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Offline startups are missing out on a major revenue stream

If you own a startup here in South Africa and don’t have an online presence yet, you may be missing out on a major future revenue stream.

PricewaterhouseCoopers has released a report called “Emerging companies and the ecosystem” that includes a survey conducted with 743 South African respondents comprising  startup owners (85%), tertiary institutions, government, incubators and accelerators (12%) and investors (3%). Of the startup owners, 60% are involved in app development, mobile applications, ecommerce/online, digital advertising and big data.

According to the survey, 65% of respondents are using digital channels as part of their core strategy, 36% of respondents using online channels currently estimate that over the next five years more than 75% of their revenues will be derived online, while 20% estimate revenue of between 50%-75% coming from online channels.

“Most emerging companies are using digital channels, including social media, to sell products and services and educate their customers about both their products and their brands. The growth in these digital channels is bringing companies closer to the market they intend to serve, allowing them to communicate with and relate to the needs of their customers,” the report stated.

Additionally, 37% of companies using online as a sales channel reported selling between 50% and 100% of their products and services online, while 55% expect to do so over the next five years. Only a quarter of respondents indicated that online would not be applicable to their business in the next five years.

“The majority believe they will be selling 75% -100% of their products online in the long term. Respondents’ outlook is supported by the fact that more and more South Africans are accessing the internet via their mobile phones. Not only is the mobile phone a device for transacting to buy, it’s predominantly used for entertainment, information access and money transfers,” PwC said.

“The Internet gives startups and small businesses access to a national and international market from very early on. In our case, we could sell to the whole of South Africa without having to open stores in malls across the country,” said Yuppiechef managing director and co-founder, Andrew Smith in an interview included in the report.

“Likewise, we expanded to Namibia, Botswana and Mauritius without needing a physical presence in those countries,” Smith went on. “We have now started selling online video cooking courses, and have had users from 90 countries across the world. Small businesses also have access to the world’s best tools for running their operations.”

If you’re seriously considering adding digital as an additional sales channel, you should invest in a focused and purposeful way into this channel, the report advises. But bear in mind that requires expertise and skills to manage the often large investment required to maximise the returns.

“Once online traction has been gained, the benefits will be reaped, provided that you hire or outsource the right expertise to run the process for you,” PwC said.

Should you like to read more, you can download the full report from the PricewaterhouseCoopers website.

[Source – PricewaterhouseCoopers, image – CC 2.0 by Wikimedia Commons]

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