Imminent Growth in E-Business presents opportunities

The imminent growth of South Africa’s e-commerce industry presents a number of opportunities for business to leverage. However, it is also important to take cognisance of the specifics of the South African context to ensure that these benefits are fully optimised.

March 12, 2012

The imminent growth of South Africa’s e-commerce industry presents a number of opportunities for business to leverage. However, it is also important to take cognisance of the specifics of the South African context to ensure that these benefits are fully optimised.

Research by Morgan Stanley has estimated that sales of smart phones will exceed those of PCs in 2012, while research group Gartner has also forecast that smart phone penetration will reach 80% in South Africa by 2014. With the increase in smart phone users reaching a critical mass, combined with take-up of online and mobile payment solutions, this will lead to a rapid boom in e-commerce.

According to Katherine Akeroyd at Step Strategic Venturing, a boutique professional services company, these two factors will significantly affect the online landscape for businesses in Africa over the next few years. “Internet penetration in South Africa has, so far, lagged many other countries, due to the high cost of access; however as more and more South Africans gain access to the internet for the first time through smart phone technology, this will radically alter the face of e-commerce in South Africa.”

“We have seen a number of new online payment solutions being developed including EasyPay and Virtual Card Services as well as the introduction of PayPal in South Africa. As consumers begin to understand that such services are secure, we are likely to see a far higher take up in online payments in South Africa.”

“In addition, we have also seen the emergence of successful mobile payment solutions such as Fundamo, a South African company that was bought by Visa, enabling people to make payments via an innovative e-wallet solution. It is positive to note that South Africa is at the forefront of technical innovation and as this solution is made available to local banking institutions, it will further drive confidence in online and mobile transactions.”

As a result of this convergence between online and mobile payments, local businesses will be able to reach a far wider pool of potential customers than ever before. “While this change broadens the customer base available, it is also essential that companies that do aim to operate online conceptualise a robust strategy. Engaging with customers online is very different to physical interaction and companies need to develop their strategy for this online channel.”

“Businesses wishing to maximize their online presence must ensure that their products and services are aligned to the appropriate customers, and are being delivered through the right channel,” says Francis Gray, one of the Directors at Step. “A common mistake by companies is to attempt to place their entire business online; but a successful online strategy is one that supports the existing business model rather than trying to simply replicate it in an online space.”

“Critically, businesses need to differentiate between whether they are offering an online product or service, or if they have built an online channel to sell their existing products,” says Gray.

“An online channel is equally specific. Far too often one comes across glorified digital billboards disguised as ‘online retail.’ The market has come rather to expect the instant gratification as found on Google and Apple and Android app stores, and consequently expect simplicity whether buying a book online or signing up for short term insurance,” continues Gray.

Akeroyd notes that the logistics of the South African market mean that some businesses will be able to exploit this new trend easier than others, especially industries that do not require the physical delivery of items such as travel, banking and entertainment. “However, we are likely to see growth across a number of other broader industries, as a result of a further take-up of online and mobile payment options and a greater adoption of courier services. As more consumers gain internet access via their smartphones, we will begin to see the critical mass develop to make an online presence increasingly vital for more and more businesses.”

“It is those companies that understand the changing expectations of their customer base; identify the potential risks to their existing business strategies; and adapt their strategy to offer easy solutions such as vouchers or e-ticket delivery, that will benefit significantly from an online presence in the next two years; but with such a significant change expected in a short space of time, companies must formulate their online strategies now in order to ensure they do not get left behind,” concludes Akeroyd.