E-commerce Barriers in South Africa

E-Commerce seen as an IT initiative: In the views of some of the key executives the idea that e-commerce is an IT
initiative was quite prevalent. That idea together with the Chief Information Officer’s role in many organisations is
often not weighted sufficiently relative to the directors of product areas. In businesses where e- commerce is doing
well, the product areas are driving it as an alternative channel to sell product and the CIO a key role in influencing
strategy. Although there are various approaches it is advisable to ensure that it does reside in a product area and that
the IT department are partnered to deliver the correct solution and architecture.
SA consumers are not ready : A widely held view is that due to the socio-economic challenges faced by SA, there are
too small a percentage of the population who has access to computers and internet. This has largely been shifted
through the growth of the smartphone, high speed mobile internet and the development of mobile applications for
commerce. There is also a belief that South African consumers will not readily pay delivery charges and that many are
either without credit cards or not trusting their use in online systems. Key to bear in mind here is the massive growth
in SA’s middle class, which in 2008 before the global financial crisis was said to be growing by 12, 000 people per
month.
The High Start-up Cost: A common concern among the executives was the cost of starting out in online retail. In
further investigation a common thread emerged which might point to the source of this concern. That is the lack of
knowledge of e-commerce which has caused many of these retailers to engage overseas vendors or consultants to
investigate the opportunity. These vendors often return expensive proposals from a capital investment perspective
but also in ongoing support and maintenance from an off-shore location. In our scanning of the SA e-commerce
solutions provider landscape we found that SA in fact has a plethora of internationally recognized online solution
providers. Some of these key facts are that companies like Kalahari.net is completely built and supported in SA.
SA does not have sufficient skills: There was a concern regarding the scarcity of skills in SA in the IT and
particularly in the e-commerce arena. This is mainly a genuine concern and businesses need to commit by
investing in supporting the training of additional resources in this arena.
Starting out is risky: A fairly common concern is that a retailer might invest a fair deal on capital and effort
only to have either too few benefits delivered or have the venture fail. Public failure could lead to the erosion of
customer service and brand equity. There are many alternatives here to reduce some of this risk. Collaborations are
probably the surest way in which to share risk and introduce an external partner. These can take the form of
collaborations with implementation partners, current online businesses, with fulfillment and delivery partners or
even partnerships with hosting companies.

South African retail and the impact of e-commerce

The SA consumer and the digital divide
We conducted a survey and held focus groups which had a sample population of 62 which cut across the Living Standards
Measure range (50% below R300k p.a and 50% above). In order to understand current shopping orientation, their level
of adoption of online retail, the perceptions and opinions regarding online and to identify any commonalities. Our findings
highlighted the following:
 People across all the LSM groups and across age, sex and race boundaries are adopting online retail in some
form and measure. In many cases they were not even cognisant of the fact that they were.
 A high percentage (39%) transacts using their mobiles, slightly more than those who only use their PC’s.
 With the mobile purchases, airtime, ring tones, music and other mobile related products are popular.
 One of the most popular areas of spend (57%) was with airline tickets and event tickets, while hotel bookings
ranked at 47%. This was most prevalent above the income level of R300k per annum.
 Groceries and apparel had the least optimistic response with many citing a lack of knowledge.
 The general consensus (85%) was that their experience was satisfactory, but with concern over security and
privacy is shown by only 57% indicating comfort in this area.
When asking our focus groups for suggestions for the future, they said:
 They wanted to see more price comparison services available through online.
 They cited the need for more effective delivery services for goods.
 They also suggested that a focus on responsiveness to consumer complaints would go a long way towards
developing trust. Together with this the need for more clarity and education on the benefits and the
mechanics of online would also provide confidence.
Research findings
E-commerce is growing in South Africa. All our research shows retailers are responding to the consumer demand for an
online presence. In our interviews we met with Executives who were passionate about e-tailing:
 Those who were aware of its importance and exploring possible strategies
 Those that thought a presence for information was sufficient10
 Those who thought it was not significant in SA.

The 5 Most Significant Consumer Trend that helped Ecommerce growth in South Africa

1. Growth in e-tailing
In South Africa, a survey of online retailers showed that only 7%, predicted growth of by 40% or less in 2011, whilst
77% believed that their growth would be between 41-60% (World Wide Worx, Online Retail in SA 2011/2012). This is a
critical indicator of confidence in the online retailer which is based on their belief and understanding of the growing trend
toward e-tailing. The table below shows that Online retail sales in South Africa is small relative to the total retail sales, its
growth rate is substantially higher (World Wide Worx, Online Retail in SA 2011,118).


2. Buying Apparel and Groceries online
The earliest growth experienced in online sales was in the arena of CD’s, books, flight tickets and electronic equipment.
3. Consumer shifts toward Mobile commerce
Studies show the growth of mobile commerce and their use as touch points and a consumer who seamlessly switches
between them to transact. The popularity of the smartphones and tablets is a big driver of a shift in consumer behaviour.
Number of Global Mobile Payment Transaction Types in Millions
By 2015, shoppers around the world are expected to spend about $119 bn on goods and services purchased via mobile
phones. This number represents about 8% of the total e-commerce market, according to ABI (Research.86).Mobile online
shopping is reaching critical mass, says senior analyst Mark Beccue. In the USA, mobile shopping rose from
$396m in 2008 to $1.2bn in 2009. A more than threefold increase in one year indicates significant consumer interest.”
These numbers, however, are dwarfed by mobile online shopping in Japan, which exceeded $10bn in 2009
In the past decade, the only serious category of business usage of mobile commerce in SA has been airtime purchase. With
ringtone and phone wallpaper purchases, this category resulted in the market passing the R2-bn mark in sales in 2004, from
R50m in 2000. Where making purchases in exchanging airtime for a logo for example, consumers do not realize the
transaction has financial value (World Wide Worx, Online Retail in SA 2011,49). A study at the end of 2010 shows 52% of those
using cellphone banking said they had purchased airtime via their phones. A minority claimed to have made
regular purchases using their phones: a mere 11%. Only 9% of cellphone bankers claimed to have purchased pre-paid
electricity via their cellphones, while 5% had used cellphone banking to make a once-off payment to a retail store (World
Wide Worx, Online Retail in SA 2011,50). While people do not intend directly buying from their phones, 10% to 15% of the
revenues from retail are expected to be influenced by mobile applications this year: amounting to as much as $340 billion in
total retail sales across the USA, France, Germany, and the UK (World Wide Worx, Online Retail in SA 2011,51).
Our interviews with large retailers in the USA, Canada and the UK produced varied feedback in that the North American
markets seems to show a slower adoption rate of mobile commerce than in Europe and the UK. Industry experts we met such
as Google Canada, Microsoft and solutions provider, Buddy Media supported the idea that developing countries like SA have a
unique opportunity to use Mobile commerce to leap frog the developed world, since it does not have the legacy of PC based
internet access models to the extent that the developed countries do. Retailers in these countries should be more readily able
to develop and drive growth in mobile without having to track through the full evolutionary cycle of e-commerce.


4. Multi-channel as a trend
Future Operating Model
The cross-channel challenges
To be truly cross-channel, says Verizon Business, retailers need to enable “buy and pick-up anywhere”, but pay once in
one channel. Verizon says that within this broad integration challenge: “Retailers are finding themselves in the
information business. To be competitive, it‘s important for them to know what motivates customers to buy and what
creates loyalty so that targeted marketing campaigns can be developed. The best weapon retailers have is their own
data. Ironically, capturing data across channels can help them better plan and target cross-channel strategies. They need
to analyze merchandise performance. Gaining important insights in areas like product demand, price and promotion,
category performance, and assortments, can help optimize product mix, forecast inventory swings, and even improve buying
positions with vendors. To realize full value of this data, they need to have it consolidated, integrated, and accessible,
however identifying, gathering, storing, and securing data requires a fair amount of overhead. IT investments are needed.
Inventory management has always taken an inordinate amount of effort. Accurate visibility and forecasts help reduce stockouts. Automating inventory and establishing visibility are just the first steps. Inventory systems must be integrated across
channels to provide product consistency in quantities and in price and description. The greatest improvement comes when
the supply chain is open and integrated with distributors, wholesalers, and suppliers” (Verizon Business, 2011).
Our interviews in the international markets showed a consistent focus on moving to multi-channel by large retailers.
Although the designs and approaches vary in some form, the underlying principle of selling to customers through channels
that they want to shop is prevalent. The common challenges both locally and internationally are to integrate customer data
in a useable and value adding way and to build flexible supply chains.

McKinsey touts the multi-channel retail strategy known as triple-play, a combined approach that integrates retail store
strategy with online and catalogue sales. They conclude:”Catalogues attract new customers, drive repeat business, and
coordinate product lines; the Web offers convenience, product information, and quick updates for pricing or promotions;
stores, by contrast, allow shoppers to handle and test goods before they buy them. The challenge for triple plays is to
understand how customers use each channel, to match products to that channel’s economics, and to create a consistent
customer experience across all of them. Add the contact centre, in a four-play strategy, as defined in this paper, and the
customer is provided with instant access to personal assistance, while the store has an opportunity to both increase the size
of the purchase and the level of customer satisfaction. While such four-way strategy is not tried and tested, and no data is
available on its success, it represents emerging strategic best practice (McKinsey, 2011)”.
5. Social Media as a Trend
Empowered to stay connected to multitudes of people, communities, groups or businesses, enabling them to assimilate,
contribute, chat, share, collaborate, purchase and work, has influenced behaviour (L. Freedman – Etailing Group 2011).
Facebook has more than 400 million users and in the USA their members spend an average of 14 minutes daily on the site
(Accenture, Social Networks enabling the Market of Me 2010:3-4). Globally Facebook, which is by far the largest social media
force, has 750 million members (2011: Mark Zuckerberg). Analysts and industry experts are now predicting that Facebook has the
potential of becoming the de facto Internet of the future. In an interview of Buddy Media UK MD, we gleaned better insight into this
idea, in that:
 The Internet lifecycle started with the Availability of information to the Selling of goods and services to the
Organization and orchestration of resources, like Google and then to the Personalization of online resources
around individuals needs – Facebook!
 Businesses are using Facebook to conduct Customer Relationship Management, engaging consumers into
community like conversations about product, service and aspiration. This engagement is proving so powerful that a significant rethink of the use of traditional “push” communication through traditional media sources, is
evident. An example of this is the premium retailer, Burberry, which has recently enjoyed a massive resurgence
in its popularity, is rated as one of the best business users of Facebook, by the Buddy Media MD. Interestingly,
Burberry received 6.5 million “Likes” on Facebook and the question is to what measure its advertising spend
with fashion magazine, Vogue, is still significant, since Vogue has a readership of 1.6 million people. The
diagram below shows the Top 10 Brands on Facebook and the graph shows the margin by which people access
those brands through Facebook instead of through search engine, Google.

Social media begins with people and grows with collaboration

“Several years ago, integrated
marketing was a big buzz,” Christa
Carone, Corporate Vice President
and Chief Marketing Officer for Xerox,
says. “Now we’re talking about brand consistency across these media. I’m
helping to drive that. What I’ve learned
is that you have to start with your
people first and a commitment to the
integrity of the brand, then give them
some kind of guidelines so they can get
started. I’ve been fascinated looking at
how the community evolved. When you
let people go [ahead with social media],
they’re excited, they’re smart – have
high aspirations where you can take
social – it’s really exciting to see this
creative energy.

“It’s unsettling for some people in our
organization to feel empowered,” she
continues, “because in the past we’ve
said ‘No, you only speak to the media
if you’re in PR,’ for example. Now we’re
saying, ‘Anyone can speak.’ We have
our guidelines for developing Facebook
pages, Twitter handles, and lines are
blurring between personal and business
online personas. We hope to empower
our sales force more to use social.”
With Best Buy’s Twelpforce – where
more than 3,000 Best Buy in-store
employees answer consumer questions
via Twitter – and other digital and social
initiatives, Best Buy has made the most
of its early-adopter clients to build
multi-way conversations that support
their core business goals.

“[The evolution of our social strategies]
is happening fast, from an organizational
perspective,” Adobe’s Travis says.
“Part of being a leader in social is
being genuine. We’ve reorganized our
organization to be a hub and spoke,
not to regulate but to provide shared
learning, a lot of dialog between the
hub and spokes.”
“We have corporate communications,
but we also have call centers and so
many other touch points,” Kimberly
Kadlec, Worldwide Vice President,
Global Marketing Group for Johnson &
Johnson. “We need to start to empower
some of the areas beyond marketing
and advertising. Whatever touches your
consumer needs to have a consistent
tone and with a human voice; we’re
focused on that.”
“We try to get our marketing people
into the call centers at least once a
year so we stay connected,” Steve
Fuller, Senior Vice President and CMO
for L.L.Bean, says. “It humanizes our
customers; when customers become
numbers, bad things happen. It also
simplifies marketing and promotion
messages. Talking to your customers
will often give you a very different
perspective around a marketing
effort’s effectiveness.”

Successful Facebook Outputs combine social networks with consumer / brand interactions.

Dan Rose, Vice President of
Partnerships and Platform Marketing
for Facebook, encourages brands
to “take the marketing funnel with
awareness at top and action at bottom,
and turn it into a circle where you have
you and your friends at the middle.
Make it faster and easier to find and
share with friends.”
For example, Ticketmaster benefits
from the friend-focus of Facebook
because people tend to go to concerts
with someone else. They added the
capability for Ticketmaster customers
to share the news about their recent
ticket purchase with friends. For every
share that happens on Facebook via
Ticketmaster, Ticketmaster generates
more than five dollars in ticket revenue,
and they track these results daily.

Restaurant reservations site OpenTable
added the “like” button for its restaurants
and sees a 25% increase in reservations
and a 200% increase in member
registrations at OpenTable.com,
once the Facebook user sees the
restaurants on Facebook.
To gather more product reviews,
Benefit Cosmetics allows customers
to add reviews on the Benefits
Facebook page, then those reviews
flow automatically into Benefit’s
product pages. Within two weeks,
through Facebook, they got fans to
review 80% of their products.

To Marisa Thalberg, Vice President of
Global Digital Marketing for The Estée
Lauder Companies, social media is
the ultimate conduit to high-touch
relationships, building on Lauder’s
one-to-one selling in stores. Social
media lets consumers feel a sense of
connection with the brand and with
each other. On Facebook, Estée Lauder
tries not to push a marketing message;
rather, they want to be authentic in the
brand voice and make it appropriate
for social media.
“You want to be able to recognize the
brand’s voice – it’s the hardest thing
to get right, in my opinion, to make the
voice consistent but make it relevant
to social,” Thalberg says.
Social also enables an “unprecedented
intimate brand relationship,” Thalberg
says. “Ultimately, communications
are merging and uniting around our
consumer. She expects us to come to
her, so we need to foster a continuous,
intimate, varied experience for her,
depending on where she is and what
she wants, when she wants it.
“Brands can validate the consumer,
but now she also validates our brands,”
Thalberg says. “Social media enables
association with brands to literally
act as badges. [Social users share]
the brands they associate themselves
with, such as the bag you carry. This is
where brand equity is so powerful.”
“Social is fundamental to Adobe,”
Travis says. “We have always engaged
with our customers – Adobe labs and
forums are part of our DNA. Digital for
us is the backbone of our marketing;
we spend greater than 70% of our total
marketing spend on digital. We’re trying
not to think of social as a media type
– it’s a fundamental shift in our culture,
customers want to engage with us. We
continue to see how we can integrate
it across everything we do.”

Emerging Trends N Best Practices in Global Ecommerce

As social media, app stores and global availability become standard, many companies are looking to enhance the online customer experience.While retail and other transactions via Internet are customary, more than ever companies are simplifying the ways in which customers interact with their website and ultimately make online purchases. Here are eight trends happening right now in global e-commerce that seek to enhance the user experience:

Micro-payments – Among the most revolutionary changes in the coming months—not years—is the use of micro-payment systems from a variety of financial firms, e.g., Paypal, Visa, WesternUnion, among others, including banks. This trend is facilitated by the W3C working group that approved these protocols and technical standards for the interworking. These systems will change not only how we carry money but how we value money and think about purchases. (Consider how a purchase of $4.99 feels in a mobile app store vs. at Dunkin' Donuts.) Payment systems that make it easier to buy online, coupled with mobile technologies will accelerate the usage of global e-commerce applications.
Mobile technologies – More people access the Internet on their mobile devices than on any other device. We are rapidly approaching the time (if we are not already there) where designs must be created for the mobile Web first, and for the desktop second. Mobile technologies facilitate comparison shopping; with the advent of barcode reader apps and price-comparison databases, a consumer could snap a bar code in Walmart and quickly reference product reviews and prices on walmart.com (or compare prices with Walmart competitors). Mobile technologies also facilitate impulse buys – especially with the advent of micro-payments tied to the mobile device. Just recently, Starbucks customers can not only place an order with their Smartphone, but also make a purchase.
Social media – As Facebook has become the most visited site on the Web, the role of social media, including Facebook and its local clones such as Twitter, is increasingly important. Social media sites increasingly act as points of entry to e-commerce sites, and vice versa, as e-commerce sites build rating, loyalty and referral systems tied to social media. Group buying (e.g., Groupon) is also gaining mainstream ground, with many "deal of the day" sites competing for an increasingly savvy consumer base, but improvements lie ahead as the social aspects and user experience are refined.
Fulfillment options – I believe that users will want to have multiple fulfillments and return options when interacting with a vendor: ship to address, courier, pick-up in store, return to store, etc. Having many fulfillment options is how customers view their overall customer experience. Some companies have made a business proposition online by being exceptional in service to the online channel (e.g., Zappos).
Global availability – Increasingly, consumers want the availability to buy products from foreign sites and have them delivered locally. Thus, currency and customs will be of growing concern to many online retailers. Along with this, there will be concerns with local privacy laws and restrictions on related data collection and storage.
Localization – While the trend is to globalize, what’s often more important is to localize. User Centric’s research clearly shows that sites that ‘feel’ local – with proper imagery, language, time/date, weights/measures, currency, etc. – resonate far more than sites that seem culturally distant or sterile.
Customizability – Consumers want control, and want to be able to design the details of the items they purchase.
Time-based availability – Some of the hottest and most successful sites are those that have a time-critical response component. Sites like Groupon, Gilt and others capitalize on the perception of limited-time availability. Creating a sense of urgency drives traffic and purchase behavior.

Can FACeBOOk Become ReTAIl?S ?NexT GOOGle?

“Social” has of course been the buzzword of the past few years. Now the inescapable fact that Facebook
has more users than there are Americans and that the company has made several well-publicized
moves in the commerce arena mean “social commerce” will be a popular conversation topic in the
months to come.
1
Some of the boldest prognostications have been that Facebook will be “the next
Google.”
2
The most common refrains supporting that perspective were variants of the following:
“With hundreds of millions of users, it will affect everything, including commerce.” (CEO,
social commerce vendor)
“Shopping is inherently social, so it would make sense for a social network to play
a significant role in the shopping process.” (VP, online marketing, $1 billion-plus
multichannel retailer)
However, we would be remiss to not point out that there is no shortage of skeptics when it comes to
Facebook and particularly around commerce. Computer scientist and author of the acclaimed book
You Are Not a Gadget: A Manifesto, Jaron Lanier disparagingly describes the mad frenzy around
Facebook as “digital Maoism.”
3
Data that Forrester has collected with Shop.org for two years has
reflected that social networks fail to drive meaningful revenue for eBusiness professionals in retail,
have a questionable ROI, and are generally ineffective as customer acquisition tools

Furthermore, while Facebook proponents would argue that the best of Facebook commerce is
yet to come, the fact remains that, in spite of an open architecture and several hundred thousand
developers making efforts to develop useful social shopping applications, few, if any, have managed
to create a breakaway success. In contrast, paid search was viewed as a home run in Google’s early
days. Social networks, however, are not yet viewed quite as positively by retailers (see Figure 1-3).
To better understand these findings, we spent eight weeks interviewing nearly two dozen technology
vendors, retailers, and interactive marketers to craft a perspective on the topic. Facebook did not
respond to requests to be interviewed prior to publication of this document. The questions we set
out to answer were the following: How are eBusiness professionals in retail using Facebook? And
why hasn’t Facebook been able to generate more for eBusiness professionals in retail?