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SA’s online shopping catapults to R71bn turnover

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 08 May 2024
South Africans are becoming more aware of the increased convenience of online shopping.
South Africans are becoming more aware of the increased convenience of online shopping.

Online retail in South Africa has witnessed remarkable growth, exceeding 6% of total retail sales, and reaching R71 billion turnover in 2023.

This, driven by a strong shift to enhance customer experience by local e-tailers, positions the sector to break the R100 billion mark by 2026.

Online Retail in South Africa 2023, a study conducted by World Wide Worx, in partnership with Mastercard, Peach Payments and Ask Afrika, reveals online sales skyrocketed in SA last year, growing 29% from 2022.

The findings were announced during a webinar this morning. According to the study, the 2023 rise comes after a 35% increase the previous year took the total to R55 billion in 2022.

The overall growth coincides with a decline in total retail sales – only the second one this century – emphasising the growing significance of online platforms in the retail sector, reveals the study.

“Physical retail has been stagnant for many years in South Africa, and now it’s completely flat – as online retail reaches 6.15% of total retail,” said Arthur Goldstuck, MD of World Wide Worx.

“Whereas the boom in sales two years ago could be attributable to what was termed the ‘pandemic dividend’, brought about by a massive demand for home deliveries beginning in 2020, the ongoing rise is driven by competitive e-commerce strategies from most major physical retailers, existing e-shoppers moving more off their traditional shopping to the online space, and credit card payment processing becoming more streamlined.”

According to Goldstuck, the strategic shift towards competitive e-commerce offerings and enhanced customer engagement, including sophisticated artificial intelligence (AI)-driven tools, has fundamentally transformed the retail landscape in SA.

The study also notes the success of the Shoprite Checkers Sixty60 service, which saw a 63.1% increase in the latter half of 2023, while Pick n Pay grew online sales by 76% and Woolworths reported a 47% online sales increase. By contrast, the country’s largest online retailer, Takealot, grew sales by only 6%.

“Online retail is forecast to reach 10% of total retail by the end of 2025 in SA. This is a truly significant number because we saw that when that level is reached in more mature markets, such as the UK and US, it caused tremendous excitement around online retail.

“At that level, all companies realised that online retail was now at a critical stage – so critical that it requires even greater investment, in some cases more than traditional retail,” explained Goldstuck.

Online retail is forecast to reach 10% of total local retail by the end of 2025. (Source: Online Retail in SA report)
Online retail is forecast to reach 10% of total local retail by the end of 2025. (Source: Online Retail in SA report)

Tipping the cart

Andrea Rademeyer, founder and executive chairperson of Ask Afrika, added that the demographic data supplied by the company’s Target Group Index (TGI) survey underscored a significant shift in consumer behaviour.

“As South Africans move more of their spending online, they also become more confident in the medium and increase their individual levels of spending. Most significantly, they are becoming more aware of the increased convenience and choice available online.”

An industry survey conducted among South African retailers by World Wide Worx, as part of the study, showed that customer service was paramount to online retail success, with 73.9% of respondents emphasising its importance.

Stock availability and a wide range of quality products were also crucial, while competitive pricing and personalisation of offers were less critical. This is expected to change, with the advent of AI in personalising offers.

The most significant operational challenges for the industry were payment failures (18.2%) and managing customer queries and complaints (16.8%).

However, the major issue for cart abandonment by consumers was reported to be caused mostly by declined credit cards (52.2%). Concerns over the security of credit card information and complicated checkout processes were also significant factors leading to abandoned carts.

The TGI Survey, conducted among 16 000 South African consumers, found that 20% of consumers had found the online medium gave them more choice and variety. However, only 18.6% regarded it as safe and secure to shop online.

Goldstuck added that the overall findings provided a powerful indication of the continued future growth of SA’s e-commerce sector, also propelled by the arrival of Amazon in SA.

Amazon is expected to shake-up South Africa’s e-commerce space and take on established local players such as, Bob Shop, Massmart-owned Makro Marketplace and Zando, as well as global players such as Temu and Shein, among others.

“This comprehensive report not only reflects the current state of online retail but also forecasts continued robust growth in the sector, partially driven by the arrival of in the local market,” he said.