FNB records sharp e-commerce growth since 2019

Source: Getty

Originally dominated by digital goods such as airline travel and accommodation, the nature as well as the scale of the e-commerce sector has changed, with restrictions on travel and gatherings pushing consumers to turn to e-commerce for an increasing array of goods and services.

Key indicators of growth

FNB Merchant Services statistics indicate an explosion in the growth and variety of the e-commerce sector since 2019:

• Before the Covid-19 pandemic e-commerce accounted for 8% of total card payment spend in the retail space. At that stage, the sector was largely (35%) made up by spend on travel and accommodation (T&A).

• By the end of 2021, e-commerce accounted for 14% of total card payment sales with T&A accounting for only 11% of that.

• Despite T&A restrictions heavily impacting online spend in 2020, total online sales jumped 55% that year and another 42% in 2021, driven by increased spend in less traditional e-commerce industries.

• Excluding T&A, online spend doubled (102%) in 2020 and continued its surge in 2021 with another 39% in growth.

• Transactional volumes are just as robust – estimated at 500 million for 2021, up from 200 million in 2019 and 345 million in 2020.

• Average purchase values are declining as smaller retail and lower basket items gain traction with purchase values declining 12% from R450 in 2019 to R390 now.

• FNB Merchant Services estimates that South Africa’s e-commerce market will reach more than R400bn by 2025 on the back of more than 1 billion transactions per annum.

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Need to focus on omnichannel retail strategy

According to Thokozani Dlamini, FNB Merchant Services CEO: “Not all major retailers were prepared for the sudden change, but those that were successful were the ones who could adopt a fast reliable logistical solution in meeting the delivery demand. Key challenges to overcome were consumer trust in the fulfilment of sales where physical products had to be delivered, and logistical solutions to meet spiking demand.”

“Despite the accelerating trend, there is still time for retailers without a digital presence to make the shift, but a lot depends on the industry in which they operate and the nature of their client base. Large-ticket items such as household electronics and décor (televisions, dining room sets, kitchen equipment, living room sets) would likely still see consumers wanting the touch/feel/witness experience before committing to an expensive purchase. This highlights the urgent need for retail companies to focus on their omnichannel retail strategy.”

For those who are unable to invest in a professional and specialist digital environment, the lure of a marketplace such as offered by Takealot, Bidorbuy, Facebook marketplace and similar solutions like super merchants, payment gateways and even banking solutions are a logical next step. Retailers opting for this digital-marketplace route are generally smaller independent operations who recognise that their client base can be expanded beyond their immediate regional presence without having a bricks and mortar (B&M) presence.

Increasing competitiveness of SMEs

“In fact, an interesting result of the shift to e-commerce has been the increasing competitiveness of smaller, independent retailers,” Dlamini explained. “Larger retailers have bargaining power and with that potentially significantly lower input costs than an SME going virtual, but even so, their digital costs are significantly higher since they need to maintain a unique digital offering while data security is paramount.”

Larger retailers are compelled to have a brand-specific digital and shopping presence that requires extensive day-to-day management and maintenance particularly in the security of payment and customer data. SMEs don’t necessarily have this data security problem as they can leverage off marketplace and payment gateway portals to manage their data and payment risk. SMEs can also specialise, finding niche offerings that counter the need to compete on price.

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“E-commerce has already exceeded our conservative estimates initially published at the peak of the pandemic, and it is clearly here to stay.

Travel and accommodation are still lagging significantly behind pre-pandemic values and volumes as borders are tightly controlled and travel restrictions remain in place. Even so, we can expect e-commerce to continue its strong growth in the medium term. Millennials and Gen-Z are evermore digitally entrenched and have little or no fear for online experiences, whether social or commercial,” Dlamini said.

“The ability to recognise that window-shopping is migrating to browser-shopping will dictate how future retail develops. Companies that offer the best online experience backed by pricing will become most successful. E-commerce should be seen as a natural extension of the consumer’s shopping experience. E-commerce is not a static offering: businesses need to constantly monitor consumer demand dynamics and quickly respond to remain relevant. Retailers should not expect to simply replicate their B&M merchandising strategy for their website.”