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THE RISING OPPORTUNITY TO DRIVE DIGITAL PAYMENTS
AND CUSTOMER ENGAGEMENT IN RETAIL, NOVEMBER 2018
E-COMMERCE
AUTHORS
Future Watch Report2
At Business Finland, we create new growth by supporting companies to go global, as well as funding innovations.
Our top experts speed up the identification of business opportunities around the world and help transform them
into global success stories. Future Watch is part of TF Market opportunities service and it provides actionable
insights from our global network for Finnish businesses and stakeholders. More information at
www.marketopportunities.fi
Lehlohonolo Mokenala
Consultant
Zahil Jackpersad
Consulting Analyst
TOPICS
1. WHAT IS e-COMMERCE
2. CURRENT STATUS AND TRENDS IN SOUTH AFRICA’S e-COMMERCE
3. IMPLICATIONS AND FUTURE OPPORTUNITIES FOR TEAM FINLAND
Future Watch Report3
E-COMMERCE
A GROWING NUMBER OF SECTORS ARE TURNING TO AN E-COMMERCE
BUSINESS MODEL, WITH RETAIL AMONG THE MOST PROMINENT
Future Watch Report4
Retail Industry
E-CommerceOnline Retail
Part of e-Commerce
Not included in e-Commerce
Source: Frost & Sullivan
• The e-Commerce market is made of mainstream retail products offered over online platforms,
digital products and service as well as the online delivery of services from other sectors such as
travel and accommodation, financial services, etc.
• Online retail is an important subset of the e-Commerce market is currently contested on the one
hand by traditional retailers that establish an online presence. On the other hand, is online-only
retailers who do not have a brick-and-mortar retail footprint such as Amazon, Alibaba and
Takealot , who are the dominant providers of online retail.
E-COMMERCE
GLOBALLY PRIMARY E-COMMERCE RETAIL STRUCTURES ARE MADE UP OF
B2B AND B2C
5
Total eCommerce Market: Primary eCommerce Retail Structures, Africa, 2017
B2C e-Commerce
Business to consumer (B2C) is the most prevalent e-Commerce model wherein businesses sell goods and products directly to the end –
user typically via a website. With an online shop front or an online marketplace customers can browse products online, make a purchase
decision, and proceed to an electronic checkout wherein payment processing will take place. Examples include standard retail
eCommerce stores like Jumia, Takealot, Souq, Konga, etc.
B2B e-Commerce
A Business to Business (B2B) model operates by providing products from one business to another, through either online auctions or
marketplaces. Online auctions are computerised formats of traditional auctions wherein buyers set the prices and bid against each other.
Examples include online marketplaces and SaaS companies like – IBM, Volkswagen, Johnson & Johnson, Proctor & Gamble Co. etc.
MarketChains
Suppliers Manufacturers
Wholesalers/
Distributors
Retailers
B2C
E-commerce
Customers
B2B E-commerce
Source: Trellis; European Business School; Frost & Sullivan
E-COMMERCE
DEMAND GENERATION, ONLINE PAYMENTS, ORDERING AND DELIVERY
HAVE DRIVEN INNOVATION IN E-COMMERCE IN AFRICA
Future Watch Report6
Total eCommerce Market: eCommerce Value Chain, Africa, 2017
1. Demand
Generation
2. Order
Placement
3. Online
Payments
6. Returns
Handling
5. Cash
Handling (COD)
4. Warehousing
and Logistics
Order assembling
and packing at
master warehouseLast mile
delivery to
customer
Delivery to
master
warehouse
Delivery to
secondary
warehouse
Source: Frost & Sullivan
Areas of innovation and disruption along the e-commerce value chain
E-COMMERCE
THE GLOBAL MARKET FOR ECOMMERCE IS POINTING NORTH, WITH
INCREASINGLY MORE CUSTOMERS OPTING TO SHOP ONLINE
Future Watch Report7
China
• China is the largest
eCommerce market in
the world estimated at
$393 billion.
MEA
• The MEA market makes up only
7% of global eCommerce
market. The region is however,
expected to witness high growth
over the next five years
United States
• The US is the world’s second
largest eCommerce market. It was
estimated close to $364 billion in
2015 and is expected to reach
$630 billion by 2020.
Latin America
• Latin America contributes to
approximately 10% of the total
global online sales.
• Brazil and Argentina are the two of
the largest countries in terms of
online retail.
Europe
• Europe accounts for 34.8% of the
global online retail market. The
UK’s online retail as a percentage
of total retail stands at 13%,
highest globally.
Key Highlights of the Global Market for e-Commerce, Global, 2017
Source: Frost & Sullivan
E-COMMERCE
THE MIDDLE EAST AND AFRICA ECOMMERCE MARKET IS EXPECTED TO
GROW AT 12.1% CAGR DURING THE PERIOD 2017-2020.
Future Watch Report8
Low High
Egypt
Kenya
South Africa
Nigeria
Degree of Ecommerce Development across Key
African Countries, Africa, 2017
eCommerce Market: Revenue Forecast, Middle East
and Africa, 2017–2020, CAGR = 12.1
2017 2018 2019 2020
Africa 7,5 8,3 9,3 10,6
Midde East 9,2 10,2 11,5 12,9
Growth Rate 10,8% 12,4% 13,0% 13,2%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
0,0
5,0
10,0
15,0
20,0
25,0
OverallGrowthRate
B2CeCommerceMarketSize
(in$Bn)
Source: EuroMonitor; eshopworld; Frost & Sullivan
TOPICS
1. WHAT IS e-COMMERCE
2. CURRENT STATUS AND TRENDS IN SOUTH AFRICA’S e-COMMERCE
3. IMPLICATIONS AND FUTURE OPPORTUNITIES FOR TEAM FINLAND
Future Watch Report9
E-COMMERCE
Future Watch Report10
• As one of the more developed economies on the continent, South Africa has one of the largest and fastest
growing e-commerce markets on the continent.
• This has been driven by a relatively larger high-income population and higher internet penetration (54%)
together with the adoption of smart devices such as smartphones and tablets.
• In 2017, South Africa’s e-commerce market was worth an estimated $2.7 billion, registering a 15% growth rate
over the period 2016-2017. B2C e-Commerce makes up a growing portion of South Africa’s retail sector,
accounting for 1.9% of retail revenue in 2017
• The market is expected to maintain the 15 % growth rate over the forecast period as more consumers gain
access to the internet.
AN OVERVIEW OF THE SOUTH AFRICAN E-COMMERCE MARKET
Population: 56m
Nominal GDP: US$ 349bn
Retail: US$43.6bn
Internet Users: 30.81 million
Smartphone Penetration: 61%
E-Commerce Users: 18.4 million
E-Commerce Market Size: $2.7 billion
Forecasted Market Growth 2017-2021: 15% p.a.
Key Facts and Figures (2017)
5.7%
3.7%
2033E
South Africa’s Ocean Economy is growing at a much
higher rate than the global Ocean Economy
0,7% 0,5%
3,3%
1,9%
Egypt Kenya Nigeria South Africa
Africa Average:1.5%
eCommerce Market: B2C eCommerce Market as a % of
Total Retail Market, Africa, 2017
Source: StatsSA; We Are Social; EuroMonitor; Frost & Sullivan
E-COMMERCE
THE E-COMMERCE MARKET IS FORECASTED TO GROW BY 15% OVER THE
PERIOD 2017-2020
2,33
2,70
3,25
3,84
4,39
4,70
2,0
2,5
3,0
3,5
4,0
4,5
5,0
2016 2017 2018 2019 2020 2021
E-CommerceServiceRevenue
(USD$Billion)
Year
Future Watch Report11
18% of the population made an
online purchase via a mobile
device.
29% of the population claimed to
have purchased a product or
service online.
The average annual revenue per
user was $146 in 2017 and is
expected to reach $190 in 2021.
E-Commerce penetration was 31%
in 2016, and is expected to reach
43% by 2020.
E-Commerce Market Size and Forecast, South
Africa 2015–2021, CAGR = 15.1%
Key Market Drivers
2016 2017 2018 2019 2020 2021
17.1m 18.4m 19.9m 21..5m 23.2m 24.8m
E-Commerce Forecasted Users (million), South Africa
2015–2021
Source: eshopworld; We Arre Social; Frost & Sullivan
CAGR
E-COMMERCE
SOUTH AFRICA’S E-COMMERCE MARKET IS HIGHLY FRAGMENTED WITH A
RANGE OF PROVIDERS ACROSS DIFFERENT MARKET SEGMENTS
Future Watch Report12
eCommerce Market: Key Companies across Product Categories, South Africa, 2017
Food/Grocery
Electronics, Fashion, Household Appliances,
and Smartphones & Accessories
Travel/Movies
Vehicle Purchase/Rentals Real Estate
Price Comparison
Source: Frost & Sullivan
E-COMMERCE
TAKEALOT, WHOSE REVENUE HAS GROWN BY A CAGR OF 93% DURING
2011-2017 IS ONE OF THE LEADING PROVIDERS IN THE MARKET
0,0
1,0
2,0
3,0
4,0
5,0
2011 2012 2013 2014 2015 2016 2017
Tuhannet
Future Watch Report13
Top e-Commerce Providers by Sales in selected Segments, South Africa, 2017
12,5%
5,5% 5,1%
2,7% 2,2% 2,0% 1,8% 1,6% 1,5% 1,5% 1,5% 1,4%
0,0%
3,0%
6,0%
9,0%
12,0%
15,0%
Takealot Apple App
Store
Pick n Pay Woolworths Sportsmans
Warehouse
Incredible
Connetion
Exclusive
Books
HomeChoice NetFlorist Mr Price Amazon Spree
Takealot Historical Revenue, 2011 –2017
2011,
$7.5 Million
2017
$333.8 Million93%
Source: Euromonitor; Mybroadband; Naspers; The MediaOnline; Frost & Sullivan
Takealot has a product portfolio spanning 21
departments. While the focus is largely on online
retail as opposed to the marketplace model, its
strong financial backing from Naspers and Tiger
Global has played a vital role in enabling the
company to reach the market leadership position
in the B2C eCommerce space in south Africa.
E-COMMERCE
TAKEALOT’S LONG-TERM PLAN TO BOOST ITS ONLINE MARKETPLACE SALES
WILL REQUIRE EXPANDING ITS MOBILE MARKETING
Future Watch Report14
Overall
Strategy
Takealot's product category diversification to 21 departments and its only online presence
differentiates itself from other eCommerce companies in South Africa. While the focus is largely on
online retail as opposed to the marketplace model, its strong financial backing from Naspers and
Tiger Global has played a vital role in enabling the company to reach the market leadership position
in the B2C eCommerce space in south Africa.
Company Facts
• Founded in: 2011
• Headquarters: Cape Town,
South Africa
• Parent Company: Naspers
(53.5% stake)
• Number of employees: 1200+
• Key Investors: Tiger
Global, Naspers
• Geographical Presence:
South Africa
Product Category
• Fashion
• Phones, Tablets, and Accessories
• Computing and Accessories
• Electronics
• Household Appliances
• Office Supplies
• Health and Beauty
• Sports and Fitness
• Baby, Kids, and Toys
• Games and Consoles
• Pets
Business Model
• Takealot follows both online
marketplace and online retail models,
of which the latter is dominant.
Currently, Takealot marketplace
accounts for 17%–18% of the overall
gross merchandise value (or gross
revenue).
• In an attempt to grow its marketplace
business, the company is looking to
increase this to 40-50% during the
next 3-5 years.
• The company has only online
presence wherein it is available as a
website as well as a mobile app.
Source: SME South Africa; My Broadband; Frost & Sullivan
E-COMMERCE
TECHNOLOGIES SUCH AS ANALYTICS AND CHATBOTS ARE AN AREA THAT
TAKEALOT IS EXPECTED TO LOOK TO IMPROVE CUSTOMER ENGAGEMENT
Future Watch Report15
Digitised Engagement
• Takealot provides digitised engagement
to its customers via website and mobile
app available on both android and iOS
platforms.
• Unlike Jumia, Takealot is yet to invest
in chatbot messaging services.
Digital Customer Acquisition
• Takealot offers app only deals -
exclusive benefits and competitions for
app users in an attempt to attract more
customers to use mobile app over
website.
Distribution and Delivery
• With regards to shipping time, there are
two options given to customers based
anywhere in South Africa – Courier and
Collect from warehouse.
• The Takealot Delivery Team (formerly Mr D
Courier) does last-mile package deliveries
for all Takealot Group companies as well as
other independent business services, such
as FNB Credit Cards
Payments and After-Sales Service
• Takealot provides a number of payment
options including COD, credit/debit card,
instant EFT, discovery miles, mobicred,
bitcoin, and eBucks for flexible, fast, and
convenient payments on both website and
mobile app platforms
• Takealot’s return policy is such that
customers are given 30 days from the date
of delivery in case they want to place a
return request. While there is no additional
return fees, 100% refund of the total
amount paid is credited to customer’s
account
E-COMMERCE
KEY MARKET TRENDS – SOUTH AFRICA
Future Watch Report16
1. Omni Channel Retailing – Ecommerce companies are setting up physical stores or
customer experience centres to provide digital in-store experience to the large fraction
of customers who are still hesitant to buy products online.
2. Payments Integration – While credit/debit cards are the mainstream payment
options in South Africa and cash-on-delivery (COD) in Egypt, Kenya, and Nigeria,
Cryptocurrency is making inroads in South Africa.
3. The Shift from e-Commerce to m-Commerce – The growing adoption of
smartphones is accelerating the shift in the preferred platform from mobile website to
mobile app while providing enhanced convenience to users in terms of choosing their
preferred medium.
4. Adoption of Analytics and AI Technologies – E-Commerce companies are
increasingly leveraging AI technologies to provide chatbot services and personalized
recommendations for customers in order to personalize the engagement with clients
and enhance the shopping experience.
Leading
Market
Trends
Source: Frost & Sullivan
E-COMMERCE
1. ECOMMERCE COMPANIES ARE EMBRACING OMNI-CHANNEL STRATEGY IN ORDER TO
PROVIDE A CONSISTENT CUSTOMER EXPERIENCE ACROSS DIFFERENT SALES CHANNELS
Future Watch Report17
Implications of Omni-ChannelKey Companies that have Omni-Channel presence
Key eCommerce companies that have Omni channel presence
Consolidated inventory management
to ensure full visibility of availability
of stock across platforms
Enabling multiple digital payment
platforms, including in-store POS,
mobile and card
Virtual reality and augmented reality
can offer online customers a richer
shopping experience online
Network optimization in logistics
using analytics in order reduce costs
• In a survey on B2C eCommerce, it was found out that about
44% South Africans go to a physical store to try out a product
but eventually make the purchase online due to the
convenience of online stores and the ability to compare prices
• In addition, fashion and furniture retailers are looking to give
customers the experience of being in-store by adopting virtual
and augmented reality technologies, with the view to further
improve the convenience for the customer
• Furniture retailer Lewis, have previously expressed an interest in
augmented reality to help customers improve product selection,
usable for in-store and online store shopping experience
• This follows on from what other providers such as @Home,
Dulux and Plascon have done
Source: Frost & Sullivan
E-COMMERCE
2. PAYMENTS INTEGRATION
Future Watch Report18
Gift Card;
9%
Cash on
delivery;
23%
Debit
card; 22%
Direct
debit; 18%
Credit
card; 16%
PayPal;
14%
Customer Payment Option Preferences, South
Africa, 2016
Has a Bank
Account
Has a Credit
Card
Makes and /or
Receives Payments
via Mobile Account
Makes online Purchases
and / or Pays Bills
Online
70% 14%13% 8%
• South Africa has one of the highest bank account and internet
penetration rates on the continent at 70% and 54%, respectively, but
a low credit card penetration rate at only 13%
• At least 22% of e-commerce customers prefer to use their debit cards
to pay for their services compared to only 16% for credit cards
• Due to some lingering doubts over the e-commerce model, 23%
customers would rather pay cash on delivery, particularly, for high
value items such as fashion and electronics
• Integration of technologies such Crypto-currency is expected to
further transform the payments landscape
• Takealot, a leader in innovation in the country, is among the very few
companies that accepts Bitcoin as a payment option emphasizing its
willingness to new technologies.
• Other providers accepting bitcoin include Raru, PiShop and FirstShop,
which connect through BitX and payment gateway and PayFast
Source: Statistia; We Arre Social; mybroadband; Frost & Sullivan
E-COMMERCE
2. THERE IS A PREFERENCE FOR COD IN MOST OF AFRICA, HOWEVER IN SOUTH AFRICA
THE PAYMENT LANDSCAPE IS STILL DOMINATED BY DEBIT AND CREDIT CARDS
Future Watch Report19
Key Trends – Payments Integration
African
Countries
Phase 1: Cash
On Delivery (COD)
Phase 2: Mobile
Money/eWallets
Phase 3: Credit/
Debit Cards/EFT
Phase 4:
Cryptocurrency
Egypt
Kenya
Nigeria
South Africa
Increase in banking population
Increase in trust in online purchases and online payments
Payment Model Penetration Levels Nil Low Medium High
Source: Frost & Sullivan
E-COMMERCE
3. WHILE THE USAGE OF MOBILE APPS WILL CONTINUE TO STEADILY INCREASE WEBSITES
WILL CONTINUE TO BE THE MAIN INTERFACE FOR E-COMMERCE
Future Watch Report20
Key Market Highlights
• Mobile websites still remain the most preferred platform across Middle East and Africa with nearly 60% of online users
preferring this platform as the majority of customers in this region are finding it more convenient to use laptops and
desktops as opposed to mobile phones. However, with the steadily growing smartphone penetration, an increasing
number of customers are shifting from accessing mobile websites to mobile apps. This trend is more prevalent in Nigeria
where nearly 70% of online population makes purchases via mobile phones
• E-Commerce companies are increasingly looking to leverage advanced technology in order to personalize the shopping
experience. They are therefore building customer engagement strategies around mobile apps, as customers have
become attuned to using their mobile devices for a range of function. Moreover, this adds to the customer’s
convenience as they are able to make purchases at any time or location, while they are relatively limited when making
purchases on a laptop/desktop
• Traditional retailers Woolworths and Pick ‘n Pay still rely on SMS-based marketing campaigns but are trying to enhance
their mobile presence and marketing through their respective apps
• In addition they are also looking to content management solutions (CMS) to create a consistent shopping experience
across the different devices in order to avoid customer churn
Mobile Website Mobile Apps
Source: Frost & Sullivan
E-COMMERCE
4. ANALYTICS AND AI ARE BECOMING AN IMPORTANT SOLUTION FOR THE ECOMMERCE
INDUSTRY TO PROVIDE PERSONALIZED AND RICHER SHOPPING EXPERIENCE
Future Watch Report21
Key use cases, their impact, and extent of their usageKey eCommerce companies using Analytics and AI
Key Market Highlights
• Leading eCommerce companies such as Takealot have
made significant investments in analytics and AI
technologies in order to provide personalized
recommendations. Unlike Jumia, Takealot is yet to provide
a chatbot messaging services but is considering enabling
it.
• Spree uses product recommendations to drive sales, with
which it has enjoyed some success. There is however scope
to apply more advanced technologies such as analytics and
machine learning in order to make this process efficient,
which retailers are still not integrating into their customer
experience.
• Other smaller providers such as Clevva and Jumo use AI,
while the larger retailers Pick n Pay and Woolworths are
turning to AI to personalize shopping.
To respond to customer
inquiries for simple tasks, and
providing solutions/
recommendations by
leveraging NLP technology
To provide personalized
recommendations by
analysing past customer
behaviour, by leveraging
predictive analytics
To automate warehouse
operations by applying
machine learning algorithms to
data
Chatbots/AI
Assistants
Personalized
Recomm-
endations
Smart
Logistics
Use Case Impact Extent of Usage
Low
Med
High
Low
Med
High
Low
Med
High
Source: Frost & Sullivan
TOPICS
1. WHAT IS e-COMMERCE
2. CURRENT STATUS AND TRENDS IN SOUTH AFRICA’S e-COMMERCE
3. IMPLICATIONS AND FUTURE OPPORTUNITIES FOR TEAM FINLAND
Future Watch Report22
E-COMMERCE
50,6
87,6
88,1
88,3
88,7
90,3
90,7
92,7
93,1
98,2
100,0
- 20,0 40,0 60,0 80,0 100,0
South Africa
Denmark
Switzerland
Netherlands
UAE
Hong Kong
Sweden
Finland
USA
Norway
Singapore
Score
Rank Country Score out of 100
1 Singapore 100.0
2 Norway 98.2
3 USA 93.1
4 Finland 92.7
5 Sweden 90.7
6 Hong Kong 90.3
7 UAE 88.7
8 Netherlands 88.3
9 Switzerland 88.1
10 Denmark 87.6
52 South Africa 50.6
• Finland is considered one of the most digitally
competitive countries in the world, ranked 7th
out of 61 surveyed countries by the IMD
World Competitiveness Center(*) in 2018.
• The country ranks even higher (4th) on the
Technology environment of the economy ,
which captures its context to enable the
development of digital solutions by way of
regulation and access to capital.
• As a result, Finnish companies have the
platform to advance their technology
capabilities and drive digital transformation,
while in comparison, South Africa ranks 52nd
of the group.
• Finnish companies are well-positioned to
meet the rising need for digital payments and
analytics & AI in South Africa’s e-commerce
market.
Future Watch Report23
FINLAND HAS THE SUPPORT STRUCTURES BE A DIGITALLY COMPETITIVE
ECONOMY GLOBALLY
Source: IMD World Competitiveness Center; Frost & Sullivan *IMD - Institute for Management Development
World Digital Competitiveness Ranking Based on
Technology, Global , 2018
E-COMMERCE
• Finland is positioning itself to become a leader
in AI technology, with the government lending
support this ambition by enabling skills
development and innovation.
• While Finland is becoming a key provider of AI
in the healthcare sector, retail is also expected
to become an important area of focus as local
retailers expect to have the highest growth of
AI during 2018-2023 of all sectors.
• AI is expected to impact brick-and-mortar
and online retailers across the following
functions:
 Chat Bots and Virtual Assistants,
 Marketing and Segmentation,
 Dynamic Pricing and Supply Chain
Optimisation
• Some of the leading South African retailers
have already integrated analytics and
automation into their operations.
1
1,2
1,4
1,6
1,8
2
2018 2019 2020 2021 2022 2023
Manufacturing Healthcare
Retail and Consumer Financial Services
Future Watch Report24
FINNISH COMPANIES CAN LEVERAGE THEIR GROWING ANALYTICS AND AI
CAPABILITIES TO IMPROVE CLIENT ENGAGEMENT IN E-COMMERCE
Expected AI Growth from AI by Sector, Finland, 2017
Source: PWC; Frost & Sullivan
• With at least 11 in 2017, Finland ranks second only
behind Switzerland for the number of AI start-ups in
Europe according to City.AI.
• Other more established companies in the AI and
analytics space include Curious AI, Silo.AI and Tieto.
E-COMMERCE
Future Watch Report25
LOCAL ONLINE RETAILERS ARE INCREASINGLY TURNING TO ANALYTICS AND
AI TO IMPROVE CUSTOMER ENGAGEMENT AND TARGETED MARKETING
Three main technology application
Targeted Marketing
Intelligence along
the supply chain
Automated
engagement
Local retailers with both a physical
and online presence such as
Woolworths, Pick n Pay and The
Foschini Group are looking to
analytics to personalize and localize
customer interaction
Retailers such as Spree are using
predictive analytics to manage stock
levels. They leverage AI and
customer engagement across the
omni-channel to better predict
customer spending
Online retail such as Takealot are
exploring chatbots on their online
stores in order to automate customer
engagement. This will be supported
by the AI and analytics solutions that
they are taking up
Retailers have access to a vast amount of data generated through the retail business that
they are positioned to leverage in order to boost sales
Opportunities for Analytics, Artificial Intelligence and Chatbots
Sample of Relevant Companies
Source: PWC; Frost & Sullivan
E-COMMERCE
Future Watch Report26
RETAILERS WITH AN ONLINE PRESENCE ARE TAKING UP AR AND AI
SOLUTIONS TO HELP CUSTOMERS WITH PRODUCT SELECTION
• In the construction market, the manufacturers of
tiles and household and office fittings offering
customers virtual impressions of the final product
• Providers of paints are also leveraging augmented
reality (AR) and virtual reality (VR) technologies
to allow customers to try out products without
needing to take physical samples
• AR and VR technologies are also becoming
relevant for clothing and furniture retailers in
South Africa to help customers with their online
purchase choices.
• Furniture retailer @Home is one of the main local
providers to provide customers with a virtual
impression of their home with the range of
products the retailer offers.
Providers using AR & AI
Companies Indicating interest in AR & AI
Providers using AR & AI for e-Commerce
ConstructionFashion&Furniture
Source: Frost & Sullivan
E-COMMERCE
Future Watch Report27
EMERGING SPECIALIST ONLINE MARKETPLACES ARE LOOKING TO IMPROVE
THEIR DIGITAL MARKETING EFFORTS
• Despite the growing use of smartphones, there is still scope
to improve mobile advertising and engagement in e-
commerce, as providers still rely on SMS campaigns
• Customers go online to search for items to buy rather than
use in-app ads. Following their search, they call the business
and not the online-based ‘click to call’ functionality,
•
49%
of shoppers are reported to
have visited an online retail
store at least once a month,
compared to 45% in 2016.
• Emerging local online marketplaces for specialist and
general products require digital marketing solutions.
• Takealot is trying to boost sales from its online
marketplace business, and are looking to increase the
revenue contribution of this segment from 17% to
around 50%. This will require improvement of its digital
marketing, including on mobile
• Specialist market places for goods such as industrial,
mining and medical equipment are expected to become
more prevalent in South Africa. This will require digital
marketing services and CMS solutions in order to drive
traction in the market.
80%
of internet users only use their
mobile devices to access the
internet, 67% of whom do so
with the intent to shop
whether online or in a store
Source: We Are Social; memburn; PWC; Frost & Sullivan
441
508
580
659
739
809
0,0
200,0
400,0
600,0
800,0
1 000,0
2016 2017 2018 2019 2020 2021
AdSpend($million)
Search
Internet Advertising Spend, South Africa, 2016-17
Camilo Ramada
Advisor
camilo.ramada@businessfinland.fi

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Future Watch South Africa: Rising opportunities in digital payments and customer engagement in retail

  • 1. 1 THE RISING OPPORTUNITY TO DRIVE DIGITAL PAYMENTS AND CUSTOMER ENGAGEMENT IN RETAIL, NOVEMBER 2018 E-COMMERCE
  • 2. AUTHORS Future Watch Report2 At Business Finland, we create new growth by supporting companies to go global, as well as funding innovations. Our top experts speed up the identification of business opportunities around the world and help transform them into global success stories. Future Watch is part of TF Market opportunities service and it provides actionable insights from our global network for Finnish businesses and stakeholders. More information at www.marketopportunities.fi Lehlohonolo Mokenala Consultant Zahil Jackpersad Consulting Analyst
  • 3. TOPICS 1. WHAT IS e-COMMERCE 2. CURRENT STATUS AND TRENDS IN SOUTH AFRICA’S e-COMMERCE 3. IMPLICATIONS AND FUTURE OPPORTUNITIES FOR TEAM FINLAND Future Watch Report3
  • 4. E-COMMERCE A GROWING NUMBER OF SECTORS ARE TURNING TO AN E-COMMERCE BUSINESS MODEL, WITH RETAIL AMONG THE MOST PROMINENT Future Watch Report4 Retail Industry E-CommerceOnline Retail Part of e-Commerce Not included in e-Commerce Source: Frost & Sullivan • The e-Commerce market is made of mainstream retail products offered over online platforms, digital products and service as well as the online delivery of services from other sectors such as travel and accommodation, financial services, etc. • Online retail is an important subset of the e-Commerce market is currently contested on the one hand by traditional retailers that establish an online presence. On the other hand, is online-only retailers who do not have a brick-and-mortar retail footprint such as Amazon, Alibaba and Takealot , who are the dominant providers of online retail.
  • 5. E-COMMERCE GLOBALLY PRIMARY E-COMMERCE RETAIL STRUCTURES ARE MADE UP OF B2B AND B2C 5 Total eCommerce Market: Primary eCommerce Retail Structures, Africa, 2017 B2C e-Commerce Business to consumer (B2C) is the most prevalent e-Commerce model wherein businesses sell goods and products directly to the end – user typically via a website. With an online shop front or an online marketplace customers can browse products online, make a purchase decision, and proceed to an electronic checkout wherein payment processing will take place. Examples include standard retail eCommerce stores like Jumia, Takealot, Souq, Konga, etc. B2B e-Commerce A Business to Business (B2B) model operates by providing products from one business to another, through either online auctions or marketplaces. Online auctions are computerised formats of traditional auctions wherein buyers set the prices and bid against each other. Examples include online marketplaces and SaaS companies like – IBM, Volkswagen, Johnson & Johnson, Proctor & Gamble Co. etc. MarketChains Suppliers Manufacturers Wholesalers/ Distributors Retailers B2C E-commerce Customers B2B E-commerce Source: Trellis; European Business School; Frost & Sullivan
  • 6. E-COMMERCE DEMAND GENERATION, ONLINE PAYMENTS, ORDERING AND DELIVERY HAVE DRIVEN INNOVATION IN E-COMMERCE IN AFRICA Future Watch Report6 Total eCommerce Market: eCommerce Value Chain, Africa, 2017 1. Demand Generation 2. Order Placement 3. Online Payments 6. Returns Handling 5. Cash Handling (COD) 4. Warehousing and Logistics Order assembling and packing at master warehouseLast mile delivery to customer Delivery to master warehouse Delivery to secondary warehouse Source: Frost & Sullivan Areas of innovation and disruption along the e-commerce value chain
  • 7. E-COMMERCE THE GLOBAL MARKET FOR ECOMMERCE IS POINTING NORTH, WITH INCREASINGLY MORE CUSTOMERS OPTING TO SHOP ONLINE Future Watch Report7 China • China is the largest eCommerce market in the world estimated at $393 billion. MEA • The MEA market makes up only 7% of global eCommerce market. The region is however, expected to witness high growth over the next five years United States • The US is the world’s second largest eCommerce market. It was estimated close to $364 billion in 2015 and is expected to reach $630 billion by 2020. Latin America • Latin America contributes to approximately 10% of the total global online sales. • Brazil and Argentina are the two of the largest countries in terms of online retail. Europe • Europe accounts for 34.8% of the global online retail market. The UK’s online retail as a percentage of total retail stands at 13%, highest globally. Key Highlights of the Global Market for e-Commerce, Global, 2017 Source: Frost & Sullivan
  • 8. E-COMMERCE THE MIDDLE EAST AND AFRICA ECOMMERCE MARKET IS EXPECTED TO GROW AT 12.1% CAGR DURING THE PERIOD 2017-2020. Future Watch Report8 Low High Egypt Kenya South Africa Nigeria Degree of Ecommerce Development across Key African Countries, Africa, 2017 eCommerce Market: Revenue Forecast, Middle East and Africa, 2017–2020, CAGR = 12.1 2017 2018 2019 2020 Africa 7,5 8,3 9,3 10,6 Midde East 9,2 10,2 11,5 12,9 Growth Rate 10,8% 12,4% 13,0% 13,2% 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 0,0 5,0 10,0 15,0 20,0 25,0 OverallGrowthRate B2CeCommerceMarketSize (in$Bn) Source: EuroMonitor; eshopworld; Frost & Sullivan
  • 9. TOPICS 1. WHAT IS e-COMMERCE 2. CURRENT STATUS AND TRENDS IN SOUTH AFRICA’S e-COMMERCE 3. IMPLICATIONS AND FUTURE OPPORTUNITIES FOR TEAM FINLAND Future Watch Report9
  • 10. E-COMMERCE Future Watch Report10 • As one of the more developed economies on the continent, South Africa has one of the largest and fastest growing e-commerce markets on the continent. • This has been driven by a relatively larger high-income population and higher internet penetration (54%) together with the adoption of smart devices such as smartphones and tablets. • In 2017, South Africa’s e-commerce market was worth an estimated $2.7 billion, registering a 15% growth rate over the period 2016-2017. B2C e-Commerce makes up a growing portion of South Africa’s retail sector, accounting for 1.9% of retail revenue in 2017 • The market is expected to maintain the 15 % growth rate over the forecast period as more consumers gain access to the internet. AN OVERVIEW OF THE SOUTH AFRICAN E-COMMERCE MARKET Population: 56m Nominal GDP: US$ 349bn Retail: US$43.6bn Internet Users: 30.81 million Smartphone Penetration: 61% E-Commerce Users: 18.4 million E-Commerce Market Size: $2.7 billion Forecasted Market Growth 2017-2021: 15% p.a. Key Facts and Figures (2017) 5.7% 3.7% 2033E South Africa’s Ocean Economy is growing at a much higher rate than the global Ocean Economy 0,7% 0,5% 3,3% 1,9% Egypt Kenya Nigeria South Africa Africa Average:1.5% eCommerce Market: B2C eCommerce Market as a % of Total Retail Market, Africa, 2017 Source: StatsSA; We Are Social; EuroMonitor; Frost & Sullivan
  • 11. E-COMMERCE THE E-COMMERCE MARKET IS FORECASTED TO GROW BY 15% OVER THE PERIOD 2017-2020 2,33 2,70 3,25 3,84 4,39 4,70 2,0 2,5 3,0 3,5 4,0 4,5 5,0 2016 2017 2018 2019 2020 2021 E-CommerceServiceRevenue (USD$Billion) Year Future Watch Report11 18% of the population made an online purchase via a mobile device. 29% of the population claimed to have purchased a product or service online. The average annual revenue per user was $146 in 2017 and is expected to reach $190 in 2021. E-Commerce penetration was 31% in 2016, and is expected to reach 43% by 2020. E-Commerce Market Size and Forecast, South Africa 2015–2021, CAGR = 15.1% Key Market Drivers 2016 2017 2018 2019 2020 2021 17.1m 18.4m 19.9m 21..5m 23.2m 24.8m E-Commerce Forecasted Users (million), South Africa 2015–2021 Source: eshopworld; We Arre Social; Frost & Sullivan CAGR
  • 12. E-COMMERCE SOUTH AFRICA’S E-COMMERCE MARKET IS HIGHLY FRAGMENTED WITH A RANGE OF PROVIDERS ACROSS DIFFERENT MARKET SEGMENTS Future Watch Report12 eCommerce Market: Key Companies across Product Categories, South Africa, 2017 Food/Grocery Electronics, Fashion, Household Appliances, and Smartphones & Accessories Travel/Movies Vehicle Purchase/Rentals Real Estate Price Comparison Source: Frost & Sullivan
  • 13. E-COMMERCE TAKEALOT, WHOSE REVENUE HAS GROWN BY A CAGR OF 93% DURING 2011-2017 IS ONE OF THE LEADING PROVIDERS IN THE MARKET 0,0 1,0 2,0 3,0 4,0 5,0 2011 2012 2013 2014 2015 2016 2017 Tuhannet Future Watch Report13 Top e-Commerce Providers by Sales in selected Segments, South Africa, 2017 12,5% 5,5% 5,1% 2,7% 2,2% 2,0% 1,8% 1,6% 1,5% 1,5% 1,5% 1,4% 0,0% 3,0% 6,0% 9,0% 12,0% 15,0% Takealot Apple App Store Pick n Pay Woolworths Sportsmans Warehouse Incredible Connetion Exclusive Books HomeChoice NetFlorist Mr Price Amazon Spree Takealot Historical Revenue, 2011 –2017 2011, $7.5 Million 2017 $333.8 Million93% Source: Euromonitor; Mybroadband; Naspers; The MediaOnline; Frost & Sullivan Takealot has a product portfolio spanning 21 departments. While the focus is largely on online retail as opposed to the marketplace model, its strong financial backing from Naspers and Tiger Global has played a vital role in enabling the company to reach the market leadership position in the B2C eCommerce space in south Africa.
  • 14. E-COMMERCE TAKEALOT’S LONG-TERM PLAN TO BOOST ITS ONLINE MARKETPLACE SALES WILL REQUIRE EXPANDING ITS MOBILE MARKETING Future Watch Report14 Overall Strategy Takealot's product category diversification to 21 departments and its only online presence differentiates itself from other eCommerce companies in South Africa. While the focus is largely on online retail as opposed to the marketplace model, its strong financial backing from Naspers and Tiger Global has played a vital role in enabling the company to reach the market leadership position in the B2C eCommerce space in south Africa. Company Facts • Founded in: 2011 • Headquarters: Cape Town, South Africa • Parent Company: Naspers (53.5% stake) • Number of employees: 1200+ • Key Investors: Tiger Global, Naspers • Geographical Presence: South Africa Product Category • Fashion • Phones, Tablets, and Accessories • Computing and Accessories • Electronics • Household Appliances • Office Supplies • Health and Beauty • Sports and Fitness • Baby, Kids, and Toys • Games and Consoles • Pets Business Model • Takealot follows both online marketplace and online retail models, of which the latter is dominant. Currently, Takealot marketplace accounts for 17%–18% of the overall gross merchandise value (or gross revenue). • In an attempt to grow its marketplace business, the company is looking to increase this to 40-50% during the next 3-5 years. • The company has only online presence wherein it is available as a website as well as a mobile app. Source: SME South Africa; My Broadband; Frost & Sullivan
  • 15. E-COMMERCE TECHNOLOGIES SUCH AS ANALYTICS AND CHATBOTS ARE AN AREA THAT TAKEALOT IS EXPECTED TO LOOK TO IMPROVE CUSTOMER ENGAGEMENT Future Watch Report15 Digitised Engagement • Takealot provides digitised engagement to its customers via website and mobile app available on both android and iOS platforms. • Unlike Jumia, Takealot is yet to invest in chatbot messaging services. Digital Customer Acquisition • Takealot offers app only deals - exclusive benefits and competitions for app users in an attempt to attract more customers to use mobile app over website. Distribution and Delivery • With regards to shipping time, there are two options given to customers based anywhere in South Africa – Courier and Collect from warehouse. • The Takealot Delivery Team (formerly Mr D Courier) does last-mile package deliveries for all Takealot Group companies as well as other independent business services, such as FNB Credit Cards Payments and After-Sales Service • Takealot provides a number of payment options including COD, credit/debit card, instant EFT, discovery miles, mobicred, bitcoin, and eBucks for flexible, fast, and convenient payments on both website and mobile app platforms • Takealot’s return policy is such that customers are given 30 days from the date of delivery in case they want to place a return request. While there is no additional return fees, 100% refund of the total amount paid is credited to customer’s account
  • 16. E-COMMERCE KEY MARKET TRENDS – SOUTH AFRICA Future Watch Report16 1. Omni Channel Retailing – Ecommerce companies are setting up physical stores or customer experience centres to provide digital in-store experience to the large fraction of customers who are still hesitant to buy products online. 2. Payments Integration – While credit/debit cards are the mainstream payment options in South Africa and cash-on-delivery (COD) in Egypt, Kenya, and Nigeria, Cryptocurrency is making inroads in South Africa. 3. The Shift from e-Commerce to m-Commerce – The growing adoption of smartphones is accelerating the shift in the preferred platform from mobile website to mobile app while providing enhanced convenience to users in terms of choosing their preferred medium. 4. Adoption of Analytics and AI Technologies – E-Commerce companies are increasingly leveraging AI technologies to provide chatbot services and personalized recommendations for customers in order to personalize the engagement with clients and enhance the shopping experience. Leading Market Trends Source: Frost & Sullivan
  • 17. E-COMMERCE 1. ECOMMERCE COMPANIES ARE EMBRACING OMNI-CHANNEL STRATEGY IN ORDER TO PROVIDE A CONSISTENT CUSTOMER EXPERIENCE ACROSS DIFFERENT SALES CHANNELS Future Watch Report17 Implications of Omni-ChannelKey Companies that have Omni-Channel presence Key eCommerce companies that have Omni channel presence Consolidated inventory management to ensure full visibility of availability of stock across platforms Enabling multiple digital payment platforms, including in-store POS, mobile and card Virtual reality and augmented reality can offer online customers a richer shopping experience online Network optimization in logistics using analytics in order reduce costs • In a survey on B2C eCommerce, it was found out that about 44% South Africans go to a physical store to try out a product but eventually make the purchase online due to the convenience of online stores and the ability to compare prices • In addition, fashion and furniture retailers are looking to give customers the experience of being in-store by adopting virtual and augmented reality technologies, with the view to further improve the convenience for the customer • Furniture retailer Lewis, have previously expressed an interest in augmented reality to help customers improve product selection, usable for in-store and online store shopping experience • This follows on from what other providers such as @Home, Dulux and Plascon have done Source: Frost & Sullivan
  • 18. E-COMMERCE 2. PAYMENTS INTEGRATION Future Watch Report18 Gift Card; 9% Cash on delivery; 23% Debit card; 22% Direct debit; 18% Credit card; 16% PayPal; 14% Customer Payment Option Preferences, South Africa, 2016 Has a Bank Account Has a Credit Card Makes and /or Receives Payments via Mobile Account Makes online Purchases and / or Pays Bills Online 70% 14%13% 8% • South Africa has one of the highest bank account and internet penetration rates on the continent at 70% and 54%, respectively, but a low credit card penetration rate at only 13% • At least 22% of e-commerce customers prefer to use their debit cards to pay for their services compared to only 16% for credit cards • Due to some lingering doubts over the e-commerce model, 23% customers would rather pay cash on delivery, particularly, for high value items such as fashion and electronics • Integration of technologies such Crypto-currency is expected to further transform the payments landscape • Takealot, a leader in innovation in the country, is among the very few companies that accepts Bitcoin as a payment option emphasizing its willingness to new technologies. • Other providers accepting bitcoin include Raru, PiShop and FirstShop, which connect through BitX and payment gateway and PayFast Source: Statistia; We Arre Social; mybroadband; Frost & Sullivan
  • 19. E-COMMERCE 2. THERE IS A PREFERENCE FOR COD IN MOST OF AFRICA, HOWEVER IN SOUTH AFRICA THE PAYMENT LANDSCAPE IS STILL DOMINATED BY DEBIT AND CREDIT CARDS Future Watch Report19 Key Trends – Payments Integration African Countries Phase 1: Cash On Delivery (COD) Phase 2: Mobile Money/eWallets Phase 3: Credit/ Debit Cards/EFT Phase 4: Cryptocurrency Egypt Kenya Nigeria South Africa Increase in banking population Increase in trust in online purchases and online payments Payment Model Penetration Levels Nil Low Medium High Source: Frost & Sullivan
  • 20. E-COMMERCE 3. WHILE THE USAGE OF MOBILE APPS WILL CONTINUE TO STEADILY INCREASE WEBSITES WILL CONTINUE TO BE THE MAIN INTERFACE FOR E-COMMERCE Future Watch Report20 Key Market Highlights • Mobile websites still remain the most preferred platform across Middle East and Africa with nearly 60% of online users preferring this platform as the majority of customers in this region are finding it more convenient to use laptops and desktops as opposed to mobile phones. However, with the steadily growing smartphone penetration, an increasing number of customers are shifting from accessing mobile websites to mobile apps. This trend is more prevalent in Nigeria where nearly 70% of online population makes purchases via mobile phones • E-Commerce companies are increasingly looking to leverage advanced technology in order to personalize the shopping experience. They are therefore building customer engagement strategies around mobile apps, as customers have become attuned to using their mobile devices for a range of function. Moreover, this adds to the customer’s convenience as they are able to make purchases at any time or location, while they are relatively limited when making purchases on a laptop/desktop • Traditional retailers Woolworths and Pick ‘n Pay still rely on SMS-based marketing campaigns but are trying to enhance their mobile presence and marketing through their respective apps • In addition they are also looking to content management solutions (CMS) to create a consistent shopping experience across the different devices in order to avoid customer churn Mobile Website Mobile Apps Source: Frost & Sullivan
  • 21. E-COMMERCE 4. ANALYTICS AND AI ARE BECOMING AN IMPORTANT SOLUTION FOR THE ECOMMERCE INDUSTRY TO PROVIDE PERSONALIZED AND RICHER SHOPPING EXPERIENCE Future Watch Report21 Key use cases, their impact, and extent of their usageKey eCommerce companies using Analytics and AI Key Market Highlights • Leading eCommerce companies such as Takealot have made significant investments in analytics and AI technologies in order to provide personalized recommendations. Unlike Jumia, Takealot is yet to provide a chatbot messaging services but is considering enabling it. • Spree uses product recommendations to drive sales, with which it has enjoyed some success. There is however scope to apply more advanced technologies such as analytics and machine learning in order to make this process efficient, which retailers are still not integrating into their customer experience. • Other smaller providers such as Clevva and Jumo use AI, while the larger retailers Pick n Pay and Woolworths are turning to AI to personalize shopping. To respond to customer inquiries for simple tasks, and providing solutions/ recommendations by leveraging NLP technology To provide personalized recommendations by analysing past customer behaviour, by leveraging predictive analytics To automate warehouse operations by applying machine learning algorithms to data Chatbots/AI Assistants Personalized Recomm- endations Smart Logistics Use Case Impact Extent of Usage Low Med High Low Med High Low Med High Source: Frost & Sullivan
  • 22. TOPICS 1. WHAT IS e-COMMERCE 2. CURRENT STATUS AND TRENDS IN SOUTH AFRICA’S e-COMMERCE 3. IMPLICATIONS AND FUTURE OPPORTUNITIES FOR TEAM FINLAND Future Watch Report22
  • 23. E-COMMERCE 50,6 87,6 88,1 88,3 88,7 90,3 90,7 92,7 93,1 98,2 100,0 - 20,0 40,0 60,0 80,0 100,0 South Africa Denmark Switzerland Netherlands UAE Hong Kong Sweden Finland USA Norway Singapore Score Rank Country Score out of 100 1 Singapore 100.0 2 Norway 98.2 3 USA 93.1 4 Finland 92.7 5 Sweden 90.7 6 Hong Kong 90.3 7 UAE 88.7 8 Netherlands 88.3 9 Switzerland 88.1 10 Denmark 87.6 52 South Africa 50.6 • Finland is considered one of the most digitally competitive countries in the world, ranked 7th out of 61 surveyed countries by the IMD World Competitiveness Center(*) in 2018. • The country ranks even higher (4th) on the Technology environment of the economy , which captures its context to enable the development of digital solutions by way of regulation and access to capital. • As a result, Finnish companies have the platform to advance their technology capabilities and drive digital transformation, while in comparison, South Africa ranks 52nd of the group. • Finnish companies are well-positioned to meet the rising need for digital payments and analytics & AI in South Africa’s e-commerce market. Future Watch Report23 FINLAND HAS THE SUPPORT STRUCTURES BE A DIGITALLY COMPETITIVE ECONOMY GLOBALLY Source: IMD World Competitiveness Center; Frost & Sullivan *IMD - Institute for Management Development World Digital Competitiveness Ranking Based on Technology, Global , 2018
  • 24. E-COMMERCE • Finland is positioning itself to become a leader in AI technology, with the government lending support this ambition by enabling skills development and innovation. • While Finland is becoming a key provider of AI in the healthcare sector, retail is also expected to become an important area of focus as local retailers expect to have the highest growth of AI during 2018-2023 of all sectors. • AI is expected to impact brick-and-mortar and online retailers across the following functions:  Chat Bots and Virtual Assistants,  Marketing and Segmentation,  Dynamic Pricing and Supply Chain Optimisation • Some of the leading South African retailers have already integrated analytics and automation into their operations. 1 1,2 1,4 1,6 1,8 2 2018 2019 2020 2021 2022 2023 Manufacturing Healthcare Retail and Consumer Financial Services Future Watch Report24 FINNISH COMPANIES CAN LEVERAGE THEIR GROWING ANALYTICS AND AI CAPABILITIES TO IMPROVE CLIENT ENGAGEMENT IN E-COMMERCE Expected AI Growth from AI by Sector, Finland, 2017 Source: PWC; Frost & Sullivan • With at least 11 in 2017, Finland ranks second only behind Switzerland for the number of AI start-ups in Europe according to City.AI. • Other more established companies in the AI and analytics space include Curious AI, Silo.AI and Tieto.
  • 25. E-COMMERCE Future Watch Report25 LOCAL ONLINE RETAILERS ARE INCREASINGLY TURNING TO ANALYTICS AND AI TO IMPROVE CUSTOMER ENGAGEMENT AND TARGETED MARKETING Three main technology application Targeted Marketing Intelligence along the supply chain Automated engagement Local retailers with both a physical and online presence such as Woolworths, Pick n Pay and The Foschini Group are looking to analytics to personalize and localize customer interaction Retailers such as Spree are using predictive analytics to manage stock levels. They leverage AI and customer engagement across the omni-channel to better predict customer spending Online retail such as Takealot are exploring chatbots on their online stores in order to automate customer engagement. This will be supported by the AI and analytics solutions that they are taking up Retailers have access to a vast amount of data generated through the retail business that they are positioned to leverage in order to boost sales Opportunities for Analytics, Artificial Intelligence and Chatbots Sample of Relevant Companies Source: PWC; Frost & Sullivan
  • 26. E-COMMERCE Future Watch Report26 RETAILERS WITH AN ONLINE PRESENCE ARE TAKING UP AR AND AI SOLUTIONS TO HELP CUSTOMERS WITH PRODUCT SELECTION • In the construction market, the manufacturers of tiles and household and office fittings offering customers virtual impressions of the final product • Providers of paints are also leveraging augmented reality (AR) and virtual reality (VR) technologies to allow customers to try out products without needing to take physical samples • AR and VR technologies are also becoming relevant for clothing and furniture retailers in South Africa to help customers with their online purchase choices. • Furniture retailer @Home is one of the main local providers to provide customers with a virtual impression of their home with the range of products the retailer offers. Providers using AR & AI Companies Indicating interest in AR & AI Providers using AR & AI for e-Commerce ConstructionFashion&Furniture Source: Frost & Sullivan
  • 27. E-COMMERCE Future Watch Report27 EMERGING SPECIALIST ONLINE MARKETPLACES ARE LOOKING TO IMPROVE THEIR DIGITAL MARKETING EFFORTS • Despite the growing use of smartphones, there is still scope to improve mobile advertising and engagement in e- commerce, as providers still rely on SMS campaigns • Customers go online to search for items to buy rather than use in-app ads. Following their search, they call the business and not the online-based ‘click to call’ functionality, • 49% of shoppers are reported to have visited an online retail store at least once a month, compared to 45% in 2016. • Emerging local online marketplaces for specialist and general products require digital marketing solutions. • Takealot is trying to boost sales from its online marketplace business, and are looking to increase the revenue contribution of this segment from 17% to around 50%. This will require improvement of its digital marketing, including on mobile • Specialist market places for goods such as industrial, mining and medical equipment are expected to become more prevalent in South Africa. This will require digital marketing services and CMS solutions in order to drive traction in the market. 80% of internet users only use their mobile devices to access the internet, 67% of whom do so with the intent to shop whether online or in a store Source: We Are Social; memburn; PWC; Frost & Sullivan 441 508 580 659 739 809 0,0 200,0 400,0 600,0 800,0 1 000,0 2016 2017 2018 2019 2020 2021 AdSpend($million) Search Internet Advertising Spend, South Africa, 2016-17