The eCommerce Opportunity in South Africa
High mobile penetration, rising consumer confidence in online transactions, and secure online gateways are driving eCommerce growth globally. However, by international standards, eCommerce penetration across Africa is still relatively low. But it is estimated that 600M consumers will be online by 2025, spending $75B each year, which offers a tremendous opportunity.
Traditional payment instruments, including payment cards and credit transfers, remain the preferred method of payment for online shoppers in South Africa—however 40 percent of online transactions in the next five years are expected to be alternative payments.
97 percent of South Africans believe that their payment credentials are safe when shopping in person, but nearly one-fifth (19 percent) believe that their credentials are not safe when shopping online. There is a real gap in perception of safety, which means that the growth trajectory of in eCommerce in South Africa may be stymied by the perceived threat of the fraud online as well as actual fraud. 70 percent of consumers indicate that they would stop shopping at a merchant where they have been a victim of fraud. Fraud is a reality (one-third of all consumers report that they have experienced card fraud in the past five years) and the growth of eCommerce without effective fraud prevention measures will deter fraud-fatigued South Africans from moving their shopping online.
Retailers are taking advantage of the eCommerce opportunity by focusing intensely on digital channels to drive growth. However, there are a range of growth strategies that can be pursued, as not every merchant has the same starting point or the same motivations. What these growth strategies have in common is that they require focus on the customer experience.
While there are variations and overlaps, there are five key strategies that provide a useful framework for evaluating the different growth trajectories;
- Brick-and-mortar retailers going online for the first time
- Successful domestic online merchants that optimize eCommerce by diversifying channels and distribution models
- Multi-channel retailers investing in mobile
- Domestic merchants expanding internationally
- Digital merchants delivering omni-channel experiences and expanding into point of sale
Each of these starting points has its own unique challenges. For example, expanding internationally creates a range of unique payment challenges. Cross-border merchants should present prices in the local currency, tailor their fraud prevention systems for local patterns and calculate local sales tax and VAT.
If marketing itself as a local business, a merchant must also translate its online shop into the local language, offer local shipping methods, and accept locally-preferred payment methods. South African merchants may consider one or a combination of these growth strategies, but they must carefully evaluate the ability of their payments vendors to support their chosen strategy as they seek to claim a slice of pie that could be worth $75 billion a year within the next decade.
ACI Worldwide will be discussing the challenges of cross-border eCommerce at the upcoming Seamless Payments conference in South Africa. Please stop by to see us at Booth #30.
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