Biggest growth sectors for online stores in South Africa

Online retail in South Africa is expected to have passed the R14-billion mark in 2018 as ecommerce grows.

This is one of the major findings from the Online Retail in South Africa 2019 study, conducted by World Wide Worx.

The 2018 figure – which represents 25% growth over 2017 – comes as 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.

“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,” the report found.

Growth in apparel accelerates

The report found that apparel remains the fastest growing sector in online retail in South Africa.

However, it noted that it is also the sector with the highest turnover of businesses.

“Apparel illustrates the perils of a low barrier to entry – the survival rate of online stores in this sector is probably directly proportionate to the ease of setting up an online apparel store.”

The highest number of respondents were in the apparel category, with 23% of the sample in this category.

The second largest number of respondents fell into the General category, at 10.8% – this includes sites like Loot and Takealot.

The third largest numbers of respondents are found in four categories:

  • Arts & Crafts/Decor
  • Alcohol, Tobacco & Vaping
  • Food, Groceries, Non-alcoholic  Beverages & Gourmet Food
  • Home & Garden

“Unsurprisingly, a fast-growing category is alcohol, tobacco and vaping,” the report stated.

“The increased online supply of vapes, juices and accessories suggest that the SA smoking bans, and the change in the legal status of marijuana during the survey, may have boosted consumption.”

Not investing

Despite this strong growth, the report found that a significant impediment to ecommerce in South Africa is the unwillingness of businesses to reinvest.

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.

This is despite 71% of all online retailers surveyed saying they are profitable.

“However,  profits in ecommerce are no definite indicator of long-term sustainability,” the group said.

“Young online retailers who do not reinvest in the underpinnings of their business may be sacrificing short-term financial gain for long-term survival.

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Biggest growth sectors for online stores in South Africa