Is your business in danger of falling behind by ignoring ecommerce? Digital Planet CEO Neil Watson makes the case for adding an online sales channel before it’s too late.
Think ecommerce in Africa is still lagging behind the rest of the retail world? Think again. The success of relatively new online retailers such as Zando and Konga is proving that the continent is more than ready for online shopping. Take JUMIA, the Nigerian online shopping platform that was started in 2012. Less than three years later, the business employs 1 000 people and has warehouses in eight other countries.
Once, having an ecommerce channel may have been optional for business, but with each passing year and new set of figures, it becomes clearer that this is no longer true. The recent DHL Shop the World report highlighted the high growth potential of emerging markets in ecommerce. McKinsey highlights that the African ecommerce market is accelerating after a slow start and could soon account for 10 per cent of all retail sales.
Is time running out for retailers who haven’t yet made the leap to online platforms? The evidence certainly seems to say so. Some online players in South Africa are growing faster than brick-and-mortar shops, which means they are cannibalising traditional retail. For retailers, online platforms are becoming increasingly compulsory not just as additional sales channels, but to ensure that ecommerce players don’t end up eating their lunch.
The most important part of ecommerce is investing at the right levels at the right time. This differs depending on the kind of product you’re offering and how comfortable consumers are purchasing your product online.
For IT sellers, for example, the market is mature enough that it may already be too late. There are too many online players fighting for a piece of the pie. Unless you have a big brand, an innovative concept or a lot of marketing spend, it will be hard to get above the crowd.
On the other hand, some markets such as fashion apparel are just beginning to mature. Players like Mr Price have invested tens of millions in building their online brand, ensuring that they are at the forefront and will be directing the market in South Africa.
Once you’ve determined that it’s time for you to build your ecommerce store, you then need to look at investing the right amount for the next three to five years. It can be tricky to invest at the right level. In large organisations, we often see an over-investment in technology when the market doesn’t warrant it. Investing too heavily too early means you may never see a return on investment.
The later you engage in online retail, the more developed the market will be, which has both advantages and disadvantages. A more mature market means that technology is more mature and there are skills available.
The downside is there will already be more competitors and it will be more expensive to establish yourself as a brand. You’ll also be learning while everyone else already understands the market so you could suffer reputational damage. Finally, the skills will be there, but will be much more expensive.
For most companies, it’s better to start too early than too late. This will give you scope to experiment so that when the market arrives, you’ve learned your lessons and can take advantage without huge marketing investment and reputational risk.
Once you’ve determined the right time to make the leap, the real work starts. From the planning stage to the fulfilment stage, there is a lot that goes into a successful ecommerce channel. Customer service, logistics, reverse logistics, warehousing, marketing and many other specialised areas need to be considered. Most businesses do not currently have skills to tackle it on their own and would be advised to seek outsourcing partners who do have those skills on hand.
One thing is certain when it comes to ecommerce – it’s not a question of whether to explore online platforms but when. South African customers may have been slow to start transacting online, but we’ve reached the tipping point for ecommerce.