eMarketplaces & Brands: The ecommerce price point •

by MarkLives (@marklives) What roles do brands play in today’s world of ecommerce? How does this impact on how consumers choose products? We emailed a panel of key industry executives for their take on South Africa’s ecommerce market. Next up is Karl Hammerschmidt of RunwaySale.

Karl Hammerschmidt (@Karl_Hamm) has a BComm in finance but his background is firmly rooted in the online world. While working for Clicks2Customers, he was offered the opportunity to relocate to Australia to start up its new office. He also consulted on the digital strategy for the biggest private shopping club in Australia, New Zealand and South East Asia. He returned to South Africa in 2012 and, together with partner Elmien Smit (now his wife), started RunwaySale, an exclusive, free, members only, online shopping community that provides access to designer fashion brands at discounted prices.

How is ecommerce impacting on how consumers choose products?
Karl Hammerschmidt: From a nascent industry a few years ago, South African online spend is forecast to grow to over R53bn in 2018 and mobile online shopping is set to take the lion’s share. Aspirational brands available online are giving even greater credibility and growth to ecommerce and shoppers have a sense of security knowing that premium brands are available online. In addition, shopping online for clothing is easier if you are buying brands you are familiar with and trust as you know the size you wear.

South African consumers are increasingly status conscious and brands are integral to this. During our six years in business, we have seen how brand loyal consumers are and, in the case of RunwaySale, if they find a brand they covet, at a good price, they will buy it. We currently work with over 500 aspirant brands and with just over 1m members signed up — and 3.5m visitors to our site last year — there is proof that brands are sought-after online, especially if the price point is right.

Ecommerce also provides an additional sales channel for brands — often to a new audience — so it is mutually beneficial for both the consumer and the brand. The days of consumers dabbling online and trying to determine whether an online order is worth the risk are over; technology is helping build confidence in online shopping because consumers can keep track of their purchases from the moment they buy something right through to delivery.

What should brand managers know about online retail through online marketplaces (such as Amazon.com and similar local operations)?
KS: A number of brands has opened standalone stores; while this might be great for branding opportunities, it does complicate the shopping experience for a consumer. You have to visit several stores to find your desired brands. And, if you want to shop around, there are fewer brick-and-mortar retail outlets offering a range of designer brands under one roof. However, some consumers still use a mix of online-offline when shopping — especially in the 18–34 age bracket. Referred to as ‘showrooming’, it means they visit a store to view a product but then make an online purchase.

For luxury brands, brand equity is critical. Online offers brands the opportunity to sell items through an attractive additional channel outside of the traditional retail environment. Our business model offers brands a retail space to help move excess stock without compromising on brand equity. The reality is that every season there are items that don’t move; we are able to help brands sell these items at prices that are attractive to consumers, presented in an eye-catching and elegant online environment in ‘limited time’ events, which moves stock, builds brand awareness and ensures brand protection.

How may a brand optimise its presence in these online retail spaces to make it easy for consumers to find and access their products?
KS: Our business model has been success for brands because we offer ‘flash sales’ or limited-time sales which allows consumers to purchase high end fashion and accessory brands at affordable prices… for a limited period. According to international research, ecommerce transactions often include products not available instore so; to capitalise on this, ecommerce retailers need to focus on featured deals and increase impulse-purchase options.

For a number of our brand partners, online represents one of the few growing channels of sales. The tough climate has obviously meant that brands have had to rethink their approach but, equally, we’re able to bring them a new, young, tech-savvy customer who probably wouldn’t have walked into one of their stores. We also provide an efficient and safer way of clearing slower-moving stock in these tough times. It’s on a different platform and, largely, to a different audience.

We went about identifying the designer brands we wanted to showcase on our site and work closely with them to source products. Our dedicated-buying team coordinates and collaborates with brands in terms of availability, pricing and merchandising. Even though we’re online, merchandising of the product is as important as a mannequin in the window or the item being seen on a rail.

And, in a South Africa, price is key. Online shopping allows consumers to compare and then buy a product at a price that suits their pocket and have it delivered to their door.

Finally, what are your predictions for online retail’s current and future share or retail spend in South Africa, how will mobile change online buying habits, and how will it impact consumers’ offline buying behaviour?
KS: For retailers, ecommerce is moving to mcommerce. We predict that mobile will dominate in the next five years, when around 75% of offline shoppers will migrate to being mobile shoppers. We have seen our mobile sales increase and have had to accommodate the growth in this market, which is now around 53% of our business.

This exponential growth is because: smartphones and tablets are far more affordable; consumers are more tech-savvy; they have become comfortable with online shopping; mobile applications are increasingly user-friendly and customer-centric; and financial transactions are secure. This makes it easier for people to shop, even on the go. Mobile users are proactive and always connected. They use their mobiles in exactly the same way they used to use PCs — from communicating and entertainment to news and looking for deals, shopping and always, always posting about their activities.

Where we will be in the next 10 years is anyone’s guess; online shopping in SA is still small compared to other countries. It’s growing but let’s not kid ourselves and pretend it’s bigger than it is. If you take a lot of categories out of the equation, such as airline tickets and perhaps electronics, you are definitely not looking at a percent of total retail sales coming from online. So, actually, only around 1% of total retail sales are online — we’re smaller than other online markets, which means we need to adapt and work around that.

In the UK, 28% of the fashion market is online which means one in every four dresses is bought online. It will take some time for us to get to 10%, let alone 28% but it does mean we have 10 times the growth ahead of us. There is huge opportunity ahead.

We believe buying online will become more mainstream. It used to be the realm of people who were comfortable with computers but now more consumers are purchasing online. We have found that the shopper demographic has changed, with older people now shopping online — and grandparents are talking about their purchases — so the transition to mainstream is happening.

Ecommerce is a very dynamic environment where innovation, efficiency and instant gratification is the name of the game. The use of digital technologies, in conjunction with changing shopper behaviours, is making ecommerce an indispensable channel — brands wanting to convert online consumers need to focus their attention on convenience, as well as the shopping journey. The ease of entry is growing and brands are taking notice. It is also pretty obvious that mobile is going to fundamentally change the nature of online shopping.

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