Online Shopping Is an Important Lifestyle Change

Internet retail sales are growing steadily, indicating that consumers are increasingly reluctant to spend their free time searching for a parking spot. Is your business ready to get a slice of that pie?

With businesses bracing for the tough times ahead, those who have not done so already will be considering moving onto the Internet. With good reason. Online retail sales are recording high rates of growth in South Africa, even as brick-and-mortar retailers are faltering. In 2007, total spending on online retail goods in South Africa surpassed the R900-million mark. That represents an increase of 35 percents in comparison with 2006.

And there is still plenty of room for growth. In South Africa, only about half a percent of retail sales are concluded online. In USA, that figure stands at 7 percent, and is expected to double in five year’s time.

South African online retailers hesitate to put a fixed number to their future expectations, but most are confident that good times await them. They point out that the past growth was achieved in the unfavourable environment of scarce and expensive broadband Internet access. That is set to change. In about five years, the work on the new undersea cables linking African Internet users to the rest of the world will be completed, bringing more and more affordable broadband access. Consequently, running a business on the internet in South Africa is looking increasingly promising.

That means now is a good time to position your company to reap the fruits of the expected boom. True, doing business on Internet is not all roses. The pet peeves of the South African Internet retailers are (1) costly couriers, (2) high banking fees and (3) the low number of credit card users in South Africa.

However, those failings should not put you off. Selling online is not a passing fad, as some trend-watchers used to think a few years back. It is an important lifestyle change. People will shop online more and more because it is so convenient. Given a choice, consumers will gladly forego the traffic jams, the searching for the parking spot, the queues at the tills, and opt for shopping from the comfort of their home.
In order to participate in the benefits of this trend, some careful planning and budgeting is necessary.

You may opt to set up your own Internet shop. That entails either buying a ready-made e-commerce solution, which on the lower end typically costs between R5000 and R10,000 (the price of higher-end solutions being practically limitless), or doing it yourself with the help of open-source programmes like osCommerce or Zen Cart, which are free, but involve a rather steep learning curve.

Your main objective in setting up an Internet shop is to get paid for the goods you sell. That is why you should decide early on which payment methods you are willing to accept. You will save a neat pile if you tell your customers that they can pay only via Internet transfer, directly into your bank account. A number of online businesses do just that. However, that may send shoppers who prefer to pay by credit card right off your site.

In view of that little glitch, you may choose to accept credit card payments. Now you need to budget for several additional expenses. For the privilege of becoming an Internet credit card merchant, expect to pay to your bank up to 5 percent per every online credit card transaction (if your bank asks for more, shop around for another bank).There is also the cost of the secure credit card gateway (your bank will probably recommend one to you). The secure gateway services people usually charge a flat monthly rate of about R100 to R150, plus about half a percent of the value of each transaction.

And if you think that now is the time to sit back and watch the cash from online sales start flowing your way, think again. All of the above is only a foundation on which to build. The next step is to drive the Internet traffic to your site. For this, you can only partially rely on search engines picking up your site, on other sites linking to your site, on the word of mouth, and similar free exposure techniques. For more substantial number of visitors, it is necessary to rely on paid advertisements, online as well as offline.

If you like the idea of getting a piece of the online sales pie but balk at the task of setting up your own e-commerce site, consider alternatives. You may, for example, open a shop in an existing online shopping mall, or take your wares to a less formally structured online market place like bobshop.co.za.

The advantage of joining the “big guys” is that you get a ready-made large potential customer base. You also get somebody else to worry about attracting the traffic, paying for the advertising, and about the technology needed to keep a high-traffic site up at all times.

Whichever way you choose to go, moving online – either as the only sales outlet, or as an extension of an existing brick-and-mortar store - is a step few retailers can afford to forego.