In this note, we examine some global e-commerce trends and perform a relative online price analysis of South African household goods sellers. We think a strategy to address the challenges and opportunities arising from e-commerce and smartphone use in retail should be a priority for South African furniture/appliance sellers. Also, with the emergence of price comparison websites, that include products from print media catalogues, traditional credit furniture retail chains products are now in direct competition with mass-market discount chains and online retailers.
■ Smartphone shoppers are different. Google* recently highlighted how mobile devices impacted the customer‟s path to purchase. We evaluated the South African household goods seller‟s websites to check if they cater for the functions smartphone shoppers typically look for according to Google (e.g. store locations, trading hours etc.). We found that the mass-market value chains (JDG cash, Makro and DionWired) had the best website functionality.
■ We examined how South African internet users research and effect purchases online relative to their developed market peers. We found that South African internet users do less online research than their developed market peers – except for purchases of insurance and personal loans. Interestingly, personal loans was the only category that South Africans both researched and purchased more online than their developed market peers. We think this may possibly point to disparate pricing between credit providers, which incentivises the additional research effort. Net-net: we think that the low level of online purchasing in South Africa highlights the opportunity for ecommerce in South Africa.
■ Our online price comparison showed that mass market discounters (such as Makro) were on average c.19% less expensive than traditional credit furniture retail chains on comparable products. On a retailer-specific basis we found that Ellerines was priced at the biggest premium, whilst Makro offered the best value.
■ Looking forward to the Lewis FY13 results, scheduled for release on 22 May 2013, we reiterate our concern regarding Lewis‟ declining trend in account numbers. We have left our earnings forecasts unchanged, but highlight possible downside risk to consensus if March retail sales or Lewis‟ performance on new account acquisition disappoints. StatsSA is scheduled to publish SA retail sales on 15 May 2013 as per Bloomberg.
■ Lewis (Hold; TP: R71.00; 12 month forward PE c.5x) remains our preferred pick of the furniture retailers priced at a c.15% discount to JD Group (Sell; TP: R35.00; 12 month forward PE c.6x) with a similar medium term earnings growth profile.
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