In the current economic climate of South Africa and frankly the world, the only thing we can be certain of is that the only constant in life, is change. As a Millennial, it is almost unfathomable to think of a time prior to the digital era. We have grown accustomed to consuming massive amounts of data on a daily bases on search engines like Google, and social platforms like Facebook. These innovations have had a massive impact on business models globally and in the South African market. In the retail industry, the digital transformation has changed the way consumers are reached.
Even though e-commerce is still a new trend in South Africa and only amounts to 1% of the total retail market, online retail has been growing at a rapid pace that far surpasses traditional retail. According to the market research company Statista, there are 30.5 million e-commerce users in South Africa in 2019. The e-commerce market revenue amounted to US$3.308m in 2019 and is expected to show a 15% revenue growth in 2020.
The e-commerce consumer is predominantly from a higher LSM and currently, the bulk of orders are made in metro areas specifically Johannesburg and Cape Town. The fastest-growing categories include electronics, media, fashion and apparel. There has also been an increase in sales of larger products like furniture and appliances. The majority of South African online shoppers make their final purchase via desktop however, mobile site traffic is significantly higher than desktop.
Takealot is the largest online retailer in South Africa in terms of market value, revenue and volumes. They also have the highest level of traffic on their site. Most retail stores within South Africa are aware of the importance of an online presence even though e-commerce contributes to a small portion of their total sales. Massmart is a good example of a large retail group that offer online shopping with separate websites for each of their stores.
An online platform is also a great tool for smaller companies to introduce their products to a large audience. Growth of online retail will encourage innovation and greater efficiency within the retail sector. We have seen great achievements by local online companies like YuppieChef and NetFlorist.
There is no doubt that e-commerce is a booming industry in South Africa. With Generation Alpha being the first generation to live their entire lives immersed in technology, they will set the tone for retail in the following decades.
The question still stands whether the mall culture will ever die out completely. When it comes to competition between brick and mortar stores and online retailers in South Africa, online is not currently seen as a threat as most large retailers have adapted to the niche online market. I believe that the immediate greater risk to local retail would be if an international online retail giant like Amazon would enter the South African market. Amazon is one of the largest international retailers and probably the most well know online retailer in the world. They do not have a South African website but they do however, deliver to South Africa from Amazon.com.
In the current retail environment, it is necessary to consider the rise of e-commerce and to understand the potential threats and opportunities that are likely to arise as a result
Goga, S. (2019) E-commerce and its impact on competition. Available from: http://www.compcom.co.za/wp-content/uploads/2019/09/Goga-S-E-commerce-and-its-impact-on-competition.pdf
Statista. (2019). Ecommerce South Africa. Available from: https://www.statista.com/outlook/243/112/ecommerce/south-africa
Bizcommunity. (2019). How female consumers are shaping SA’s e-commerce boom. Available from: https://www.bizcommunity.com/Article/196/394/195135.html
Yousafza, HK. (2019, January 29). What’s holding back e-commerce in South Africa. The Journalist. Available from: http://www.thejournalist.org.za/spotlight/whats-holding-back-e-commerce-in-south-africa