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Classifieds: the missing link

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There has been enough said about the prolificacy of collaborative consumption in 2015, a trend where consumers are taking on the roles of producers and service providers, says Johan Nel, CEO of Gumtree South Africa.

We’ve seen peer-to-peer car- and accommodation sharing (like Uber and AirBNB) take the world by storm seemingly overnight, but there are also numerous peer-to-peer lending services, task-sharing services, peer-to-peer clothing sales, peer-to-peer teaching … the list is endless.

Perhaps the oldest of these pivots would be peer-to-peer trading that has happened both offline (the infamous “small ad” section of the newspaper) and online (online classifieds are among the most trafficked sites in the world today).

The industry has been far from stagnating. There has been expansion into new services, the advent of vertical specialization and precision targeting for advertisers, to name but a few interesting local developments. However, converting individuals who have never used such as platform has been a challenging one – particularly in a South African context where the Web is still opening up to a new generation of users who did not grow up with ecommerce as part and parcel of their shopping experience.

Early adopters have lauded the convenience, the experience of meeting new people and not being bound to a store, whereas mainstream users were swayed by the ability to make money or find significantly lower priced items online. For the last remaining few, these factors were outweighed by a significant barrier: the risk.

We know that the perceived risk far outweighs the actual risks of transacting online. The majority of South African classifieds have confirmed that only a handful of cases of theft or fraud are reported every month, despite the fact that millions of transactions are conducted in the same window. Until the perceived risk is lowered, it stands to reason that shopping behavior won’t change.

It’s been a challenge for many classifieds globally. Some have introduced lengthy registration processes and complex security measures, which made their sites safer but alienated their early and mainstream adopters. After all, the beauty of peer-to-peer trading is that it is that simple – email, connect, sell. Heavy moderation was found to be off-putting and unwanted.

But by introducing optional third party escrow services and facilitators such as Shepherd (powered by Standard Bank), we are finally seeing these barriers diminish without compromising the characteristics that lie at the heart of the site – the freedom to transact as individuals, without undue interference.

For the first time ever, a buyer can deposit money into an escrow account and have a courier bring the desired item to their door. If the buyer is satisfied with the item, the courier merely has to activate their handheld prompter to release the funds to the sellers. The parties never have to meet, handle large amounts of cash or worry about defaulted payments. It’s win-win, bringing the formality of traditional online retail to the peer to peer space. The same applies to car buyers, who can have a professional service provide financing, full vehicle checks and history and all other elements of the transaction, giving them peace of mind.

This also addresses the much-studied aversion for online shoppers who perceive the risk of buying an item via the Internet as much higher because of limited physical access to an item before purchase. Second hand designer clothing and wedding and evening wear, for example, are often sold via classifieds but buyers might not be keen to try on the clothing at the sellers’ home. Electronics are another luxury item that most customers would prefer to thoroughly test for compatibility and functionality before signing off on the sale. Others simply do not want to interact with sellers or invite buyers into their homes.

Will every buyer and seller make use of these services? Probably not, but for the ones that have never used an online classifieds’ site before, this could very well be the nudge that pushes them into the era of peer-to-peer selling.