Local online retailers show growth, profitability

Bacher says that although some “brick and mortar” retailers have battled to make a successful jump to the online environment, many specialist South African e-tailers are reaping healthy profits.

Local research company World Wide Worx recently cited international research showing that online retailers are struggling to achieve profitability because of the high cost of maintaining a transactional website.

In the report, World Wide Worx MD Arthur Goldstuck said even the large retailers were battling high costs, with issues ranging from secure and stable payment systems through to effective fulfilment. He also suggested that local online retailers showed poor awareness of best practise in web site strategy.

Excellent growth

Bacher says that although the report is “spot on” in most cases, some South African e-tailers are bucking the trends described. The country's top online retailers, such as NetFlorist, Kalahari and Digital Planet, are all currently showing excellent growth.

“Although our technology costs are significant, they have not prevented us from reaching a profitable position in our business,” said Bacher. “We've been able to get to scale despite the constraints in the market, like broadband costs. We've been experiencing year-on-year growth of 40% off a relatively high base, and the growth just doesn't seem to stop.”

This is in contrast to the international findings, which says “abandoned” shopping baskets are a major factor for online retailers, often due to the complexity of the transaction process.

Bacher says the growing success of the local online retail industry is due to “a fundamental shift” in online retail, in which e-tailers are making strategic decisions about the way they do business and interact with an increasingly sophisticated online shopping public. They are looking for ways of bringing them closer to new and existing customers, and finding points of differentiation in a steadily maturing online marketplace.

Becoming more sophisticated

At the same time, South African Internet users are becoming more sophisticated in using multiple shopping channels to research and buy products.

“Powerful new search services are driving greater spending activity, and improved personalisation technology is allowing retailers to think more like their customers. Mobile phones and new wireless devices all support e-commerce, and we have to cater to this market,” says Bacher.

“We're going to see more and more acceptance of online purchasing in the next few years. Customers are increasingly enjoying the convenience and safe shopping environment that online retailing brings,” he concludes.