Businesses worldwide were negatively affected by the global economic crisis of the past few years. Online retail sales, however, continued to grow during this turbulent economic time and are still on the rise today. According to Arthur Goldstuck, “Internationally not a single region saw a drop in retail e-commerce during the global financial crisis.”
Goldstuck heads World Wide Worx, the leading Internet research firm in South Africa, and they recently released the report, “Online Retailing in South Africa 2011.” The report shows that South Africans spent US$700 million on online retail sales in 2010, up 30% from 2009. Currently, South Africa is the only country on the African continent with significant online purchases, due largely to the fact that South Africa currently has more people accessing the Internet.
However, simply having Internet access does not directly correlate to sales in e-commerce. “It’s not so much the number of people on the Internet that has an impact on online sales, but rather the number of experienced users on the Internet,” notes Goldstuck. “The model we’ve developed shows that experience is (when a user has been online) around five years or more.” Based on this information, World Wide Worx is predicting that by 2013 there will be a huge boom in online retail sales in South Africa, as Internet usage has started to become an everyday activity there.
South Africa today can be compared to the United States in the late 1990s in terms of Internet usage in general. In 2010, 5.3 million people in South Africa had Internet access and that number is expected to climb to 6.8 million by the end of 2011. The first five years that the Internet was available in South Africa only 1.5 million people were using it regularly.
So, how is e-commerce faring so well in a country where most people still do not own personal computers? “It’s [growth is] driven by people accessing the Internet through their cell phones. That, in turn, means that more and more people who don’t have PCs are able to start using the Internet,” says Goldstuck. While phones may not be as efficient as computers for searching the web and making purchases, it will entice people to buy PCs, tablets, and notebooks so that they can take full advantages of what the Internet has to offer.
In terms of demographics in South Africa, Goldstuck notes that, “There’s no question that the majority of those who are using their cell phones to browse the Internet are younger users. The problem with that, in terms of retail, is that they tend to have less disposable income…The younger demographics are more likely to be spending online, they’ll spend less, but they have a higher propensity to spend.”
Goldstuck believes that e-commerce is only going to get more popular despite global economic uncertainty. “The general retail environment doesn’t affect online retail. This is because online retail represents people taking existing spending and moving it from the physical environment to the online environment. It’s for that reason that growth in the number of Internet users, and experienced users, is the main correlation of growth in online retail. As they’re becoming experienced [online] they are moving their spending from a traditional environment to the online environment.”
For a company to have success in the world of e-commerce, Goldstuck recommends that above all it must, “understand the online environment. The company needs to realize that it’s not a case of using it to replace physical sales. It’s an additional channel and the various channels need to be integrated with each other. The biggest mistake many of the big retailers have made is trying to set up an online retail operation as a separate business, almost competing with their retail business. That is a recipe for failure because it loses out on all of the benefits of having a physical business.”