How do you decide whether to sell your product online or not? It’s like the old Shakespeare adage “to be or not to be”, so I say, of course you want to be! There is no life without being and no being without life. And of course, you want to sell your products online because that is where the growth is. Online shopping is growing at a much higher rate than traditional shopping, and there is a tremendous amount of research locally and internationally that confirms this trend.
In 2005, the Centre for the Digital Future at the University of Southern California released its 5th annual study called The Digital Future Project. This is a long-term study which tracks a sample of 2,000 households across America and their changing behaviour year-on-year. Online purchases have tripled from 2002 to 2005. In the same study three three-quarters of the people who buy online say that online buying is reducing their purchases from local retail stores. And this is likely the biggest threat to companies that are not selling online. That you will lose market share to some website without even knowing you’re losing those customers.
There are several factors that are responsible for the rise of online shopping. Firstly, the ease of use is exemplified by companies like Amazon.com and eBay. And eBay has likely done more for online shopping than any other, with services like PayPal, which is a virtual shopping mechanism that is based on a user’s email address. This allows individuals to make and receive payments through a trusted third party, i.e. PayPal, bought by eBay a few years ago. Amazon.com has developed a virtual marketplace for 2nd hand goods to be bought and sold by anyone.
In South Africa, the leading online retailers are companies like Kalahari.net, BidorBuy and Netflorist. They have minimal brick-and-mortar investments and can compete and beat their competitors without the overhead of physical stores. I have to note that Kalahari.net is part of the Naspers group (who also owns 30% of MXit) and has huge financial resources behind it, whereas newer competitors like Take2 and Loot are growing very fast and have no such backing.
My associate Arthur Goldstuck, MD of World Wide Worx, reports that growth in online retails is expected to grow by more than 35% this year after growing at 33% in 2006. The total spend is expected to reach R929 million, up from R688 million in 2006. The best news continues to be the spectacular growth in online ticket sales for the airline industry. The combined sales for FlySAA.com, Mango, Kulula.com, 1Time and Nationwide in online ticket sales are expected to reach R3 billion, which is about 3 times the rest of the online retail segment put together.
One of the drivers is the growing availability and demand for broadband Internet access. Another survey from Goldstuck predicts that broadband users will double to about 800,000 users by the end of 2007. Services like Telkom’s ADSL are becoming cheaper and cheaper, while iBurst, MyWireless and 3G from cellphone networks are more commonplace and provide an excellent alternative to ADSL. The key to continued growth is more broadband users in South Africa.
The year 2005 was a watershed in the Internet industry as the worldwide number of Internet users broke the 1 billion barrier for the first time. Because online shopping is changing the behaviour of consumers in the real world, it is important for companies to understand how the Internet can benefit them.
Small companies can compete with a big company on equal grounds. Even individuals can take on big corporations. The best example of this is my friend Tony Roocroft, who generates more than R1 million in profits for himself from more than 100 websites, and he sits in an office in Bedfordview. Tony is taking market share away from companies locally and internationally, and they don’t even know about it. And his secret? Give people really good information.
When you have a website with really good information that will answer people’s questions and help them solve a problem, you start to build trust. Once you earn the trust of a website visitor, you can begin to sell them products.
One last example of the dramatic changes taking place because of the Internet. Websites like Google Product Search (formerly Froogle), Shopping.com and locally Jump.co.za are comparative shopping search engines. These websites allow consumers to search for the best price for a particular product in one location without physically driving to different malls or walking to different shops. Comparative shopping brings the price the seller wants to sell the product closer to the price the consumer is willing to pay for the product. This trend alone should be enough to make big retailers sit up and take notice.
And even though less than 10% of South Africans have Internet access, that is going to change with a huge investment in infrastructure for the 2010 World Cup. Don’t wait any longer, get broadband, get a website and start thinking of what information or products you can sell to the 1.1 billion Internet users worldwide. Think global, act local.
Ramon Thomas is an entrepreneur with an uncanny knack for spotting global online trends and turning them into meaningfull insights in South Africa. You can book him as a speaker for your next event or conference.