Two-thirds of online purchases are items that customers “want” rather than those they “need” – and the top two online retailers are luxury goods outlets, according Columinate’s Online Retail SITEisfaction Survey.
The research study was commissioned to better understand what South African consumers are buying online, who they are buying it from and their level of satisfaction with online retailers.
The research study is the first-of-its-kind in South Africa, and in addition to its analysis of online shopping trends, it also makes recommendations to online retailers on how they can improve their services in line with customer expectations.
When shoppers were prompted about why they like shopping online, references to “convenience” and “saving time and money” were top of mind.
However, the data revealed that consumers might not be as rational about their motivations for online retail therapy as they think: 64% of online purchases were made within the “wants” category (travel, music, books, games, DVDs, event tickets and so on); whereas, only 36% of purchases were made on “essential” goods such as groceries, clothes and health supplies.
This is very different to total (online and offline) spending habits, where bigger portions were spent on essentials for these same range of items.
“People believe that they purchase online to save time and money, but with purchases being skewed towards non-essential items, the report indicates that ‘saving’ isn’t necessarily the main driver,” says Henk Pretorius, CEO of Columinate.
“This creates an opportunity for online retailers to increase sales in the ‘needs segment’,” he explains. “Online retailers should focus on promoting the time and money that consumers can truly save by purchasing essential items online. For example, buying a DVD online may save a few minutes in a mall, but buying the week’s groceries online could save one an hour or more.”
Secondly, the survey investigated what makes traditional offline retailers who are entering the online space, like Woolworths, different from digital-native players like Kalahari.
A major finding was that offline stores with an online presence have huge initial levels of trust compared to online-only retailers, but that trust tends to be on par after purchases. “This could be due to issues with post-purchase experience factors such as delivery,” comments Pretorius.
A similar observation was made around value for money perceptions. Online-only stores lag behind in terms of perceptions of value for money against their offline-first counterparts. However, once a purchase has been made these perceptions are matched.
“In general, these findings show the importance for digital players to facilitate initial purchases, as this elevates trust and value perceptions and confirms the reliability of the stores to a potentially sceptical consumer. Initial perception is an area where offline brands have an advantage as they transfer offline brand trust over into the online space. People simply trust brands they have shopped at before,” says Pretorius.
A whopping 77% of respondents claimed that they had placed items in their online shopping cart, but left the site before checking out. The main reasons stated for not following through with the purchase were linked to price (29%) and the consumer changing their mind (21%).
“Taking into account that consumers were mainly purchasing luxury items online and that there is no cashier or sales assistant to facilitate the process, many shoppers simply don’t see it through,” says Pretorius.
Consumers cited reasons such as “I realised I was being impulsive” or “I realised I didn’t need it”, to explain why they abandoned their online cart.
Only 7% cited delivery or payment method issues as a barrier to online shopping.
The survey ranked online retailers on their overall satisfaction levels to ascertain who delivers the best customer experience.
“The SITEisfaction score is determined by calculating the number of highly satisfied users versus the percentage of highly dissatisfied users. We measured each site on a number of key drivers including ease of use, information, trust security, value for money, range of products, and delivery performance,” Pretorius explains.
Kalahari emerged as the clear winner, with a SITEisfaction score of 76. In second place was Yuppiechef with a SITEisfaction score of 71. In third place was Woolworths with 63; Takealot.com took fourth place with 55, and Groupon was narrowly in fifth place with 54. The report also identified the best players in each of the different categories such as clothing, electronics, food, general retailers and discount stores.
Looking ahead at the future of the industry, Pretorius identifies “mobile-readiness” as an opportunity for the industry.
“Considering the growth in smartphones and app usage in South Africa over the last year, a surprising result from the survey is the lack of mobile impact in the digital shopping space. There is both a lack of stores that offer shopping apps, as well as a lack of usage of the apps currently available,” comments Pretorius.
“There is definitely more to be done in this space if stores want to fully engage shoppers and create on-the-go shopping opportunities for consumers. Mobile and tablet apps are a promising area of focus for all retailers,” he recommends.
In addition, Pretorius warns against thinking of online shopping as something that is optional.
“All indicators point to an increase in the size of the online retail market in South Africa and recent investments from both local and global players have confirmed the intention for growth in the industry,” he says.
“Traditional offline retailers need to embrace this trend. Dedicated online stores such as Yuppiechef, Kalahari and Takealot are well placed to take a chunk of consumers’ total spend on non-essential items. Items such as grocery shopping, health supplies and cosmetics also show promise, as less than 50% of consumers indicated that these are items they need to see or touch before purchasing them online.
“As such, these online-only retailers could pose a significant threat to traditional stores if they branch out into ‘needs’ segments.”