E-commerce growth beats forecasts

Online retail in South Africa will represent 1.4% of total retail sales this year, surpassing the R14 billion mark for the first time, according to new research.

South Africa’s e-commerce is starting to go mainstream, according to the Online Retail in South Africa 2019 study by World Wide Worx.

The research, produced with Visa and Platinum Seeds, said e-commerce in the country will grow 25% over last year’s sales, which World Wide Worx said is a “surprise given predictions that online retail growth would slow down to below 20% by 2018”.

“Forecasts have been beaten as a result of massive investments in online retail, aggressive marketing and the rapid uptake of new shopping channels like mobile shopping and Instagram.

“Furthermore, most established online retailers have enhanced their digital presence and refined their fulfilment models, while many traditional retailers are starting to see significant growth in their online offerings.

“It is not unusual to see growth rates of between 25% and 50% reported by individual online retailers, with slightly more tempered expectations for 2019, 2020.”

The result is that growth accelerated in both 2017 and 2018, and only a small dip in the rate of growth can be expected in 2019 and 2020, World Wide Worx said.

Online retail is projected to reach 1.4% of total retail sales in South Africa, based on an estimated R1 trillion to be spent through traditional channels this year. The 2% mark is likely to be reached by 2022.

Forecasts

The forecasts from 2018 to 2020 show online retail sales more than doubling from 2016, to almost R20 billion, a year sooner than originally forecast in 2016.

“Online retailers in South Africa still make up a small proportion of overall retail, but for the first time we see the promise of a broader range of businesses in terms of category, size, turnover and employee numbers. This is a sign that our local market is beginning to mature.”

Seventy-five companies with an online retail market participated in an industry survey. Apparel remains the fastest growing sector in online retail in South Africa, but is also the sector with the highest turnover of businesses.

A significant impediment to the growth of e-commerce is the unwillingness of business to reinvest, the research found. Only one in five companies surveyed invested more than 20% of their online turnover back into their online store. Over half invested less than 10% back.

The single most critical factor in the success of online retail activities, as reflected in this survey, is customer service.