E-commerce booms as retail sales plummet to record decline
The COVID-19 pandemic has forced SA’s brick-and-mortar retailers to embrace e-commerce, which has been touted as the lifeline for retailers after the sector reported a record decline in sales during the initial lockdown period.
Last week, Stats SA announced SA’s retail sales for April plummeted to the largest decline on record, with sales down 50.4% for April 2020, compared to the same month in 2019. In May 2020, retail sales fell 12% year-on-year due to the COVID-19 pandemic crisis and consequent lockdown restrictions imposed by government since 27 March.
Despite the decline in retail sales, industry insiders believe COVID-19 has fuelled a sudden digital surge, which has led to an increase in the uptake of online shopping in SA.
With more online retailers ramping up their digital offerings in recent months as a result of reduced footfall in stores, this is expected to lead to a permanent uptick in online shopping as consumers increasingly adapt their purchasing behaviour to cope with the unpreceded crisis.
Arthur Goldstuck, head of World Wide Worx and chairman of the Sasfin Bank digital advisory council, says SA’s e-commerce industry, which consisted of around 2% of total retail in SA prior to lockdown, did not play a role in the drop in retail sales.
“The plummeting of retail sales in SA by 50% is a direct consequence of the massive scope of lockdown that we saw at the end of March 2020 – it was obvious that retail in SA would crash.
“With the broad opening of retail, we have seen a fundamental change in the role e-commerce plays in retail in SA. In the context of the COVID-19 pandemic being likely to last through 2021, social distancing is going to remain a feature of physical retail for some time to come.
“As a result, online retail will play a significant role, not only for those who have been shopping online, but also for those who would have preferred physical retail but were disincentivised from visiting physical stores.”
While social distancing has led to shifts in consumers’ online shopping behaviour, Goldstuck believes that an estimation maximum of online shopping numbers could be as much as 3% in 2020.
“At this stage, it's hard to estimate the growth of e-commerce in SA during lockdown, because different stores have experienced dramatically different growth rates. We've, for example, seen OneDayOnly reporting 40% growth, while Mr Price Group has reported 90% growth in online sales. So it is clearly based on existing readiness for online retail and the extent to which physical sales could be moved into the online space,” notes Goldstuck.
In addition to an increase in online retail sales, OneDayOnly says it reported a 40% increase in page views per user during lockdown, and a 15% increase in basket sizes.
“Based on this data, we can definitively say South Africans have embraced online shopping in a more natural fashion and this trend is looking likely to continue and ultimately grow,” says Matthew Leighton, spokesperson for OneDayOnly.
Warrick Kernes, founder of Insaka eCommerce Academy and member of the Education Committee for E-commerce Forum Africa, says some Insaka eCommerce Academy students, who are entrepreneurs, have reported online sales that are more than double the pre-COVID-19 period, with some industries reporting growth rates as high as 15 times more, particularly in the baby products and home DIY categories.
“Since the COVID-19 pandemic and lockdown, retail has plummeted but this is not because of e-commerce which was partially banned at the time. Once e-commerce was allowed, consumers were, and are increasingly, more willing to shop online in order to avoid public spaces and the spread of the virus.
“As consumers’ behaviour has shifted to more online shopping, there is a great opportunity for offline sellers to move into the online world – I believe they should have embraced this change long ago but thankfully many have been able to pivot quickly and save their businesses,” notes Kernes.
Jonathan Smit, MD and founder of PayFast, says more than 15 000 new merchant accounts have been registered on the PayFast platform since the lockdown started, indicating South African businesses are embracing the migration to e-commerce.
“Despite e-commerce making up a small sector of the economy, the pandemic has doubled adoption rates across the board. This is on trend with established e-commerce markets in the US and other countries. We saw a 98% increase in total payment volumes processed from April to May alone. This is a month-on-month growth rate unlike we’ve ever seen in a 30-day period, including peak season shopping over the festive period.”
The boom, adds Smit, has resulted in some challenges for merchants relating to delivery timelines, product availability, increasing online shopper traffic, and the ability to fulfil customer demand.
“E-commerce businesses should manage periods of unprecedented growth and spikes in customer demand by automating their business processes, balancing stock levels and maintaining good relationships with recruiters to speed up the hiring process,” advises Smit.