No e-Christmas this time
Arthur Goldstuck, MD of research house World Wide Worx, says SA differs from international markets in that its online retail space is dominated by groceries offered by the likes of Pick ‘n Pay and Woolworths. However, he estimates that the section of the market that would benefit from the seasonal gift-buying frenzy of the last two months of the year accounts for 25% of their turnover.
While the industry in the US also sees roughly 25% of its sales over the year-end period, that’s across the entire online retail market (excluding airline ticket sales) and not just in one section of the market, as is the case in SA.
Goldstuck says there are a number of reasons for SA’s online retailers not having the same level of success as their international counterparts. "One of the key issues is the actual delivery of goods. While internationally customers are used to same-day or next-day delivery of goods, that’s somewhat of a novelty in SA."
In the US online retailers saw a spike of 38% during the last week before Christmas, significantly higher than the seasonal average growth of 26%. That was partly due to the unreliable nature of SA’s logistics systems but also because our online retailers aren’t large enough to keep stock of any but the most popular items.
Larger retailers, such as Kalahari.net, have a greater selection for 24-hour delivery but not enough for shoppers to put all their faith in the online sector’s ability to deliver their presents on time. Many smaller online retailers also face the barrier that when allocation of stock from importers and distributors occurs they fall low down on the list of priorities, with the major retailers getting the lion’s share of "hot" products.
While SA may not have entered into the online spirit this Christmas, Goldstuck estimates that 2008 will be the year that online retail comes into its own in SA. By then the dominance that the likes of Kalahari.net, Digital Planet and NetFlorist have in the market will have been mitigated somewhat by the introduction of new specialist retailers focusing on specific niche markets in the way that industry stalwart Cybercellar.co.za has already. Goldstuck says those could also include products such as clothing and jewellery.
Competition is already heating up with the likes of Exclusive Books and Loot.co.za making strong inroads in the online book selling market. Goldstuck alleges that it’s only a matter of time before other specialist retailers in the real world start to make more concerted efforts to grow their slice of the online retail pie.
The one area that still remains a thorn in the side of all online retailers in SA is the cost of connectivity and the current low penetration that broadband has. While last year saw massive growth in that area the high cost of an always-on Internet connection will continue to hamper growth in that market. However, with competition in both the telecoms and online retail markets continuing to grow it may not be long before we can speak about the Internet becoming a real factor in life in SA.
Finweek
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