Non-executive director at Glasshouse Consulting
16 August 2012 10:22am
The internet is seen as the single most innovative change agent in the 21st century and, hence, it deserves the serious attention of interested stakeholders, considering its uses and benefits to individuals,organisations and the society.
In the context of the retail industry which represents one of South Africa’s largest growth sectors, e-commerce provides an additional operating channel and operational efficiencies capable of increasing the economic vibrancy of the retail sector. Ultimately, the real benefits of e-commerce arise from how tasks are performed within the traditional retail value chain and how technology impacts upon ownership, costs, efficiency and consumer satisfaction.
In order to begin understanding the challenges to mass diffusion of e-commerce in South Africa, three key questions need to be answered;
1. To what extent has internet diffusion occurred in the retail sector?
2. What measures have been put in place to quantify the actual and potential uses and benefits of the internet, in terms of operational efficiency?
3. What are the identified barriers to the widespread usage of the internet?
To address these questions, a research study was taken using a mixed methods approach to the research, combining the survey method with in-depth interviews with selected leaders in the retail industry in SA. The quantitative data was subjected to statistical analysis, primarily descriptive in nature, while the qualitative data were content analysed and both were used to qualify and embellish each other.
The findings show that while the internet has made significant forays into the sales, marketing and other operational functions of most retail organisations surveyed. Its impact is far from being revolutionary, as expected, due to some strategic impediments and constraints, namely, the ambivalence of organisations to use or not to use the internet as a strategic resource.
Other barriers relate to the perception of risks involved in online purchasing in an environment increasingly riddled with white collar crimes and fraud. Suggestions are made to address these constraints, starting with the need for organisations to develop a strategic posture in which the internet and its associated needs and demands are integrated into the business strategy. Secondly, government and its agencies have a role to play in developing citizens who are internet-savvy and friendly and also creating a fraudulent-free social environment. Under these conditions, the internet can hope to cause the exponential growth of the retail sector and, indeed, all sectors of the South African economy.
Summary of findings
1. The analysis of the research shows evidence that supports the view that internet penetration in the retail organisations surveyed is still in its infancy, with less than 40% agreeing that it plays only a supporting and not a direct role in driving the broader business performance, although in this role, about 70% agreed that it has boosted their sales tremendously in terms of broadening customer base.
2. The internet is a “yes, but” success story in the sense that, in spite of its great potentials, it has not revolutionized the retail industry, neither has it displaced the traditional sales and marketing channels. About 66% of those surveyed agreed that the internet has made only “moderate”, “little” and “very little” impact.
3. The limited penetration of the e-commerce can be attributed to the challenges faced by the organisations surveyed.
These are four-fold:
• The ambivalence surrounding the newness of the technology, fuelling the need for a change of mindset, developing a strategic posture and requisite skills.
• The cost element of providing a “great on-line experience” for customers.
• The marketing challenges of meeting consumer needs and expectation on the internet.
• Gaining the trust of consumers in an environment polluted by crimes, including white collar crimes.
The study provided overwhelming evidence of the actual and potential benefits of the internet in terms of increasing organisational efficiency and development. However, there is a note of cautious optimism in the sense that, as far as the retail organisations surveyed, the growth and impact of internet has been rather limited, with the internet still playing a subordinate role in the most traditional business functions. The internet has certainly not displaced the traditional distribution channels of marketing, although admittedly, it has broadened customer base.
Nevertheless, the internet as a new technology has not been widely embraced by all in the retail industry in South Africa, as shown by this study. According to Akkeren and Cavage (1999), the adoption of e-commerce is a progression, requiring that entry-level technologies and, indeed, requisite skills, knowledge and attitudes be developed before the full realization of the benefits. Most organisations surveyed appeared to be at the threshold of the decision to do or not to do.
To reap the full benefits of e-commerce in South Africa, requires massive investment in both infrastructure and the development of human capacity to function and keep abreast of the changes characteristic of the technology. All these require a management with vision and commitment to initiate and sustain the effort.
Management must also consider the usage barriers and remove them to enjoy multiplier effects of their internal investments. In terms of the usage barrier, even if the resource and knowledge barriers were to be overcome, the success of e-commerce in the SA retail sector is dependent on how well the internet is adopted by end-users. Usage barriers are often related to user’s perceptions regarding the technology and responsibilities that must be shouldered when it is used.
Perceived risk is a personal perception of potential damage or loss. Commonly, consumers are more concerned about the risks involved from using financial services such as fraud transactions or identity theft than risk from buying products online, therefore it is vital to ensure that consumers feel safe from the risk of data security breaches, data manipulation, unauthorized data access, and unwanted usage patterns tracking.
Making e-commerce vital part of the future of SA organisations requires management with imagination and courage. But it also requires the collective support of the business community, government and governmental agencies responsible for education, policy and social change.
Government’s role is vital to stimulating behavior and usage. The findings from the research shows that part of the adoption challenge lies with the poor internet policy and lack of impetus from government and influential public agencies. The inclusion of online functions as part of the distribution channels and communication platforms with the general public is key to improving adoption by citizens. If local government actively encourages its people to use online tools to complete processes such as visa applications, tax returns and municipal services applications, they will stimulate online behavior which will see a much more efficient and multi-channel public sector engagement.
About Timothy Akinnusi (B.com, MAP, MBA Henley Business School)
Timothy Akinnusi is the head of digital channels in secured lending at Nedbank.
Architect at Technoviz
16 August 2012 13:49pm
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