Analysis: CNA revamps website as local online retail picks up

Samantha Enslin-Payne

Many big bricks-and-mortar retailers have been slow to embrace the online market, but many are either upgrading their offering or entering this space as internet penetration increases and consumers get increasingly technologically savvy.

Last month Edcon, which has the largest store card base in South Africa with 3.9 million cardholders, announced the revamp of its CNA website to enable customers to buy online with their Edgars or Jet cards and not only their credit cards.

Edcon’s e-commerce executive, David Gibbons, said the relaunch was aimed at doing it right with dedicated inventory and staff.

“Previously we ran the site as a bit of a hobby,” he said.

The e-commerce platform that underpinned the new CNA site was more powerful than the previous system, Gibbons said. Stock would now be held in a centralised warehouse as opposed to distributing products from stores, resulting in greater efficiency.

Edcon chose CNA as the first site to relaunch as media products – such as books, games, movies and e-books – were easier to showcase online, as well to stock and ship because they were stackable, and did not need to be in a range of sizes like apparel.

Edcon was following the model of Amazon, which had started with books.

CNA will compete with, among others, kalahari.com, which with 1 million registered users is by far the largest online retailer in South Africa, selling books, digital media, toys and electronic goods.

Liz Hillock, the head of marketing for kalahari.com, said: “We welcome competition as it helps to grow the whole e-commerce market.”

But significant local competition has been slow to materialise online.

Hillock said while there had been phenomenal growth in the sale of airline tickets online, some traditional retailers were slow to offer online shopping.

“They may not have realised the full potential of digital and mobile commerce, or were not agile enough to launch an effective online store.”

She said retailers’ experiences of online sales might have been disappointing because they merely transferred their in-store merchandising strategy to their website.

But online retail required specific expertise, for example in understanding the behaviour of users online and focusing on user experience such as how easy it was to navigate the site and check out products as well as having the capacity to deliver products quickly.

Syd Vianello, an analyst at Nedbank Capital, said the slow pace of online retail growth in South Africa was partly due to the perception that bandwidth was too slow. But when connection speeds reached the levels experienced in east Africa that would be the trigger for significant growth in online retail.

A recent survey by kalahari.com shows that tablet devices are joining smartphones in catapulting growth in online shopping. The survey of more than 4 000 connected South Africans revealed that 73.4 percent of tablet owners were already using their devices to shop online.

Hillock said: “Tablets are portable and with their touch screens and intuitive interfaces they have become a more tactile and convenient way to access the internet and shop online.”

Other research also points to strong growth in online shopping, although off a low base. Last year, online sales in South Africa exceeded R2 billion. In comparison, last year’s total retail sales at constant prices came in at R541bn, according to Statistics SA.

World Wide Worx, in research commissioned by Google, said indications were that e-commerce was growing at a rate of 30 percent a year and was showing no signs of slowing down.

Arthur Goldstuck, the managing director of World Wide Worx, said in a statement in May: “Taking into account the fact that a number of major consumer brands and chains have not yet devised comprehensive online retail strategies, the scope for future growth is even greater.”

Big retailers have had varying degrees of experience and success in online retail, while some have adopted a wait-and-see attitude.

Mike Cotterell, the head of online shopping at Pick n Pay, said the online business, in operation since 2001, was currently small in relation to the group’s overall activities, “but it is an area in which we are seeing significant growth rates of between 20 percent and 30 percent”.

Pick n Pay, which sells mostly groceries, toiletries and household items online and is expanding its range to include appliances and homeware, has recently completed a major upgrade of the website system, will soon improve the delivery model and is considering new geographic areas to expand to.

Woolworths, which has also been in online retail for more than a decade, said: “The internet, mobile phones, iPads and social media are changing the way consumers shop and engage with retailers.”

The company said its typical online customer was the working woman, juggling the demands of career, children and a home, who had time constraints and looked for convenience. There had been growth in the number of businesses using the service for office meals and other catering.

But Woolworths said bandwidth limitations had slowed the growth of online retailing and it made up a small percentage of its sales. “We believe connectivity will improve.”

Shoprite Checkers, which does not offer online shopping, declined to comment.

Fashion retailer Truworths has offered online shopping since 2003, but Truworths marketing director Emanuel Cristaudo said online purchases were less than 1 percent of total sales.

“Although we have tens of thousands of visitors to the site each month only a few hundred shop online.”

Cristaudo said the benefit of online shopping for the group was that it was an additional channel for customers to use and “we open up thousands of credit accounts on the internet. We have hundreds of thousands of customers who we are able to electronically communicate with through the internet and e-mail.”

The Foschini Group has adopted a cautious approach, with chief financial officer Ronnie Stein saying: “We have done a trial with our Foschini brand with mediocre response. So we will continue to watch the online space for our customer group and introduce on-line shopping at a later stage.”

Despite the slow pace at which traditional retailers have entered this space, some consider online shopping to be the most exciting development at present, in particular for clothing.

Mr Price Group will launch its online channel at the end of the month. Initially it will offer a full range of Mr Price Apparel. Pick n Pay said it was also considering clothing as another online category.

In South Africa, sales of apparel and shoes online were limited, Gibbons said, but these categories would thrive in the country, although it would take time as retailers needed to enhance their websites in order to support high quality images.

Among consumer products, clothing was the biggest category internationally, Gibbons said, explaining that US consumers were accustomed to buying from catalogues.

The sweet spot for online retail in apparel would be in well-known brands, Gibbons said.

Vianello said that retailers would have to start thinking about the impact of online retail, particularly what that would mean in the years ahead for how much physical retail space was required.

This, of course, would have a ripple effect on the retail property market.

But online retail in South Africa still has a long way to develop.

“It won’t be instant gratification,” Vianello said.