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Santa came through for SA’s e-commerce market

Online retailers report high activity during the crucial festive season but late deliveries are the Achilles’ heel.

While SA’s e-commerce market has made stellar gains, convincing consumers to trade their much-loved brick and mortar stores for online-clicks is still a way off. 

By global standards, South Africa’s e-commerce market is a fledgeling, with a small pool of tech-savvy consumers turning to the internet for retail therapy. But this market is poised for stunning growth, with more consumers beginning to reap the benefits that online shopping offers including convenience, wide price architecture and product ranges. 

A recent report by World Wide Worx – based on a survey conducted by research firm Ask Afrika – indicates that online shopping reached 1% of overall retail in 2016. This is tiny when benchmarked with online shopping giant the US, where online retail makes up 10% of overall retail.

World Wide Worx’s managing director Arthur Goldstuck says the 1% level means that many domestic retailers are still not geared for e-commerce.

However this may soon change, judging from the sales reported by e-commerce players during the 2016 festive season, a crucial period when retailers’ sales and profitability usually surges.  As Goldstuck puts it: “the extent of online shopping probably doubles during December… In fact, you would probably find out that the volume of orders doubles up.”

Online retailer Takealot.com can attest to this, with its chief marketing officer Julie-Anne Walsh saying that the retailer has seen a “record number of online sales” during the festive season.  Although Takealot doesn’t disclose sales and revenue figures, Walsh says it delivered over 650 000 orders across the country.

“Given our double-digit year-on-year growth, in absolute numbers, we saw more orders in the 2016 festive season than ever before,” she tells Moneyweb.

Even clothing and homeware retailers had a bumper season.

Media 24-owned online fashion retailer Spree, which was launched in 2012, saw a 96% year-on-year increase in orders placed and 79% growth in total traffic. These increases were realised from Black Friday, the US retail phenomenon fervently embraced by South Africans on November 25, up until December 23. Media 24’s e-commerce CEO Vincent Hoogduijn says compared with the growth in previous years’, where it saw year-on-year growth of 75% in placed orders, Spree’s performance is indicative of the growing appetite for online shopping. 

“This [growth in appetite] is possibly due to three things; an increase in choice, price sensitivity – where online has shown more price aggression, and customers comfort levels in purchasing online has increased,” says Hoogduijn.

For kitchen and homeware product online retailer Yuppiechef, the month of November and December always contribute a high proportion of its yearly revenue.  “2016 was no different,” says Yuppiechef’s co-founder and director Andrew Smith. “We had started our festive planning back in January, so we were well positioned by the time November arrived.”

Late deliveries

Not all is rosy for online retailers, with some consumers complaining about late order deliveries.  Takealot was on the receiving end of complaints on social media from numerous customers who maintained they didn’t receive their orders by Christmas Day.

Takealot’s Walsh says the number of late deliveries (after customers paid for an order and the estimated delivery date was missed) constituted a single-digit percentage of total orders of more than 650 000 – much the same as previous years. Walsh says there are numerous issues that can cause a late delivery –  some within Takealot’s control and others not – including supplier problems, operational errors, or a customer not being available to receive their order.

Problems might also arise at courier companies that online retailers partner with.

Late deliveries caused by high order volumes are not unique to South Africa but also leading e-commerce markets around the world, says Hilton Eachus, the e-commerce and marketing director of express courier and logistics company DPD Laser.  “Each festive season is always a time when many first-time e-commerce users take their first steps into this world, so spikes like we saw this year, are normal as the e-commerce market grows,” says Eachus.

But the problem is bigger, argues World Wide Worx’s Goldstuck: “Delivery services are still not geared towards quick delivery. The thinking and strategy in the delivery sector is that people must pay a premium for getting deliveries either the same day or overnight, whereas quick delivery is becoming the standard in the US.”

Even a small percentage of late deliveries would be a disaster for the e-commerce industry, says Julia Ahlfeldt, a certified customer experience professional, as first-time online shoppers may never repeat the purchase after a bad experience.

“If they had a bad experience, they become an anti-online shopper. Not only do they have to be converted, they have to be won over again and winning someone over again is more expensive than attracting them for the first time,” says Ahlfeldt.

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