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Online shopping boom leads to social commerce trend

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 08 Jul 2021

While the strongest online shopping group has traditionally been 25- to 40-year-olds, Generation Z (popularly Gen Z) is becoming the fastest growing group of local online shoppers.

Furthermore, Gen Z is increasingly turning to social media platforms like Facebook, Instagram and TikTok for their online shopping needs, says PayFast MD and founder Jonathan Smit.

South African-based PayFast accepts online payments from local and international buyers across more than 80 000 merchants, which run their business through the fintech firm’s payment gateway.

According to Smit, data sourced by the online payment gateway shows a year-on-year increase of 218% in the 18 to 24 age bracket (Gen Z). “Younger buyers are using their smartphones and social media to shop.”

He adds there’s been a ‘big’ increase in payments coming to the PayFast engine from social media platforms. “Locally, we still have a strong mall culture among older buyers, but Gen Z is moving this online, by supporting local brands through their social media pages.”

This is what is referred to as social commerce, where e-commerce platforms are connected to Facebook, Instagram and TikTok, Smit explains. “People are able to not only use the social media platforms for content or influence, but products are integrated into the platforms and people can make purchases.”

The PayFast MD reveals that social media giant Facebook has recorded the biggest increase. Compared to this time last year, PayFast has seen a 200% increase in payments directed from Facebook to its payment engine.

While Facebook remains the most popular social media platform locally among all age groups, Smit notes Instagram and TikTok are also gaining traction with younger users.

“Gen Z makes up over 40% of social media engagement in South Africa. Born in a digital age, they are familiar and motivated by user-generated content, which is how e-commerce stores are appealing to younger shoppers.”

PayFast data also indicates a 143% increase year-on-year of payments processed on a mobile phone, representing two-thirds of the total payment volumes processed.

“As a country, we’ve always had high percentages of smartphone usage. E-commerce merchants have to think mobile-first, when building their online stores to attract young shoppers,” says Smit.

Competitor on the horizon?

Smit believes SA’s e-commerce market is poised for further expansion, noting global retail giant Amazon as the next possible competitor to enter the market.

There’s been big increase in e-commerce activity in South Africa, as consumers avoid physical stores and problems related to panic buying.

According to research findings by World Wide Worx, the country’s e-commerce sales reached a tipping point in 2020, growing by 66% from 2018. For the year in review, total online retail revenue reached R30.2 billion. It’s expected that SA’s e-commerce sales will reach R42 billion this year, notes the study.

Additionally, a Mastercard consumer spending study found that 68% of South African consumers are shopping online more since the onset of the pandemic.

Smit says the future of the e-commerce sector is going to be “very interesting”, highlighting that’s good news for the consumer and an opportunity for businesses.

“There is a lot still to come in e-commerce and digital payments for South Africa,” he says. “We’re still at a really early stage and there’s still a lot of growth that will happen, and there will be more players that come in.”

Smit notes Takealot has been the e-commerce player that’s dominated the landscape for quite some time, and now there’s Everyshop and some of the old stalwarts likeBidorbuy.

“The market is becoming big enough that there’s starting to be other players in here, and in the future we’re going to see more international players starting to take an interest because the market starts getting bigger.

“One of the bigger competitors isn’t necessarily going to be a local one; it will be Amazon starting to be more prevalent in terms of actually delivering locally,” he concludes.