Due to the increase in internet penetration and the more recent pandemic-driven restrictions, online shopping has increased sharply. In South Africa alone, eCommerce revenue jumped by 24% in 2020 to reach USD 4 billion (around 56 Billion ZAR), signaling a growing need for a shift in the channels that businesses use to sell their products.
Getting Your Business Online
There are a number of ways in which people enter the eCommerce space, a primary one being a scenario where an existing business creates an online presence using assets like a website and social media pages.
A key feature, in this case, is the ability to make payments through the website. Selling can also happen through social media, with examples like buyable pins on Pinterest and Instagram shopping gradually taking root.
Out the Box Solutions
A business owner can either pay someone to build a bespoke website for their business or use existing ecommerce platforms that may also serve as content management systems (CMS) like:
- BigCommerce, etc.
Business owners can also get set up shops or stores and get their products listed on marketplaces like Takealot, OneDayOnly, EveryShop, etc. In this case, the business owner pays a commission charged as a percentage off each sale. Some marketplaces also have extra charges like listing fees.
Online & Brick and Mortar
Creating an online presence isn’t the end. You have to come up with a plan for how your physical store(s) and the website can complement each other. For example, your business may have to invest in a packaging process to meet the safety requirements for shipping and also for branding purposes.
You can restructure your store to accommodate this process, with some employees who would normally be dealing with walk-in traffic taking over the process. If you happen to be running more than one store, you might also want to set up your order processing and shipping in such a way that customers are catered to by the store that’s nearest to them.
The website can also be used to communicate additional services offered through your physical stores such as trying out fashion and makeup products, repair and maintenance, consultations, etc.
If you’re running a basic eCommerce store, visitors need ample information about all your products, from titles to images, descriptions, prices and so on. Take high quality photos of your products and write a little bit about each of them. Writing can be anything from summaries to product benefits.
Understanding Your Customer
When starting an eCommerce store, business owners usually make a lot of assumptions in regard to how things will go, but they are often wrong. Once your eCommerce store is up and running, it is imperative to conduct customer research.
The primary goal is usually to find out what products people like the most, but this is far from the end. Even with the right products listed on your store’s website, it is possible to fail miserably when it comes to sales. Understanding your customer is an effort that goes much deeper into their behavior to find out why they behave the way they do, and either position yourself to capitalize on their behavior or change it altogether.
Customer research can be classified in two major categories i.e. internal (on-site) and external (off-site).
Let’s start by looking at external research.
This kind of research usually involves the use of resources and materials that aren’t necessarily in your control or compiled by you.
A good example is annual consumer reports and other kinds of surveys. These documents are compiled by recognized and trusted authorities, be it research organizations, accounting and auditing firms, think-tanks, consultancy firms, print media and other publications, etc.
The major advantage here is that these entities have the resources and technical know-how required to come up with accurate data, and therefore they save you the cost of setting up your own networks of people to gather data amongst other expenses. However, a lot of this research is usually broad in nature, discussing macro and industry-wide trends, and not necessarily pinpointing your business’ needs.
Additionally, this research may be biased or slightly tweaked, usually to push a narrative that justifies the use of the researcher’s products and services or those of associated entities, which actually sponsor the research in some cases.
This kind of research focuses mainly on the different points of the business that customers interact with. It is derived by the business owner and is commonly centered around the business’s online assets such as its website and social media pages.
It also follows a meticulous plan, with a clear list of variables to be monitored. This can be anything like page visits, time spent on the website, most searched items, etc. The major backbone of this type of research is reporting and analytics tools.
Some of these tools like Google Analytics are open to the public, while others are built into the back-end of your eCommerce website or developed by other third-party vendors for ultra-specific use cases and offered at a premium while running as plugins or integrations (UserReport, Zoho Analytics, HubSpot, CrazyEgg, etc.).
These tools help you get a better sense of the composition of your traffic such as visitors’ ages, the devices they use, their locations, etc. This can help you to establish patterns in the way they behave. For example, you may find that most of your traffic comes from Facebook but the majority of people who buy are coming from Instagram.
This could mean that your Instagram following is composed of people with greater purchasing power or genuine interest and need for your products. A further look at their average order values, an affinity for discounts and purchasing frequency can tell you more about where to put your efforts.
Understanding your customer shouldn’t come at their expense. As a new eCommerce store owner, you need to find ways to learn more about customers without interrupting or inconveniencing them as they shop. The goal is to give real value or incentivize the customers in a manner that makes them want to give honest feedback.
- Discount or coupon in exchange for the completion of a brief survey.
- Lead-generation prompts and calls-to-action (CTAs) to get site visitors to submit an email address in exchange for timely updates on new offers they might be into.
Some brands present in South Africa like Axe, a men’s grooming products brand have taken an even more ingenious route by helping potential customers “find their style” through an interactive quiz that focuses on their tastes in music, fashion, gaming, sports, etc. to discover personality traits linked to specific product variants.
This research also extends to other media and communication channels used by the business such as:
- Customer helplines,
- Chatbots, and
- Verbal customer queries received by physical store attendants.
Understanding your customer will not only help you deliver a more personalized shopping experience but also answer the much bigger question of what model to go with. This can be business-to-business (B2B), where your customers are also businesses, business-to-consumer (B2C) where you’re targeting individual shoppers, or even business-to-government (B2Gov).
Mindset For Success
Just like with ordinary business, achieving success in the eCommerce space requires great resilience, intuitive thinking, and efficiency. With over 500,000 active stores on Shopify (a top 3 ecommerce platform) alone, it’d be quite naïve to come into the space hoping to be the dominant store within a few months.
Focusing on growth
One of the main questions to always ask yourself before you make any major or even seemingly minor business decisions is “How much room is there to grow?” For example, if you find a fast-moving product, don’t just add it to your catalog because the research says it will make you money.
Have you checked to see how many other stores are already selling that product? How much of it they are selling. Their prices, and any other intrinsic or acquired advantage they may have over you, be it having a strategic business partner or operating on a much larger scale, which reduces costs in many areas.
In many cases, it makes more sense to look for a product that has potential/an emerging trend. This philosophy applies to other areas like marketing too. You most probably don’t stand to benefit that much from advertising to a section of the population in a region that is already catered to by a number of other stores. You’d rather identify another region where there’s demand for the product, but no one has a foothold there, or they are delivering at a much higher price.
Opportunities come in different types. Some are around for a while and others are momentary. Once you’ve recalibrated your thinking to prioritize long-term growth, you should then look for all those small scenarios along the way that enable you to maintain momentum and even occasionally perform better than the more established competitors.
Some of these opportunities take on the form of your competitors’ weaknesses while others are macro trends that anyone can benefit from. For instance, you can pay in advance to “stock up” party supplies and costumes in anticipation of Halloween or some other holidays and festivities. As the day or period draws closer, such materials may be more in-demand and therefore more expensive to source.
In such a situation, you would be able to start selling earlier and probably drop your price or offer discounts as others jump onto the trend, ensuring that you enjoy larger profits in the start, while only leaking a tiny portion of your market share when competition rises, or even maintaining and expanding your share.
Sometimes, an opportunity may lie in the reviews on other eCommerce stores products and services. If you find a recurring complaint regarding something like return policies, cashbacks/refunds, damage-prone packaging etc., you can tweak your offers and include the changes in marketing campaigns targeting those customers.
You must always be looking for any minor or major areas where other players are dropping the ball and have the will to dare to be better than them in those areas. This is what will set you apart from the rest of the crowd.
When you’re just starting out, it is important to manage your time and other resources very methodically so that you’re always able to respond to any incidents quickly. Whether it’s downtime for a payments processor you use, a delayed shipment that needs tracking, or some other problem with a customer’s account, like unavailable features or security issues, always have a solution on hand.
Customers tend to be more forgiving with larger brands since they have a fair record of consistency, meaning that their shortfalls are looked at as rare anomalies. These same customers feel like they are doing smaller brands a favor by supporting them when they are still young and will be less lenient if you disappoint them.
Here are a number of other principles to consider adopting for ecommerce success:
- Always re-invest a significant portion of your profits into your business. Failure to do so may leave you growing at the same sluggish pace for years. It may also make customers feel like there are no visible improvements in your service to justify their continued support.
- Desist from the game-changer mentality. As a new entity, it is usually better to first understand the conventional way in which things are being done before you rush to be a disruptor. Disruption as a fashion and not a well-informed strategy will likely end with you wasting money on advanced technologies and specialists to deliver user experiences that don’t necessarily answer customers' major pain points.
- Try not to start with too many products. One of the main disadvantages of this approach is that it robs you of the chance to learn about each product’s unique demands while also complicating your overall marketing strategy. You may also end up being stubborn and trying to implement a technique that worked for one product, in order to sell a product that isn’t supported by that technique.
- Do not pick a niche that you’re barely passionate about. Niche markets often have different dynamics, especially when it comes to the voices and authorities that can sway consumer behavior. They require you to be very tuned into the culture surrounding these products, something that is hard to do if you’re not really into those niche products.
Bottom-line, avoid being greedy, be patient and manage your money properly to maintain a good cash position.
Industry Growth Trends
As we’ve already mentioned, it pays to keep an eye on what’s going on within the economy at large in order to grow your eCommerce business steadily. Since eCommerce is largely founded on the internet, it is easy to be misled by the success stories from other regions and believe that things will play out the same way for you back home.
This is why we will go on to take an in-depth look at the key trends in the South African eCommerce space in order to determine which industries are ripe with opportunity or are set to explode in the long term.
Generally speaking, the future of eCommerce in South Africa looks very bright. Revenue is projected to hit USD4,608m in 2021, with an annual growth rate of 8.16% until 2025, which would put the market volume at USD6,305m by 2025.
What’s even more eye-catching is the projection of user penetration, which is expected to be at 53.1% by 2025, up from 41.1% in 2021, with an accompanying average revenue per user (ARPU) of USD186.58. Keep in mind that eCommerce makes up only about 2% of South Africa’s retail expenditure and while that may sound discouraging, it can also be viewed as an indicator of massive room for growth.
Top industries for eCommerce
Currently, the most dominant industry in the South African eCommerce space is Fashion, which could reach a market volume of USD1,481m in 2021. Other thriving industries include digital products like music downloads, event tickets, etc. This can be partly attributed to much lower costs involved in delivering such products since they don’t require a lot of physical storage space, trucking and other logistical expenses.
There are a number of other sectors seeing steady growth such as men’s grooming products, smartwatches, pet accessories, shapewear, jewelry etc. If you can find that effective sculpting undergarment, beard oil, simple and affordable jewelry piece, or comfortable dog or cat bed, you just might be in luck.
Other relevant statistics
As mentioned above, fast-moving products aren’t the only piece to the eCommerce puzzle and in South Africa, it is crucial to understand the other consumer behavior statistics that can affect the success of an eCommerce store.
According to a 2019 Magento report with 1,006 respondents from South Africa
- 71% of respondents said they would buy repeatedly if offered free delivery.
- 58% of respondents would become repeat customers because of good prices.
- 57% say they value free returns.
- Others said they’d like delivery within 5 days (56%) and also value retailers with good reputations (24%).
The study also shows that online shoppers in South Africa value stores with eco-friendly policies:
- At least 37% of respondents said they find online shopping to be better for the environment than in-store shopping.
- 50% of respondents are inclined to shop from stores that are transparent about the sourcing methods for their products.
- 41% value lean packaging.
However, it is vital to note that there’s a bit of nuance when applying any of these insights. The main objective should be to understand which issues are more pressing when it comes to your particular field. Say you decide to go into fashion, you may mold your brand around sustainability but realize insignificant support.
Someone who understands that a lot of people may want to return shoes and clothes because of wrong fit, color, material integrity, durability (fading issues) or some other design feature may instead offer a favorable free return window. This may cause people to buy more since they are not worried about return costs if the product doesn’t suit them.
Getting Finance for Your eCommerce Business
Ecommerce businesses may sound cheap to run in theory, but the reality is that they can be quite turbulent and expensive, especially in the beginning. Many people do research and list down their projected expenditure but forget to account for all the changes that may happen down the road.
These changes may include things like having to change service providers in the middle of a term, which can drive up your expenditure for that period.
So while you plan for business as usual, you should also prepare yourself for unusual situations in business. Finance for your business should be looked at as a continuous journey and not just the initial capital to start. This is why it is important to separate business funds from personal funds and have organized business accounts.
When we talk about organized accounts, we simply mean creating an orderly footprint of your business funds to make sure that you’re eligible for certain types of loans. This may involve managing transactions to maintain a stipulated minimum balance or monthly transaction volume. A culture of robust record-keeping and meticulous accounting will help you to remain aware of your business's financial health on a day-to-day basis.
With good accounting, you can also make more accurate projections of the amount of money you’ll need to stay on top of any seasonal changes in market conditions.
Common sources of funding
Some of the most common ways to finance a startup e-commerce business include:
- Personal savings,
- Donations and grants from family and friends,
- Peer-to-peer loans,
- Venture capital and
One of the other growing sources of financing worth mentioning is online lenders. Organizations like Betterbanc are starting to offer finance products that are specifically tailored towards eCommerce business. Rather than focus on collateral security as traditional banks do, these companies can evaluate the health of your business using metrics like minimum monthly sales and the age of your business to determine your ability to pay back the loan.
This is why it is important to keep your records up to date instead of waiting for a few quarters to elapse. Having these figures on hand will make it easier for you to open up a line of credit on short notice.
Check out the helpful list of tools and resources to make sure your business record keeping is up to date and of a great standard:
Endeavor to keep alternative data that can be used to gain some insight into your business’ performance. This includes:
- Website traffic,
- Credit card transactions,
- App downloads and usage statistics,
- Product reviews,
- Social media statistics, and
- Trade references
Understand Your Finance Goals
It also helps to have a clear goal in mind that this financing will help you achieve since it helps you determine what kind of loan to pursue. The procedures you follow when seeking a large loan for growth are different from those required to secure working capital for purposes like paying pending wages/salaries.
Finance when viewed in a more fundamental manner could also take on other forms like lenient payment terms on a supplier’s end. Many established suppliers usually ask for a down-payment when dealing with new stores that haven’t yet sold much. As you grow and move products faster, you can ask for some leeway when securing large amounts of stock.
Tools and Resources
Since eCommerce is largely underpinned by digital technologies, there's a constant stream of innovation aimed at making one or more business processes more efficient, and ultimately increasing growth and revenue. These tools range from the basics like word processors and spreadsheet software that are common in conventional business, all the way to complex technologies like Augmented Reality (AR).
However, there are a few categories that address major business processes and are relevant to just about any type of eCommerce business such as:
Customer Relationship Management (CRM) – This refers to the systems used to converge customer data from disparate sources and analyze it to gain accurate and actionable insight. Common CRM providers include Salesforce, Microsoft Dynamics, Oracle SAP AG, HubSpot, etc.
Marketing Automation – These tools enable you to delegate repetitive tasks like sending emails and posting on social media to your computer. Popular marketing automation tools include ActiveCampaign, Marketo and MailChimp for things like email newsletters, and Buffer for scheduling social media posts.
Search Engine Optimization (SEO) – Organic traffic is crucial for small and infant ecommerce stores since it is cheaper to get and is usually made up of more genuinely interested customers. Getting your website to rank number one in search engine results or even just on the first page can be quite difficult. This is where SEO tools like Ahrefs, Google Analytics and SEMrush can help with processes like keyword research and evaluating your website’s domain authority and other search engine ranking scores.
Chatbots – These make use of automation to deliver customer support and other services.
Content management systems – Sometimes these come in the form of platforms like WordPress, Shopify, etc. for creating and delivering content online.
All-in-all, building an ecommerce business is a lengthy but lucrative journey which varies in nature from one country to another. It also requires close attention to the secondary needs and pain points that customers have.