Online shopping: risks and benefits

Local retailers are beginning to take note of the rate of growth of online shopping

July 20, 2013
Future shopping mall

Contrary to perception, it is more difficult to resist the urge to shop impulsively – whether for books, toys, fashion wear or computer accessories – when shoppers are physically in store than it is for online shoppers. This trend holds true even for online giants like Amazon which makes it ridiculously easy to impulse shop – it stores your banking details for you, cutting out several steps in the purchase process.

But this may change as the number of South Africans with access to the internet increases exponentially. This year an additional two million people have acquired regular access to the internet, last year the number was close to 2.5 million. “The number of South Africans with the propensity to shop online is reaching a tipping point,” says Arthur Goldstuck, MD of internet research company World Wide Worx.

Goldstuck was presenting alongside Mastercard divisional president Philip Panaino, at the release of Mastercard’s annual online shopping survey. The survey was conducted in 11 countries across the Middle East and Africa region between December and January this year. In South Africa the survey measures banked consumers between the ages of 18 and 64, who access the internet at least once a week.

Of these respondents, 54% say they use the internet for online shopping. In comparison 36% of Egyptians use the internet for shopping, 18.5% of Moroccans, 18% of Nigerians and 8.5% of Kenyans.

Goldstuck notes that simply having internet access is not enough to spur online shopping. “It comes down to the level of internet experience a user has,” he says. “We find that the typical user is only ready to transact online when they have been using the Internet for 5 years or more.”

This is the tipping point he is referring to. While there are 13m people online, just 4.6m have been online for five or more years and are comfortable shopping. But users with this history are growing. By 2018 Goldstuck calculates there will be 18.4m people online and of these 13.2m will have the propensity to shop.

This, he says, explains the drop in the percentage of respondents who are regular online shoppers – the number fell from 58% last year to 54% this year. “The number of shoppers is not keeping pace with the growth in the number of internet users. It is now up to the online retailers to convert them into shoppers.”

Two years ago it was the arrival of discount site Groupon that catalysed consumers into buying products and services online. Groupon’s growth has slowed, possibly as the novelty wears off, says Goldstuck. Last year it was fashion retailer Zando, with its huge advertising budget that spurred shoppers online. This year it remains to be seen who will do the job.

According to Mastercard, 76% of users will return to an online shopping site that they have used before and an incredible 91% of respondents said they were satisfied with the experience.

Online retail revenue has grown from R2.6m in 2011 to R3.3m in 2012 and is expected to hit R4.2m this year. This is less than 2% of total retail in SA – but at this rate of growth local retailers are beginning to take note.

The most popular site is Kalahari (with 46% of respondents having shopped there), followed by Groupon (with 14%), Amazon, BidorBuy and Takealot.com. A hefty 83% of shoppers also access a myriad of other sites including traditional retail and pure online. “The opportunities are massive and traditional retailers, which have been a little slow, are getting their act together. Companies like Cape Union Mart, Edgars and Mr Price are taking the internet very seriously,” Goldstuck says.

The increasing prevalence of local sites with good products, reliable service and free shipping means that fewer users are shopping online and overseas. “You can often get here,  and unless its a specialised item the high shipping costs act as a disincentive.”

The one category of spending that is not easily measured, but which is growing locally and abroad, is online gaming and ‘in app’ spending. This, for instance, would involve paying hard currency for donuts which are used in the popular Simpsons game. Many parents have discovered this, to their cost.

The one category that is now massively online, but whose spend is not included in the revenue calculation is airline tickets. Ultimately all airline bookings will concluded online, rather than through a travel agent.

Source: Moneyweb

More on online shopping

How to make online shopping better in South Africa

What South Africans buy online

SA’s online retail explosion

Fraud and broadband holding back e-commerce in SA

Tags: Amazon, Arthur Goldstuck, bidorbuy, Cape Union Mart, Edgars, Groupon, Headline, Kalahari, MasterCard, Mr Price, Online shopping, Philip Panaino, takealot, World Wide Worx

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