Online trade in sorry state
That doesn’t mean it did not change the world. The online shopping boom fundamentally changed the nature of many retail businesses, from the early web only retailers like Amazon.com and Dell to the later “clicks and mortar” traditional companies that opened online sites (such as barnesandnoble.com or tescos.co.uk).
That was in the US and Europe … in SA our online shopping scene is rather more of a lame duck. According to World Wide Worx, R341m was spent in online shopping in SA in 2003. In the UK over the same period? A whopping £9bn, or more than R90bn.
In SA we had about 700 online retailers in 2003; in 2004 just one “online mall” in the US called BizRate had 39000 sellers.
According to World Wide Worx, online sales growth here actually slowed from 2004’s 25% to 20% last year, which the analyst firm blames on the ridiculous cost of broadband access in SA.
That’s just part of it… there are two other very good reasons why e-commerce is floundering in SA. The first is that the postal system is slow and horribly unreliable and the courier systems are very expensive, so getting physical product to people is a real challenge. An item has to be pretty expensive to be able to offer free shipping in SA, whereas it’s the norm in the US.
The second major reason for limp online sales is that getting an e-commerce site up and running in SA is a Herculean task of trying to work with greedy (or incapable) e-commerce providers that virtually make you beg them to talk to you unless you are a large corporation. They’re not a bunch you can easily avoid: to accept credit card payments online requires a direct interconnection with a transaction clearing house.
There are only a few providers here, including the likes of MWeb Business, iVeri (part of Nedbank), Setcom and Paygate. Their terms of service vary enormously. In some cases you could be looking at a R15000 minimum turnover and a grotesque 8% commission, which pretty much knocks much of the cost benefit of doing e commerce out the window (a common international norm is about 2%). Some are more reasonable, charging about 5%, or even as little as 1%-2% plus about R1 per transaction.
In the real world, the levels of customer service and technical ability from providers make setting up an e-commerce site a nightmare. Most service providers support only the rand as a currency, making international sales virtually impossible.
An option is to outsource the whole online shop to someone like ShopDirect, which charges a set monthly fee to host your site with a certain amount of customisation (as opposed to giving an existing site a payments option). But that’s rather like taking your goodies to a seldom travelled, rather unremarkable shop and asking it to sell them on your behalf.
A realistic option for small businesses in SA that want to sell their products over the web to a global audience is to host overseas, using something like PayPal to collect payments (which has its own complications, including getting your hard-earned money back into SA), or 2Checkout, which can send funds back to SA. It’s a sad state that we even need to consider the option of the faster, easier and cheaper overseas e-commerce hosting sites.
How long will this chicken and-egg situation continue? A scattering of local online commerce stores with few meaningful payment options open to them catering to a limited market of online buyers, in a country where there is no real culture of online shopping? Ask the Minister of Communications, Ivy Matsepe Casaburi. Things are improving slowly, with broadband access finally getting into more homes and businesses to create that online culture, but we’re not even out of the starting blocks.
Businesses here need to start pushing the e-commerce providers (and Telkom) to reduce costs and improve service. In the developed world, e-commerce is huge, and growing incredibly.
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