Local consumers remain distrustful of online business

June 29th, 2016
Article by
Bradley Elliott

Internet retail sales in SA totalled R6.6bn in 2015. But by global standards, online shopping is still in its infancy. Compared to China, SA is decades behind. China’s e-commerce market was worth about $603bn in 2015 and is forecast to grow to $892bn by 2018. Online purchases in SA will climb to R10bn by the end of 2016.

Bradley Elliott, MD of digital firm Platinum Seed, said while cheaper data and smartphone penetration were aiding e-commerce, local consumers were wary of transacting digitally.

“The mistrust around online payments stems from two main reasons: the phishing methods that crime syndicates use, and education around the security of online payments, which is often too technical for normal consumers to understand.

“There are simple things to check before conducting online transactions, although where general consumers remain ignorant, online retail remains risky in the eye of the consumer,” Elliott said.

Debit and credit card companies have tried to use additional innovative steps to increase trust about online payment, 3D Secure being an example. But their execution has been poor and “made it more of a hassle for end users to transact. The main issue here is that we’re trying to use developed market solutions for developing market consumers, and need to think up new ways that make it easy for local users.”

A Euromonitor report on internet retailing in SA said another factor holding back consumers from transacting online was the long delivery time. Retailers have had to be innovative by introducing more delivery options for consumers.

“Makro rolled out locker-based collection services for its online customers in 2014. This service is expected to supplement the company’s home delivery and in-store click-and-collect services. In 2015, Makro took this idea one step further by partnering with McDonald’s SA on a pilot project to test collection lockers located at McDonald’s fast-food outlets,” the report outlined.

In sub-Saharan Africa, mobile penetration is expected to rise to 48.7% by 2020, with the population gaining access to mobile devices, which means consumer spending habits are likely to shift.

SA’s internet penetration lies at 34%, while mobile penetration is at 86%, according to data from World Wide Worx.

Elliott said as the internet of things becomes more of a reality, there will be more opportunities for retailers and consumers.

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