Articles: General Articles

South Africa is still far behind the US and the UK when it comes to online shopping. So why are we struggling? We need to change our mindset with regards to using our credit cards online; and we need to actually believe our Post Office will deliver the goods...

Bruce Whitfield:
Just how big are you on internet shopping? Shopping online, it is an increasingly popular pastime and would you do your entire Christmas shopping on the internet: food, smart outfit for Christmas day, decorations and presents, have you ever tried to do anything like that? How good are our local online retailers and in the UK for example, online retailers are predicting something like R100-million shopping spree this November and December.

In the US, Christmas sales for November and December for the year 2002 was something like $11-million; they are predicting something like $22, $23-million this year according to figures I have seen.

And someone in their early days of internet shopping in South Africa, way back I think it was in 1999, was part of what was called the Dot Coza Project was a guy called Chris Botha, he is the man who become the brain of Cape Town earlier this year, the brain of brains of Joburg and Cape Town, in that big final that we had as well. So Chris Botha he is the man who participated in that earlier, and he survived in the house just using the internet and today would be a whole lot easier, I think he must have lost something like 10 kgs during the couple of months that he was in the house.

But he managed it way back in 1999; is it considerably easier? Well the chief executive of Jump, which is a search engine for internet shopping, Albert Bredenhann joins us now, and Albert, big numbers in the US and the UK, how big is our South African online shopping market? Is it anywhere near those sorts of figures?

Albert Bredenhann:
I don?t even think it is even remotely as close to America or the UK for that sake. There are figures floating around like R540-million.

Bruce Whitfield:
Quite a lot of money being transacted on the internet.

Albert Bredenhann:
Yes, I think we could double that actually, I think it is just a question of time, get all the hurdles out of the way and I think online shopping will be booming soon.

Bruce Whitfield:
What are the big hurdles? People talk about broadband, the fact that you can?t really sit at home very easily, unless you have ADSL or one of the broadband type products and actually easily shop online?

Albert Bredenhann:
I think broadband is one of them and the cost of broadband more. I always, when people ask me, what are the hurdles, I throw it back at them and I say do you shop online.

Bruce Whitfield:
Was that a question to me?

Albert Bredenhann:
Let?s go for it, why not.

Bruce Whitfield:
I do not shop online, I do internet banking which I find absolutely remarkable. I like to manhandle product, I am a shopkeeper?s worst nightmare, I do like to feel the fruit before I buy it and page through the book and make sure I like it before I buy it. I am a very fussy shopper.

Albert Bredenhann:
And that is the only reason?

Bruce Whitfield:
That is the only reason, I don?t have a problem with online security, I do think there are people in the market that would be concerned to put their credit card details onto the internet, and that must be quite a bit inhibitor as well?

Albert Bredenhann:
I think security is definitely an issue anymore, I think everybody does online banking, my dad does, my mom does and that is good. Security, credit cards that go through the restaurant, we don?t see the credit card for five minutes and whatever happens to that.

Bruce Whitfield:
It is a question of shifting mindset.

Albert Bredenhann:
It is a mind shift, definitely.

Bruce Whitfield:
Justin in Sandton, you have done all your Christmas shopping online?

Justin:
Yes, 100 percent, no problems at all.

Bruce Whitfield:
Have you only got two friends or do you have a bunch of people that you have to buy for?

Justin:
No, I did not buy you anything, I actually did all my shopping online on a single website in South Africa, that basically, what they let me do is, let me order anything I find online, even in the USA, so previously, stores in the US would not shop to South Africa, and these guys have helped me purchase all my presents in the USA, bring them into South Africa, clear customs, and I actually got them within a week and a half.

Bruce Whitfield:
Justin you are actually a lot more organised than most people, but was your experience of online shopping in South Africa, is it a positive experience, or do you prefer to do it offshore, that sort of international online shopping?

Justin:
Well, the only problem I have in South Africa is the variety of items that is the main problem. But in general, my shopping experience has been quite pleasurable. You just simply go and place the order, give them your credit card details, continue with the transaction and then about a week and a half later, you actually get the items. So I have not had any problems at all. I do all my banking online, I have not been into a bank for about two years, so I think the way to go is the online revolution.

Bruce Whitfield:
Absolutely, Justin in Sandton, thank you for your story this evening. And Claire says she would shop online if our postal service was reliable. Is that an inhibitor of that as well, where people are actually concerned about the delivery mechanism of the stuff they buy online?

Albert Bredenhann:
That is a huge, huge, huge problem, simply because of the cost, and you never know if you are going to get it and it is just not reliable. If I look at somebody like Pick ?n Pay, I do online grocery shopping, and they have outsourced their delivery to a company called Liebentrans, and that works, I know I am going to get it, they call me before I get it.

Bruce Whitfield:
It is a courier service rather than a post office service?

Albert Bredenhann:
Correct, the courier services need to start playing the game with us and lower their costs and I think that is definitely a hurdle that needs to be overcome.

Bruce Whitfield:
Because surely one advantage of shopping over the internet is that the internet retailer does not have the huge cost of maintaining an enormous retail store network, they have got a warehouse, and they can despatch stuff to you. But a lot of that margin is swallowed up as soon as that have got a warehouse, and they can despatch stuff to you. But a lot of that margin is swallowed up as soon as that delivery has to happen?

Albert Bredenhann:
Definitely, sometimes you buy a CD for R100 or R200 and delivery might cost R30. So that is definitely a problem as well.

The frequency of customers actually buying online, and the time spent online, grows enormously when you have broadband. That explains why most people do their online shopping at work. And it puts more pressure on the regulators to make broadband easily accessible to individuals.

Bruce Whitfield:
Gary Hadfield is the chief executive of Kalahari.net, click, click, ding dong, Gary, it is stuck in my mind completely, how are you?

Gary Hadfield:
Very well Bruce.

Bruce Whitfield:
The online experience: I was going through the Kalahari.net website today, and I just see how much broader your offering is from the early days of books and CD?s and things. You actually have a wide array of stuff there now.

Gary Hadfield:
Yes definitely, we have expanded beyond the core of entertainment, into the gifting market and I think what is key for us and I heard the callers comments about delivery; delivery is not an issue, we courier, we deliver in 24 hours depending on the product ranges. So I think we have embraced it heavily and we still deliver value of R29 to your door and I think it is a fair value proposition for the customer.

Bruce Whitfield:
So you have to charge for that delivery as well, you cannot add that to the margin of the goods you sell?

Gary Hadfield:
No, I believe one has to be transparent in terms of the actual price and cost of the goods and delivery and let the consumer know. And we also, over R350, offer free delivery, so transparency is essential.

Bruce Whitfield:
And the online shopping market in South Africa, what sort of growth figures have we seen over the last five years?

Gary Hadfield:
Well, according to Worldwide Worx, we are experiencing between 20, 25 annual growth at the moment, projected to 614k in 2006 and that obviously excludes travel and ticketing and property and I firmly believe that is probably the bottom line of what is being achieved if you look at the numbers that we are running at for this fiscal.

So I think it is very healthy and I think what is more interesting is more traditional retailers come into play like your CNA?s, apparel, groceries; those areas are really growing dramatically at the moment and from my perspective, that is great because we are encouraging a culture of online buying.

Bruce Whitfield:
Gary Hadfield don?t go away, the chief executive officer of Kalahari.net. We are talking about online shopping and the chief executive of Kalahari.net is Gary Hadfield, he is on the line to us from Cape Town and Albert Bredenhann the chief executive officer of Jump, which is a search engine designed specifically to help people find things on the internet and Albert, there is an sms earlier, I am sure that this was the caller that was referring to earlier being able to source goods from all over the world through one portal in South Africa; that is a huge advantage surely?

Albert Bredenhann:
Yes, I think it is a huge advantage, I think you will see me go to Jump.co.za, what we do at Jump, let me just quickly explain that to you, there are about 600 online stores in South Africa.

Bruce Whitfield:
It is an extraordinary number.

Albert Bredenhann:
Yes, and we have got a directory which we list in categories and I think, I would say, there are about another 200 unaccounted for that I just can?t find. We find them slowly but surely. Some of those stores, we get their products every night at 1am via what we call an XML feed, and we import them into Jump and make them searchable for the consumer.

Bruce Whitfield:
So a pen shop for example may realise that it has got 500 Bic pens that it wants to get rid of and will put a special price on the internet for those and try and sell them that way for example?

Albert Bredenhann:
Well, the stores that we are talking about are only the stores that are ecommerce enabled and somebody like Makro for example, that is just a brochure, you cannot buy from Makro online and so we don?t have their products on Jump. It is only products that you can physically swipe your credit card add to your basket and get out there.

Bruce Whitfield:
Gary Hadfield, the issue of distribution in South Africa, a couple of sms?s coming through talking about the wonders of Amazon.com and how it rules and that they are saying it is cheaper than Kalahari.net, we can debate that if you like, but also, there is a suggestion that Amazon.com, the business model, they respond a lot more quickly than perhaps we do locally as well.

How advanced in our ecommerce from a perspective of actually responding to customer needs immediately?

Gary Hadfield:
Well I think from without a doubt, from a delivery perspective, and I will use Kalahari as an example, we have reduced our delivery times dramatically and I can say hands down, we beat Amazon?s delivery into SA on international products as well as local.

So I believe a hell of a lot of the players online are coming to the party and we are competing comfortably against the likes of Amazon. We are getting the international books delivered within 10 days at R29, put that into dollars and pounds, it is a really good price. So I think the majority of retailers are getting there and rising up to Amazon.

Bruce Whitfield:
But certainly the market is growing in South Africa, more and more people online are you finding that more people are logging on from work still than they are from home?

Gary Hadfield:
Yes, the majority, up to 70 percent of our trade comes from people logging on while they are at work. Obviously broadband comes into play, people tend to throw the broadband as an inhibitor but it is really an inhibitor and I think there are three key things: people tend to shop more online on broadband, but also the key variable and metric that we live by is the order per customer, the frequency of customers actually buying online, both that and the duration of the time spent online grows exponentially with broadband.

So those are key metrics and if you get the guy to shop three times versus two or three versus five times, that is what is going to make and turn things around much faster. So it is not just about the number coming on broadband, it actually alters online, the metrics dramatically.

Bruce Whitfield:
Gary Hadfield on the line to us from Cape Town, the chief executive of Kalahari.net. Albert Bredenhann, we are running short on time, there is never enough time to talk about these things, but the issue here it is almost like a tube of Pringles, once you pop you can?t stop is the payoff line there, but once you go online, I am told, there is actually no going back into the stores again.

There is this simplicity about it, there is a convenience about it and provided you know what you want. It is actually a preferential way to shop.

Albert Bredenhann:
Online shopping is something that I think everybody should start slowly. For those who have never tried it, I suggest buy a book from Kalahari, do your grocery shopping and try it. I?m not saying you should do your entire Christmas shopping over there, I think it is still nice to walk around Sandton and get the feeling of?

Bruce Whitfield:
Is it fiercely competitive? Is the retail space online fiercely competitive?

Albert Bredenhann:
I think in some areas, it is like computers, electronics, I think it is a bit of a cut throat business, as I said, there are 600 stores and probably about 100 of them are computer stores.

Bruce Whitfield:
If you think of your search engine, what is the most searched for product over the last month or so?

Albert Bredenhann:
In the last six months, we have just released the results, and iPod is still winning. iPod, GPS, LCD, Xbox 360, technology still wins.

Bruce Whitfield:
So technology stuff that people actually know, those are good products out there that people want, and it is not something they necessarily need to feel, smell and touch?

Albert Bredenhann:
Correct, but then there are products that you cannot find on the internet at all, if anybody can show me a place where I can find a Bratz doll for my little daughter for Christmas online.

Bruce Whitfield:
Bratz doll, that?s what he wants to know about. Albert Bredenhann, if he cannot find it, goodness knows whether anyone of us will have any luck finding it as well. The growing nature of internet shopping in South Africa, is it growing fast enough to sustain the 600 stores, Albert? One quick word on that.

Albert Bredenhann:
It is definitely growing and I think 2007 is going to be a great year for online shopping and everybody should try it.

Bruce Whitfield:
Weren?t they saying that in 1999?

Albert Bredenhann:
They did, but that is the next thing you should ask Telkom.

Bruce Whitfield:
It all boils down to Telkom on the regulators ultimately. Albert Bredenhann, the chief executive of Jump, the search engine also to Gary Hadfield as well, the chief executive of Kalahari.net talking about online shopping on the World at Six.