The impact of the World Wide Web on South African businesses

The impact of the World Wide Web on South African businesses A. M. Singh University of Kwazulu-Natal, South Africa Abstract In the 1960 s, Alvin Toffler predicted in his book Future Shock, that there would come a time when people would be able to shop from the comfort of one s office or home, and that computers would free them from their offices giving them more time for recreation. For many this was considered wishful thinking. However, a mere three decades later, these predictions have become a reality. At the click of a button, consumers can order items ranging from flowers to computers and even customised motor vehicles and have them delivered wherever they want. The Internet and more especially the World Wide Web have heralded a new era in shopping. Online shopping has taken off in the United States, the United Kingdom and parts of the Far East. However, it has not seen the same success in Third World Developing countries. This study examines the impact of the World Wide Web on South African businesses. In addressing this topic, a non-probability purposive sample was drawn from South African companies with a web presence. Seventy nine companies responded. The companies ranged from small to large enterprises and operated in a number of different industries. The results showed that the Web had a significant impact on cost saving, improvements in customer service, and some companies achieved additional revenue from Web sales. This study revealed that although making significant contributions, the World Wide Web was not being utilised to its full potential due to a number of obstacles identified from the study. In order to overcome these obstacles, it was recommended that businesses needed to segment their markets more effectively, identify and serve untapped niches and support the online business, offline. Keywords: South Africa, e-commerce, business impact of web, value, cost saving, customer service, income generation.

536 Human Perspectives in the Internet Society: Culture, Psychology and Gender 1 Introduction E-commerce is the use of interconnected networks to do business using web technologies [1]. E-business has caused companies to either radically restructure their conventional means of doing business, or at least consider the adoption of E-business in their future [2]. E-business is changing organisational structures [3]. The impact of the Internet on business is phenomenal. There are those on the net, those who are thinking about going on the net, and those who are probably going out of business [2]. These statements especially the latter, creates new challenges for organisations. According to Moodley [4], the traditional bricks and mortar business, is rapidly being replaced by clicks and mortar business, referring to business being conducted at a click of the mouse. Radebe [5] was of the opinion that businesses that did not get on the net and have a net presence, would be out of business within three years. This is a controversial statement in the South African context, especially since there have been no major closures of businesses that have not developed a Web presence. Furthermore, the converse is true in that many dot.com businesses have gone out of business. The corner store located in a middle to low income suburb, could not possibly face closure if the majority of its market is computer illiterate, and do not own computers. This is evidenced by the fact that only 6.8% of the South African population are Internet users [6]. Microsoft SA have been responsible for the development of digital villages and Internet kiosks would be opened for the lower income groups to have access to the Internet [7]. This initiative would still have little effect on the small corner store as a large portion, that is, 45% of the South African population are illiterate [8]. Why then should businesses be on the net? According to Oke [9], the United States Commerce Department reported that one third of its nation s 1996 real economic growth came from information technologies. It has been projected that the United States business-to-business market will generate more than $6 trillion in online trade by 2005 [10]. South African online spending is much less than the United States. In 2001 South African consumers spent R162 million on Internet purchases and, business-tobusiness transactions amounted to around R3.9 billion in 2000 [11,12]. The South African spending pales in relation to the American figures. However, this could be due to the fact that geographically, the United States market is much larger, and more people have access to computers and the Internet. Businesses do not need to limit themselves to local markets since they are now able to exploit millions of potential overseas customers. Based on these figures, businesses should not be asking if we should be on the net, but when? [2]. 2 The business value of the World Wide Web The World Wide Web (WWW) has tremendous potential and exposes new business opportunities for organisations. Figure 1 summarizes the tangible benefits for businesses being online [13]. This diagram served as the basis of

Human Perspectives in the Internet Society: Culture, Psychology and Gender 537 this study and the survey was developed according to the dimensions presented in the diagram. Figure 1: Value generated by the WWW for America's top 100 companies. Cost saving which is the objective of every organisation has improved due to businesses being online. This is possible due to the use of e-mail which is cheaper than postal and fax services. Furthermore, web pages are capable of carrying detailed information. Therefore, organisations can reduce the cost of printing brochures and the excessive costs of advertising using traditional media. Customer service which is normally limited to working hours is available 24 hours a day seven days a week all year. Websites provide the consumer with detailed product information, troubleshooting, alternate uses and frequently asked questions. The Internet generates revenues from existing and new consumers and other businesses. The Web makes marketing communications more effective than static media such as newspapers and magazines in that, web pages can include sound, graphics and animation and allow for interaction. Furthermore, as a marketing tool the Web is cheaper than television and radio. Other benefits of being online include among others: instantaneous communication with prospects, customers and employees; global access to customers and business partners; always open allowing for business to continue after hours; reaching highly desirable markets who are computer literate, have access to the Internet and possess disposable income; reaching wider specialised markets such as collectors of rare butterflies, procuring raw materials from cheaper sources; and providing customised goods and services to customers as and where they want it [13, 14, 15, 16]. It is evident that businesses have experienced immense benefits by being online, but is this trend the same in a developing country such as South Africa? 3 Methodology 3.1 Aims and objectives The aim of this study was to determine whether the WWW had a positive or negative impact on South African companies. Some of the objectives of this

538 Human Perspectives in the Internet Society: Culture, Psychology and Gender study were to determine whether: South African businesses experienced similar benefits to America s top 100 companies with regards to cost saving, customer service, revenue generation and marketing; the extent to which companies experienced benefits by being online; any relationships existed between industry and benefits gained; online business practices differed from offline business practices. 3.2 Sampling technique and sample size Due to work commitments, and limited time and financial resources, nonprobability sampling was used for this study. According to Zikmund [17], a researcher selects a sample based on his/her judgement of the characteristics of the sample members. If the researcher believes that a subject can add value to the study then that subject should be selected. Initially the South African Top 100 companies were considered to make up the sample. However, this would have excluded small and medium enterprises. In order to get a breadth of knowledge, the researcher consulted a web directory and selected 60 companies of each type, that is, small, medium and large enterprises, that the researcher felt would add value to the study. Some of the top 100 companies fell into the sample. The use of this approach may affect the accuracy of results and conclusions [18]. Nevertheless, the researcher used this approach to gain invaluable information highlighting some of the trends in the South African context. It is evident that although contributing to a broad knowledge base, the results of this study cannot be generalised to be representative of the total population. 3.3 Research instrument A questionnaire consisting of open and closed ended questions, rating and ranking scales was mailed to 180 South African businesses with a Web presence. The questionnaire was pre-tested among a group of MBA students. The responses were consistent and the time taken to answer questions did not exceed 20 minutes. 4 Results 4.1 Sample description One hundred and eighty questionnaires were administered, only 79 were returned representing a return of 44%, in contrast to the norm of 30% this was an excellent response rate [18]. Of the companies that responded, 22% were small companies, 27% were medium companies and 51% were large companies. A number of different industries were represented in the sample as depicted in Figure 2. It is evident from Figure 2, that no single industry dominated this sample. The largest group (26.6%) was drawn from the retail sector. The manufacturing

Human Perspectives in the Internet Society: Culture, Psychology and Gender 539 sector comprised 25.3%, education comprised 22.8% followed by computers and technology forming 16.5% of the sample. The lowest number of responses was obtained from the financial sector which made up 8.9% of the sample. 30 25 20 15 10 5 0 Education Financial Manufacturing Retail Technology Figure 2: Industries within which responding companies operated. 4.2 Reasons for using the World Wide Web The reasons for using the WWW included cost saving, customer service, marketing, income generation amongst others (Table 1). Table 1: Reasons for using the World Wide Web. Variable Minimum Maximum Mean Standard Deviation Cost Saving 1 5 3.924 1.662 Customer Service 2 5 3.734 0.812 Marketing 1 5 3.430 1.009 Income Generation 0 4 1.570 0.957 Other 0 5 0.949 0.876 It is evident that the results of this study were very closely linked to the value that the WWW generated for America s top 100 companies as depicted in Figure1. Cost saving was the main reason for using the Web (0 = 3.924), with the mean tending towards the maximum. Customer service (0 = 3.734), was ranked second. The fact that customer service did not rank below 2 suggests that it was a very important reason for businesses using the Web. Marketing (0 = 3.430), also tended towards the maximum showing it to be an important reason for businesses using the Web. Revenue generation tended towards the minimum,

540 Human Perspectives in the Internet Society: Culture, Psychology and Gender and did not receive a rank of 5 suggesting that organisations were not using the Internet to its full potential for income generation. Other reasons were not specified. 4.3 Impact of the Web on businesses 4.3.1 Cost saving Table 2 illustrates the cost saving impact of the Web. Cost savings were average and very low on the itemised rating scale. The majority of companies (81%) experienced very low, cost savings in the 0-9% category. Only 19% of the companies achieved average cost savings of 20-29%. None of the companies achieved above average cost savings although cost saving was ranked as the most important reason for conducting business on the Internet (Table 1). Cost savings were attributed to, in descending order of ranking, reductions in communication, printing, advertising and overhead costs. Table 2: Cost savings achieved by companies. Cost Saving 0-9% 20-29% Total Variable Frequency Percent 64 15 79 81 19 100% According to Roberts [15], with e-mail, it is possible to send more detailed information anywhere in the world for less than the price of a fax. This is supported by Ciraolo [19], according to whom it is cheaper to send a 10 page e- mail than it is to send it by overnight courier or express mail. Sending e-mail anywhere in the world costs no more than a local call to one s Internet Service Provider. 4.3.2 Customer service It is evident from Table.3 that 93.7% of the companies achieved below average (19% and lower) improvements in customer service, with 78.5% achieving 0-9% and 15.2% achieving 10-19% improvements. Only 7.4% of the companies achieved above average (30% and greater) improvements with 1.3% achieving 30-39% improvements and 6.1% improving customer service by 40% and more. It is evident from Table.3 that 93.7% of the companies achieved below average improvements in customer service, with 78.5% achieving 0-9% and 15.2% achieving 10-19% improvements. Only 7.4% achieved above average improvements with 1.3% achieving 30-39% improvements and 6.1% improving customer service by 40% and more. Although the statistics suggest that customer service improvements were minimal, it must be emphasised that there was an improvement in customer service due to having a Web presence. Improvements in customer service was attributed to, in descending order of ranking, cheap means of regular communication, having a frequently asked

Human Perspectives in the Internet Society: Culture, Psychology and Gender 541 questions page, providing detailed online information and the ability to provide instant feedback. Table 3: Improvements in customer service. Variable Frequency Percent Customer Service 0-9% 10-19% 30-39% >40% Total 62 12 1 4 79 78.5 15.2 1.3 6.1 100% According to Parker [7] the goal of every business should be to fine tune the buyer-seller relationship. Due to the low cost of e-mail, buyers and sellers can talk to each other more often and at minimal cost. The masses of information that can be contained on frequently asked questions pages makes it possible for consumers to get 24 hour customer service from a company. 4.3.3 Income generation Table 4 clearly illustrates that the World Wide Web is generating additional income for all the companies in the sample. However, only 17.7% experienced between 20 and 29% additional revenues from web sales. Table 4: Additional income generated by Web sales. Variable Frequency Percent Income Generation 0-9% 20-29% Total 65 14 79 82.3 17.7 100% According to Scholtz [20], Kulula.com an online airline generated almost all its income from online ticket sales and has been profitable from day one. 4.3.4 Overall impression of Internet business Managers were asked to rate their overall impression of having a Web presence. The majority of respondents (60.7%) found the Internet s impact acceptable, followed by 22.8% who were satisfied and two managers (2.5%) were very satisfied. Ten managers (12.7%) were extremely dissatisfied, whilst 1.3% were dissatisfied. Cumulatively, the impact of the Internet tended towards the positive end of the scale with 86% of the respondents reflecting varying degrees of satisfaction. 4.3.5 Obstacles to the optimal utilisation of the Web It is evident from the results that the World Wide Web has benefited South African businesses. However, the results were not optimal. The respondents were asked an open ended question to identify the obstacles that impeded the impact of the Web on businesses. Some of the responses included consumer

542 Human Perspectives in the Internet Society: Culture, Psychology and Gender fear, consumer literacy, poor market segmentation, untapped market niches, lack of advertising support, and poor site appearance. 5 Recommendations In order to achieve optimal utilisation of the World Wide Web, businesses need to address the obstacles that were identified by the respondents in this study. 5.1 Fear The greatest fear that customers have is the risk involved with transacting online. Businesses need to develop awareness programmes to promote the use of the web. This can be done through Internet Service Providers (ISP). ISP s could be paid to make users aware of the benefits of e-commerce. Advertising and promotions should revolve around the benefits of e-commerce, the ease of using the Internet and advertising the safety of transacting online. 5.2 Literacy For too long South Africa has run a mixed economy, that is, first and third world. In order to compete in the global economy, the country has to move forward and become a first world economy. Literacy and computer literacy are the social responsibility of the State. Businesses and human rights groups need to canvass government support for developing an electronic society. However, simply making people literate and computer literate will get them online, but does not promise sales. 5.3 Segmentation Market segments need to be properly researched. Research should focus on biographical data, such as, age, gender, income, level of computer literacy, frequency of usage of the Internet, and willingness to purchase online. Businesses need to clearly identify the target market, and determine the attractiveness of that market. If the market is both attractive and has growth potential, then only should the business go online. 5.4 Untapped niches Businesses need to identify untapped niches that can be exploited for example, the academic market is a highly lucrative and attractive online market, yet it remains unexploited. Book sellers, computer sales, banks and stationers could offer free training to employees of institutions like Universities, Colleges and Government Departments. Besides providing a community service, companies can sell their web sites at training sessions. 5.5 Advertising Promotion and advertising should be done offline, directing traffic to online e- commerce sites. Online advertising and promotion should be kept to a

Human Perspectives in the Internet Society: Culture, Psychology and Gender 543 minimum. Businesses need to use traditional advertising to create an awareness and to attract international business online. Savings due to online trade should be given back as price savings to consumers. 5.6 Site appearance Web masters need to develop user friendly sites that are attractive and free of clutter, loads quickly, contain useful and reliable information, are secure, and have simple addresses. Furthermore, web design should support the image of the business and convey the values that make the business successful. 6 Conclusion It is evident from this study that the World Wide Web has had a positive impact on South African businesses, especially with regards cost savings, improved customer service and additional revenues due to online sales. It is also clear that although most managers were satisfied with the impact of the Web that there were obstacles that limited the impact and that strategies needed to be implemented to overcome the obstacles. No study is complete without identifying its limitations. As evidenced in this study, the small sample size makes it impossible to generalise the results to all South African businesses. However, the results have clearly identified trends that leave room for further research and debate. References [1] O'Brien, J.A. 2000. Introduction to Information Systems. Essentials for the Internetworked Enterprise. ed. 9. Boston: Irwin McGraw Hill. [2] The Net Imperative. The Economist, July 1999. [Online]. Available at http://www.crab.rutgers.edu/~goertzel/economistnetbusiness.htmhttp://w ww.crab.rutgers.edu/~goertzel/economistnetbusiness.htm (Accessed: February 2004). [3] Lucas, H.C. Jr. 2000. Information Technology for Management. Boston: Irwin McGraw Hill. [4] Moodley, L. 2000. Strategic Use of E-Commerce. Presented at the E- Commerce Seminar. Durban. [5] Radebe, S. 2000. Improving Customer Service with E-Commerce. Presented at the E-Commerce Seminar. Durban. [6] Internet Usage Statistics for Africa. 2004. [Online]. Available at www.internetworldstats.com/stats1.htm. (Accessed: January 2004). [7] Parker, D. 17 February 2000. Online Trade at Risk. Security fears hamper developing e-commerce. The Daily News, p.18. [8] Aitchison, J.J.W. 1998. A Review of Adult Basic Education and Training in South Africa. [Online]. Available at www.fsu.edu/~/vadca/engli sh/adeas.html. (Accessed: July 2000).

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