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SA e-commerce growth unabated

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 28 Oct 2014
The momentum of the force of Internet history has taken hold of e-commerce in SA.
The momentum of the force of Internet history has taken hold of e-commerce in SA.

E-commerce in SA is continuing unabated on its steady upward incline and local e-commerce players are dreaming of an online Christmas.

Total Internet shopping spend by the end of 2014 is expected to near the R6 billion mark - up from just R688 million when the e-commerce curve started its marked rise in 2006.

One of SA's leading e-commerce competitors, Kalahari.com - which recently announced a landscape-changing partnership with fellow giant Takealot - is expecting the "exceptionally strong" sales it has seen in 2014 to be magnified over the coming season.

Head of marketing for Kalahari.com, Liz Hillock, says it's not only price and product range that is driving growth in online shopping but the Internet retailer has also seen a "huge surge" in sales driven from consumers shopping on their mobile phones.

According to World Wide Worx, the past nine years have seen the local e-commerce industry growing (albeit from a low base) by 30% to 35% - with a peak of 40% in 2011. "The impact of this steady growth, is a huge rise in the overall total and we will eventually see it having a massive impact," says World Wide Worx MD Arthur Goldstuck.

Ovum analyst Richard Hurst notes that, with many of SA's online retailers having overcome certain teething issues and South Africans increasingly embracing e-commerce, the industry is set for strong year-on-year growth, which will be given impetus by festive season activity.

Internet history

Largely spurring this growth, says Goldstuck, is what he calls the digital participation curve - the premise that the average Internet user will engage actively with high-level applications like online retail and interactive applications after about five years of being online.

With the number of Internet users having accelerated from 2008, the number of experienced users started accelerating significantly last year. Goldstuck says the digital participation curve will climb fast from now until the end of the decade, but this is just the beginning.

ICT expert Adrian Schofield says this success is partly due to the power of marketing and word of mouth. "Every online shopper who is satisfied with their initial experience is likely to repeat it. Trusted High Street brands entering the market also fuel the growth - and now we see Makro entering the e-market. Quite a move from their traditional 'wholesale cash and carry' mode of operation."

The rise of end-user devices - whether it be laptops, tablets or smartphones - is another e-commerce driver, notes Hurst, together with the lower cost to access the Internet. "[Another factor] has been the creation of various payment mechanisms by the financial institutions and the e-commerce destinations and, perhaps most importantly, the shift in consumer mind set and an increased knowledge and acceptance of e-commerce."

Goldstuck says, at the end of the day, there is no particular single factor behind the growth of e-commerce. "It is the momentum of the force of Internet history taking hold."

Crime factor

This upcoming holiday season begins amid a seemingly unprecedented number of reports around shopping mall robberies, which have been lining local newspapers since around August already. But analysts say this will do little to inflect e-commerce numbers.

Goldstuck says fear of crime might sway a small number of people in favour of doing their shopping in front of their screen instead of on foot, but it is ultimately those who are ready to shop online who need a push over the decision edge.

"We have around two million to two-and-a-half million people in SA that are shopping online and more than five million that are ready to shop online, but [the latter] need a strong incentive. We call it an indisputable value proposition. For some this will be safety, but for most [of the five million], it will come down to what the retailers are offering online."

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