The growth in popularity of digital goods and services in South Africa has created a substantial demand as consumers have come to expect businesses to have an expanded value-added services (VAS) offering. With most major businesses offering similar digital goods and services portfolios, retailers have little room for differentiation.
A competitive advantage for retailers can be found by focusing on:
- Customer value
- Accessibility
- Customer experience
These represent opportunities that can be addressed by optimising the channels through which you offer VAS. But, how do you choose which channels to focus on?
According to our latest research in the 2022 Digital Goods and Services Report, the preferred channels to purchase VAS in South Africa are bank apps, retailer till points, and money market counters.
Understanding how consumers use different channels to purchase VAS is vital to your business strategy. The following learnings give you a place to start when it comes to optimising your channels for customer value, accessibility, and customer experience.
1. Customer value
Our research shows that the majority of consumers feel retailers not only provide the best quality products and services but also reward loyal customers and have the cheapest offers. These beliefs alone give retailers a natural advantage when selling VAS, but they need to make the most of it by adding a strong digital presence in order to compete with banks.
Great customer value is not the only competitive edge held by retailers – they have a wider variety of digital goods and services available in store compared to digital channels. While prepaid airtime and data, prepaid electricity, money transfers, LOTTO, and bill payments are popular VAS products on bank apps (the top channel), the retailer offering is extended to include sports betting, travel and event ticketing, gift cards and goods and services vouchers.
Consumers can buy multiple VAS products in one stop: Making purchasing easy, convenient and accessible. That being said, just because consumers believe retailers offer the most customer value does not mean they are over the finish line when it comes to their digital goods and services marketplace.
2. Accessibility
As discussed above, the popularity of in-store purchases remains, despite the impact of COVID-19. As digital solutions are surging – it seems given the opportunity – most people still feel more comfortable and familiar dealing face-to-face with someone behind a till or money market counter. However, this is not always possible or the most convenient.
During the national lockdown, consumers were forced to move from in-store purchases to online transactions – and for VAS the biggest shift was towards bank apps. According to a Forbes article, ‘between 2020 and 2021, there was an extraordinary spike of 37% in total apps installed across the country’.
In our 2022 Report, accessibility is one of the main reasons for the high bank app preference. While digital goods and services can only be purchased in-store during operating hours, VAS products are available 24/7 on mobile apps.
A large share of retailers’ customers are based in rural areas where signal is unreliable. In order to offer an ‘always on’ service to compete with bank and mobile network operator (MNO) apps outside trading hours, retailers can make agreements with MNOs or even establish their own mobile virtual network operator (MVNO) product.
3. Customer experience
While customer value and familiarity might be the reasons for a strong physical channel preference, the rapid shift towards innovative digital solutions is undeniable as South Africa transitions after two years of COVID-19 restrictions.
Not only do South Africans find bank apps to be the most accessible, but they also believe banks have their best interest at heart, have the most successful digital offering, and are leaders in the digital space. Due to their digital innovation, banks are currently believed to offer a better customer experience.
By not having a strong digital channel strategy, retailers stand to lose market share to banks – even when banks offer fewer digital goods and services. To retain these customers, retailers have to be able to compete with banks on a digital level, further than USSD services.
One way to increase digital customer experience is by offering customers additional value through loyalty and rewards. By accepting loyalty points as payment for VAS on a mobile app, customers can use the points they have accumulated from in-store shopping to buy digital goods and services and keep the value in their ecosystem. MVNOs have also had great success in the past by offering rewards for app transactions.
The rise of mobile network operators
The low preference for MNO channels is attributed to the fact that these providers have only recently joined banks in competing in the VAS digital space. In 2021, Vodacom launched their super app, VodaPay, and since then their financial services have increased by 12.5% to R2 billion. This suggests incredible opportunities for MNOs as well as super apps in the future, which will place more pressure on retailers if they don’t pay attention to their digital offering.
Continue to optimise
Optimising your digital goods and services marketplace does not have to be challenging for retailers. Retailers already hold the highest customer value, and by focusing on their digital channels, such as their mobile app, they will be able to retain customers through improved accessibility and customer experience.
Offering VAS on mobile apps will expand and retain their current customer base while growing revenue without interrupting their core business. If Electrum already manages your VAS integrations, it will be quick and easy to add a new online channel and also ensure lower app development costs. To learn more about how VAS is consumed in South Africa, download our 2022 Digital Goods and Services Report.
Where do you see the future of digital channels heading? We would love to hear your thoughts – pop us an email or comment on LinkedIn.
