Online shopping battles to entice consumers
Feb 18 2010
Retail Wrap >>

While internet use has shot up dramatically in SA over the past few years, the online shopping market is small by world standards. And SA will have to overcome many obstacles before shopping from home catches on. The limited number of consumers with internet access, retailers say, prevents consumers from exploring this option. 

“The costs are considered too high to make online shopping viable at present,” says Mike Harvey, MD of SA’s largest retail pharmacy chain, Clicks. “Currently the major hurdles to expanding online shopping in SA are the high cost of broadband and limited consumer access to the internet.”

But others say the market doesn’t want online shopping and the figures bear that out. At the end of last year, online retail in SA was worth R1,6bn — less than 1% of total retail sales. The ratio of online shopping to total retail sales in China increased in the second quarter of last year to 1,9% from 1,3% and in the US, the ratio during the holiday season increased to 4%, according to marketing research company comScore Inc.

However, the reasons given by retailers may not be the full picture, says Arthur Goldstuck, MD of World Wide Worx, an internet consultancy. “In many cases it is a matter of the retailer not knowing what to do,” says Goldstuck. “Their market may very well be ready for it but they are not.”

Even retailers that do offer an online service — Pick n Pay is the biggest — structure it in a way that could make it frustrating to use. Even though the prices online and in-store are not different, the price of an item may go up by the time it is delivered — and the customer has to pay for it.

Pick n Pay spokeswoman Tamra Veley says, “We are currently investigating changing this process.” To address the further problem of running out of stock Pick n Pay is planning to open a dedicated online distribution centre to overcome the problem, and give online shoppers access to a far more extensive range of products.

Goldstuck says the thinking behind the pricing process of the food retailer does not make any sense.“One of the principles of online shopping is that you know immediately what you will be paying. The price you see is what you pay,” Goldstuck says.

Pick n Pay rival Shoprite, which has an online facility through its furniture division, says pricing is holding back the roll-out of a similar service for groceries.

“Our policy is to provide the cheapest price on a monthly grocery bill,” says Brian Weyers, the retailer’s corporate marketing director. “The overhead costs still associated with offering an online shopping service defeat the objective and we will therefore only continue down this lane once we are convinced that customers will only pay for their grocery by purchasing online.”

Still, there are flickers of interest. Makro has launched an online trading pilot project with 5000 items across selected categories.

“It’s very early days and time will tell whether Makro has a role to fulfil in this channel of not,” says Makro’s Nezar.

Retailers say the fundamental problem remains. Shoprite says its largest share of customers still doesn’t have access to online facilities.

Despite retailers’ tardiness in installing online shopping facilities, Goldstuck is positive about its future in SA.

Adapted from Source: www.businessday.co.za, 17 February 2010