Surge in online shopping a saving grace for retail sector

While retail sales in SA stagnate and even decline, online shopping has proved to be the light at the end of the tunnel for the sector.

According to Stats SA, total retail for 2023 reached R1,153-trillion, down 1% from R1,164-trillion in 2022. This marked only the second time this century that total retail had declined.

Online retail, in dramatic contrast, maintained a relentless growth rate, jumping by 29% in 2023 l to R71bn.

This was the key finding of the “Online Retail in South Africa 2024” report, released on Wednesday by World Wide Worx, in partnership with Mastercard, Peach Payments and Ask Afrika.

The study found that the share of total retail made up by the online sector had jumped from 2.8% in 2020 to 6.15% in 2023. At even a substantially lower growth rate for the next two years, it is likely to pass the 10% mark by 2026.

In mature online markets like the US and the UK, breaching 10% of total retail sales was seen as a major landmark, ushering in an era of mass adoption of online purchasing.

Gabriel Swanepoel, Mastercard country manager for Southern Africa, said the company had also seen this dramatic growth in credit card e-commerce transactions, which include online retail and the likes of travel, accommodation and airtime.

“The industry has gone from around $2bn six years ago to just over $5bn last year. A large chunk of that growth is down to consumer choice becoming more prevalent in the broader South African context.

“The other pertinent thing is that consumer behaviour changed significantly throughout Covid. A lot of those habits didn’t evaporate.”

Shoprite Checkers was the star of the online retail stage. While its overall sales grew by 13.9% in the second half of 2023 to R121.1bn, the Sixty60 app-based service had surged by 63.1% in the same period, off the back of 4.5-million downloads.

A key to the rapid growth of online shopping has been the maturing of the logistics sector, including the ability of retailers to deliver from local stores to local customers via extensive motorcycle delivery networks. Sixty60 fulfilled orders from 505 stores, with Pick n Pay almost matching it at 500 delivery outlets.

Significantly, Sixty60 created 9,903 new jobs from 2020 to the end of 2023.

Pick n Pay provides a case study of how online sales can make up for lacklustre physical store performance: in the half-year to August 27 2023, online sales leaped by 76.3% year on year, while total sales grew by only 5.4% in the same period.

Even Woolworths reported stellar online sales growth: while total food sales grew 8.4% from the previous year, online food sales increased by 47%, driven primarily by the on-demand Woolies Dash offering.

The “Online Retail in SA 2024” study confirmed that those defined as Generation Z, aged from 25 to 34, showed the deepest penetration of online shopping of all age groups: 46%, compared to 36.6% for all adults living in cities and towns in South Africa.

The study’s demographic research, based on the TGI Survey conducted by Ask Afrika among 16,000 South Africans, showed two significant shifts within age groups.

In the youngest band, those aged 15-24, penetration fell significantly, from 43.7% to 37.7%. The shift potentially indicates the effects of youth unemployment on the growth of online retail.

This is, to some extent, balanced by an even more significant shift in the oldest age group, 65 and above. From 16.4% in 2022, penetration grew to 24.9% last year.