You are one step closer to establishing yourself as a successful eTailer

Impact Partner Content: Absa / by Lesego Mpakanyane, Sector Specialist, Relationship Banking: Wholesale and Retail Sector, Absa

One of the features of our globalized world is the level at which we are able to trade across borders due to easy and convenient eCommerce trade with a value of $2 trillion in 2019, or R33.66 trillion ($/R16.82 as at the time of publishing). 

However, South Africa’s eCommerce industry is still in its infancy stage, only accounting for 0.05% (R19.7 billion) of global trade. Locally it accounts for 1.4% of trade and is expected to reach 2% by 2022, with Takealot a chief player. eTailing presents a unique opportunity and the potential for new entrants to disrupt incumbent retailers and to disrupt those who neglect to modify their business models and distribution channels to incorporate internet-based sales. 

The internet, smart devices and social media have always been key components  of successful eCommerce. eCommerce is projected to grow at a 20% current value between 2019 and 2024 to reach R49.5 billion, changing how business and consumers interact. As a result, eTailing, which describes sales conducted between retailers and consumers, has been on the rise. 

Given adoption levels of the internet, most major retailers have already recognised the opportunity to switch from multichannel to omnichannel model, and this trend has been accelerated by the current COVID-19 pandemic. 

As we recognize the growth potential of internet retail sales and high levels of internet access in South Africa, new retailers should give careful consideration in setting up their eCommerce business, in particular, eTailing. 

Who is your customer?

There are numerous approaches to help you define your customers’ characteristics.  Understanding your customers thoroughly is not a new concept, but your insights into the segments you wish to serve are vital to enable you to test your assumptions of how to serve them appropriately.. Your market segments can be defined according to various criteria, such as demographic (age, gender, profession, income, education), psychographic (lifestyle, attitudes, personality) or geographic (language, population, climate, lifestyles). First focus on those market segments where you can gain quick wins to build a base from which to grow and introduce new customers to your business.

What can you do for your customer? What is your customer paying you for?

Now that you understand the “model customer”, you need to answer the following questions:

1. How will you tell them about the online channel and what they can buy on it?

2. How will you gain their trust? How will you guarantee their safety concerning online payments? 

3. Is the purchase process easy and convenient? 

4. Will the follow-up process be easy and convenient, for example returns, complaints, re-orders?

5. What will the cost to the customer be? 

6. How will you measure customer experience and feedback?  

You can answer these questions by mapping the shopper journey graphically. Categorise shopper interactions across the value chain and determine whether the perceived benefits of this channel will exceed the costs associated with delivery. You will need to be clear on how you will unlock, extract and create value for existing and future shoppers. 

How does your customer access your channel and how do they acquire your service?

Determine who the decision-makers, the end users and the budget holders are, including their source of funds and how you are bridging a gap that is not filled currently. You will need a clear marketing and communication plan to tell customers about the proposition and be willing to bring their business to you. 

eTailers may not have brick and mortar store requirements, however, they are still required to adhere to attributes such as convenience, variety, product information, quality and price. 

Therefore, comparing the differences between a traditional shopfront and your online offering  to your target your customers will help you to determine what will make you different in the market. 

How do you make money from your channel? 

The next element to consider is the operations of your business and how to deliver value and generate revenue. Clarity is required to define your online business model and you will need to consider:, 

1. Subscription approach to the platform

2. Franchising and licensing 

3. Advertising

4. Data security

5. Transaction fees 

How do you design and build your channel? 

Create a “trial” version of your store, also known as a minimum viable solution, in which all the pertinent attributes of the store and the assumptions for success are tested. Validating your assumptions enables you to tweak, adapt and change anything that is not working as intended. Having a minimum viable solution does not need to be free, as one of your assumptions refers to gathering information from those customers willing to pay for your service. 

How do you scale your business?

Finally, think about complementary businesses that will fit well with your existing business. This could be adding new product categories or service features. Alternatively, you can broaden your target markets (customers or geographies), sell the rights to you your IP through licensing or sell access to the platform, similar to the likes of Uber and Airbnb. 

In conclusion, whatever business model you select, Absa offers various payment solutions to suit any business. As a certified 3D card acceptor, we ensure that merchants can make and receive secure and authenticated online payments. We verify all card details at the point of purchase before any transaction is done and provide customised reports via your chosen payment service provider. 

For more information, call us on 0860 111 222 or email us at franchise@absa.co.za 

You can also contact our Wholesale, Retail and Franchise team on 011 350 8000, and we have a team of regional experts that can assist you to bring your possibilities to life.