Shopping online becomes a norm
SA E-COMMERCE: BOOM AS ANNUAL SALES DAY LOOMS
Internet retail has boomed in South Africa, even before this week’s Black Friday frenzy.
Black Friday this week is expected to see a retail frenzy, both on and offline, but it will be the cherry on top of a year that saw e-commerce boom in South Africa.
In the first six months of the Covid-19 lockdown, South Africa’s largest online retail group, Takealot, achieved sales of more than R7 billion, pointing to a fullyear total of well over R14 billion.
These numbers were published on Monday in Naspers’ interim financial results for the six months ended 30 September, making up the first half of its 2021 financial year.
According to the report, the Takealot group generated $407 million (about R6.25 billion) gross merchandise value (GMV).
As significant as the number itself is the growth rate achieved: sales grew by a massive 85% in rand terms.
While GMV includes fees and other costs related to third parties, core revenue for the six months also grew strongly, at 41%, to $238 million.
The takealot.com platform, South Africa’s single biggest consumer e-commerce site, saw website sales grow 88%, with what it defines as first-party sales growing at 69% and third party sales growing by 119%.
Numbers were not broken out for Takealot subsidiary Superbalist, the online fashion, beauty and home store, but Naspers reported that it grew GMV by 37% in local currency, with healthy gross margins.
This despite the fact that Superbalist shut down completely during Level 5 of lockdown, from the end of March to the end of May.
“In the first quarter of FY21 [financial year 2020-21] ... takealot. was permitted to sell only essential goods, while Superbalist and Mr D Food could not operate at all,” the company reported. “The business rebounded in late May when trading restrictions were lifted and all three businesses exceeded their pre-Covid-19 growth rates in the second quarter.”
Once lockdown regulations were lifted, “Mr D Food regained its momentum and grew GMV 101% in local currency for the period”.
Of further significance is the fact that the first half of the financial year did not include the lucrative holiday season or the massive increase in sales generated by Black Friday deals over the last two weeks of November.
The Online Retail in South Africa 2019 study conducted by World Wide Worx originally forecast total online retail to grow to R20.3 billion in 2020, up 20% from R16.9 billion in 2019.
However, the performance of Takealot, as a barometer of the market, suggests at least 40% growth, as a result of the Covid-19 pandemic driving shoppers online.
This would be a conservative figure, however, as the highest growth segment during the pandemic was groceries, an area in where Takealot does not have the same dominance as in o t her categories. With Checkers ramping up its Sixty60 app into a one-hour delivery service – unprecedented for groceries in South Africa – and Pick n Pay acquiring the Bottles app, online grocery sales grew by well over 100%.
Pick n Pay, until now the largest online grocer in the country, reported in its interim results to end-August that the Bottles acquisition grew its online customer base by 200% and online sales by 100%.
The Shoprite group, which reported in its annual results to end-June that it grew online sales by 386% in 2019 off a low base, did not reveal sales numbers from its Sixty60 initiative, but said it had launched and scaled it up to delivery to suburban areas from 87 stores by the end of June.
The boost in online grocery sales will probably take overall growth in 2020 closer to 50%.
This suggests total online retail sales of at least R25 billion, with Takealot generating or being involved in about 55% of these sales. With regular retail sales having declined during the pandemic – Stats SA indicates around a 5% drop in the third quarter – total retail will probably settle at around the R1 trillion mark.
This will bring online retail to 2.5% as a percentage of the total – a level originally expected to be reached only by 2025.
Naspers’ group revenue growth globally of 32%, to $13 billion, was driven by growth across food delivery, e-tail and education.
It has not been plain sailing but, for online retail, Covid-19 has been the perfect storm.
Arthur Goldstuck is founder of World Wide Worx and editor-in- chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee and on YouTube.