E-commerce in South Africa January 2021 | Rhox

E-commerce in South Africa January 2021

E-commerce in South Africa has seen a large uptake especially due to recent events, but is it sustainable or will it blow over? The more digital savvy people become due to lower costs in broadband and ease of use the higher the uptake in e-commerce.


Four years ago there were approximately 18.43 million e-commerce users in South Africa, with an additional 6.36 million users expected to be purchasing online by 2021 and spending an estimated average of 189.47 USD online (Eshopworld, 2017).

Back then the average exchange rate was R13.31 to the USD, making the average estimated spend per customer at just over R2500.00 and that was before Covid-19 accelerated the e-commerce industry.

A study conducted last year stated the e-commerce industry in South Africa is expected to reach approximately R62m in revenue in 2020 and grow by 10% each year.(Statista Jul 31, 2020).

South African Flag over an e-commerce website

Around the world even with e-commerce being an accepted way of purchasing goods there is still evidence of growth.

Five years ago “209.6 million U.S. people were online shoppers and had browsed products, compared prices or bought merchandise online at least once. At the time that figure was “projected to reach 230.5 million in 2021, positioning the United States as of one the leading e-commerce markets based on online shopper penetration.”(Statista Nov 27, 2020)

Fifteen years ago 34 million Chinese were shopping online. Three years ago, in 2018, that number is now over 610 Million users. “As of 2017, digital buyer penetration rate in China has edged close to 45 percent.” (Statista Sep 30, 2020)

Looking at these info-graphics created by Hootsuite, you can get a sense of how much potential growth there is.

Infographic - Internet penetration around the world

Infographic - Internet penetration around the world

Infographic - Mobile connectivity around the world

Infographic - Mobile connectivity around the world

Southern Africa has the highest percentage of mobile and internet coverage and only 51% Internet penetration. As we face yet another family meeting and possibly tougher restrictions, more and more people are changing their buying habits and turning to online shopping as an alternative.

The cost of broadband in South Africa is still high compared to other countries. This slows down internet penetration and e-commerce sales . If the mounting pressure to drop the fees continues then it will boost online sales and allow new and existing retailers a means of offering their goods and services on a larger scale.

Often trends from developed markets play out in developing ones. These graphs were from a Mckinsey article on the USA e-commerce market I thought these were really interesting, especially the uptake of Gen X and the willingness of people to continue using online purchasing to buy products.

Infographic - Expected change in online shopping per category over the next 2 weeks

Infographic - Expected change in online shopping per category over the next 2 weeks

Infographic - Consumers who have tried a new shopping behaviour since Covid-19 started

Infographic - Consumers who have tried a new shopping behaviour since Covid-19 started

Infographic - Reason for trying a new brand in the last 3 months

Infographic - Reason for trying a new brand in the last 3 months

A very insightful look at the SA market by Julia Ahlfeldt, in The 2020 South African Digital Customer Experience report shows the following:

Infographic - South African online shopping trends Infographic - South African online shopping trends

“If customers were on the fence about trying digital experiences, then Covid gave them the motivation to take the leap”.-Julia Ahlfeldt

Advisory firm Accenture suggests that South African's still on the whole appear to prefer to purchase goods at brick and mortar stores. The main issue impacting e-commerce uptake is concerns over security by shoppers. In spite of this “According to research by Euromonitor International, online sales in South Africa will grow almost three times as fast as in-store sales in the period 2018–2023. The compound annual growth rate for online sales in that period will top 19 percent, while it will be less than 6 percent in physical stores”

Infographic - South African market size growth (Compound annual growth rate ) 2013 to 2018 Infographic - South African market size growth (Compound annual growth rate ) 2013 to 2018

Accenture notes that “recent figures released by leading retail banks show digital banking is growing fast. FNB reported annual growth in mobile banking app volumes of 65 percent, while Capitec has seen a 62 percent increase in the use of its banking app in six months”

As more and more people embrace digital to make their lives easier it will lead to a sharp uptake in E-commerce. The main challenge is for shop owners to be able to respond quickly and deliver value. After sales service that does not require a person having to travel to a physical location will be an added advantage.

Sources:


Duane Giliam Online Marketing Manager of Rhox Digital Solutions

Written by Duane Giliam
Online Marketing Manager


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