Subscribe to industry newsletters

Search jobs

How the e-commerce share of retail soared over the last year in SA

E-commerce has gone from strength to strength in South Africa over the past year off the back of the Covid-19 global pandemic and rapidly accelerated digitisation.
How the e-commerce share of retail soared over the last year in SA

In fact, findings from World Wide Worx’s Online Retail in South Africa 2021, found online retail in South Africa in 2020 accounted for 66% of retail spend, amounting to R30,2bn. This is more than double the R14,1bn reached in 2018, in just two years.

The growth is 50% higher than the total forecast for 2020 three years ago, when online retail in South Africa was expected to reach R20bn by 2020.

Paul Behrmann, CEO and founder of part-payment platform Payflex, says no one could have predicted this exponential growth.

“The pandemic completely rewrote the rules of retail with changes we expected to see over several years taking place in just months. This watershed moment for the retail industry has without question settled any lingering doubts that the future of retail is digital. E-commerce is now a bright spot in the South African economy and a lifeline for many consumers who continue to work and shelter at home.”

Payflex also experienced exponential growth over the past year as a result of the pandemic-induced e-commerce boom, growing from a shopper base of 2,000 to 80,000 in just 12 months.

From bricks to clicks

Behrmann says the pandemic showed us just how quickly shopping preferences can change, accelerating how people shop in a world growing more comfortable and savvier with technology.

While consumers shopped online before the pandemic, they had no choice but to rely on digital retailers during the Covid-19 pandemic, as physical stores closed and people opted to stay indoors as much as possible to avoid exposure to the virus.

What’s more, shoppers headed straight for their computers, filling up their virtual shopping carts with products that they might not have otherwise ordered online like groceries, cosmetics and other essential items.

A Mastercard survey of 1,000 South African consumers confirms this, finding that 68% of respondents were shopping more online since the onset of the pandemic. At the same time, the survey found the categories experiencing the highest growth are clothing, at 56%, and groceries, at 54%.

And customers who bought goods online for the first time during the pandemic's early weeks continued to do so, according to Harvard Business School.

Years of growth in the space of months

While online shopping was on the rise prior to Covid-19, the pandemic turbocharged its growth by several years in the space of months propelled by massive shifts in consumer behaviour.

Mckinsey found 10 years of e-commerce growth happened in just 90 days. While data from IBM’s US Retail Index, the pandemic accelerated the shift away from physical stores to digital shopping by roughly five years.

This resulted in a jump in global e-commerce volume to $26.7trn, according to the UN. Similarly, Adobe found e-commerce spend increased $183bn over expected levels because of Covid-19.

Closer to home, Rand Merchant Bank forecasts the sector’s value to surge by 150%, to R225bn, within the next five years.

While South African e-commerce giant Takealot reached $238m at the end of September 2020. That’s up 41% from the same period a year earlier.

Still a place for brick and mortar

Statistics South Africa found South Africa’s e-commerce sector’s exponential growth came concurrently with a slump in traditional retail last year, brought on by Covid-19 lockdowns and associated job and economic losses, falling by 4.2%, to reach R1,05trn.

But the World Wide Worx report found that there is still very much a place for brick and mortar in the South African retail landscape.

“This isn’t the end of the traditional bricks-and-mortar store,” comments Arthur Goldstuck, MD of World Wide Worx.

“Traditional retail has grown every single year in this century. In 2020, it reached R1,05-trn. This was a 4,1% drop from 2019 but, considering it is still above the R1trn mark, we can say that brick and mortar is not going away.”

Behrmann echoes these sentiments, saying there’s certainly a place for brick-and-mortar stores in the next normal. But he adds that retailers will need to reimagine the in-store shopping experience, and relook at their strategies when it comes to blending online and offline channels.

“Taking into account that the shopper will go through different channels, throughout the purchase process, omnichannel has become an imperative for brick and mortar retailers looking to remain competitive in our new realities.”

A radically different consumer

Months of lockdown and social distancing has changed consumer habits, in many cases, permanently. Customers are savvier than ever and their demands and expectations have shifted dramatically in the past 12 months as they seek more personalised and frictionless end-to-end shopping experiences.

The UN said in October that Covid-19 “has forever changed online shopping behaviours” in emerging and developed economies.

While the EY Future Consumer Index, found that 80% of consumers are still changing the way they shop. At least 61% are currently visiting brick-and-mortar stores less than before the pandemic, while 43% shop more often online for products they would have previously bought in stores.

A sudden change, lasting consequences

Behrmann says as South African consumers continue to embrace online shopping, the use of digital payments is expected to increase as consumers move away from cash.

“A significant rise in consumer preference for online channels, coupled with a greater demand for seamless and customised shopping journeys, has led to remarkable demand for interest-free and flexible payment methods like the Payflex buy now pay later offering that puts shoppers in control of the way they pay.”

And looking forward, he says there’s little doubt that the ongoing Covid-19 pandemic has irrevocably altered the retail landscape. He says technologies like augmented and virtual reality (AR/VR) and social commerce become more commonplace, and e-commerce is anticipated to become second nature to South African consumers.

“E-commerce growth is expected to continue long after the threat of the virus subsides. More importantly, online sales are likely going to take up a progressively bigger portion of South African retail sales in the coming years as technology advances and consumer behaviour and expectations continue to shift online,” concludes Behrmann.

Let's do Biz