IT Services14.03.2022

South Africa’s online shopping explosion

FNB’s Merchant Services has recorded an explosion of growth in ecommerce sales and variety in South Africa since 2019.

The bank said the Covid-19 pandemic has exponentially accelerated the adoption of ecommerce in the country.

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

FNB’s statistics showed that the local online ecommerce market was currently estimated at just under R200 billion per annum, up from R90 billion in 2019 and R142 billion in 2020.

FNB Merchant Services CEO Thokozani Dlamini said the sector had already exceeded FNB’s conservative estimates initially published at the pandemic’s peak.

His division had observed the following noteworthy trends in ecommerce in South Africa:

  • Ecommerce accounted for 14% of retail card payments in 2021, up from 8% before the pandemic.
  • Total online sales jumped 41% in 2021, after 55% in 2020, driven by increased spending in less traditional ecommerce industries.
  • Excluding Travel and Accommodation (T&A), online spending grew 39% in 2021, following a 102% rise in 2020.
  • Transaction volumes were estimated at 500 million, up from 345 million in 2020 and 200 million in 2019.
  • Average purchase values declined, from R450 in 2019 to R390 now, as smaller retail and lower basket items gain traction.

While most of the trends were positive, FNB said spending on T&A still lagged significantly behind pre-pandemic values and volumes as borders were tightly controlled and travel restrictions remained in place.

Despite this, FNB estimated that the country’s ecommerce market would reach more than R400 billion in value by 2025 on the back of more than 1 billion annual transactions.

Dlamini said not all major retailers were prepared for the sudden change brought about by the pandemic, 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,”  Dlamini said.

He emphasised there was still time for retailers without a digital presence to catch up, but that this would depend on the nature of their industries and client base.

“Large-ticket items such as household electronics and décor would likely still see consumers wanting the touch/feel/witness experience before committing to an expensive purchase,” he explained.

“This highlights the urgent need for retail companies to focus on their omnichannel retail strategy.”

FNB said that some smaller companies, who were unable to invest in their professional and specialist digital environments, turned to platforms like Takealot, Bid or Buy, and Facebook Marketplace or similar solutions such as super merchants, payment gateways and even banking solutions.

“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.”

FNB added the ability to recognise that window shopping was migrating to browser shopping would dictate how future retail developed.

“Companies that offer the best online experience backed by pricing will become most successful,” the bank said.

Now read: Absa launches Mobile Pay — Turn your smartphone into a card machine

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