumers are displaying a greater-than-expected tendency to shop online.
So says Jessica Knight, senior executive at UCS Solutions, a provider of systems for the retail value chain.
Knight notes that even with the number of local online shoppers being higher than anticipated, online retail has not taken off to the same degree in SA as it has in some of the more developed markets. Locally, online encompasses only 1% of the total retail market, in comparison to around 8% to 10% in the US and Europe.
This has caused many local retailers to see the online channel as an unnecessary expenditure, claiming that a distinct lack of Internet penetration means the average consumer is not really geared up for online purchasing at the present time, says Knight.
According to Knight, the two primary inhibitors for mass adoption are insufficient Internet access and credit card usage fears. "Between 30% and 40% of the population now has access to the Internet and increasingly this is via mobile devices. Some sites offer EFT and cash-on-delivery to overcome the credit card barrier."
She notes that a recent survey conducted by UCS Solutions indicates South African consumers are, in fact, a step ahead of these retailers, with many far more educated in the ways of online transacting than most local retailers have given them credit for.
More critically, Knight says, the survey also indicates that a large percentage of those who are transacting online are purchasing from pure-play retailers or even from international companies. This, in turn, translates directly into lost earnings and market share for local brick-and-mortar players.
"In a market where overall retail growth is under pressure, the pure-play retailers - both locally and internationally - have made inroads by offering the consumer convenience, competitive prices and choice. However, those brick-and-mortar retailers who have an omni-channel offering generally see the benefits in terms of increased overall spend per customer," Knight says.
She adds that in the research, UCS Solutions found the drivers of online shopping vary by category - for commodities and groceries, convenience is the primary driver; for electronics, shoppers consider price; for books, clothing and music ? it is primarily about greater choice, she explains.
Knight also points out that UCS Solutions recently conducted a mystery shopper survey of 35 online retailers - both local omni-channel and pure-play retailers, and UK online players who deliver to SA.
"We found the South African players performed well on the 'transactional' aspects of the experience - reliable fulfilment, good customer service and varied payment options - whereas the UK retailers generally offered a much richer, more engaging customer experience to drive higher conversion and repeat purchases."
She believes this is probably reflective of the relative maturity of the two markets and the local 'customer journey' will evolve. Some of this depends on the use of more sophisticated technology such as recommendation engines based on advanced analytics, she notes.
According to Knight, the two primary inhibitors for mass adoption of online retail in SA are Internet access and credit card usage.
"It is often tempting to look at the size of the South African online market and dismiss it as irrelevant, but international research has shown that for brick-and-mortar retailers, increasingly around 40% of their in-store sales are influenced by online activity - product research or browsing for fashion looks or building a shopping list from online recipes - so the actual value of sales concluded online is the 'tip of the iceberg' in terms of the consumer's relationship with the retail brand across all channels."