Online shopping is bucking the trend and continues to grow at rates that far outstrip traditional brick-and-mortar store sales, although this is admittedly off a low base.
Globally, the market is estimated to be worth around $963 billion this year; having leapt from $159.7 billion in 2004. Locally, according to World Wide Worx, e-commerce is expected to account for R4.2 billion, which is a fraction of overall retail sales.
While the overall sector is gaining at low single digit levels, World Wide Worx expects online trade to surge 25% in value this year; slightly down from 2012's 28%. The research company notes 2013 is the "year of the tornado" for e-commerce.
Yet, the same cannot be said for the overall market.
Dire figures
Statistics SA, which this week released retail trade sales for the month of June, notes retail sales grew a mere 1.9% in June. The figure is in real terms, which is based on constant 2012 prices and removes inflationary effects.
June's sales came after May's 6% gain, although this increase was unusual when compared with previous months, which show improvements of 2% in April, 2.7% in March, 3.9% in February and 2.2% in January.
Quarter-on-quarter, retail trade sales gained 3.3% to R158.16 billion, mainly driven by textile, clothing, footwear and leather goods sellers.
An Internet Economic Impact Study conducted by World Wide Worx shows the Internet economy should account for 2.5% of gross domestic product by 2016.
Bucking the trend
Arthur Goldstuck, MD of World Wide Worx, says online retail is immune from this trend because it represents people moving existing spending from offline to online, meaning they are not spending more, just spending more of it online.
The reality is that online trading will keep growing, regardless of the economic situation, comments Goldstuck. "The economy would have to collapse for online retail to decline in this decade."
While the rate of growth may slow, this must be seen in the context of the percentage gain coming off a high base, says Goldstuck. He notes virtual trade will keep gaining at a faster pace than brick-and-mortar outlets.
"I've been saying since the global financial crisis that we won't see the same impact in online retail as we do in general retail because of the continually rising curve of experienced users."
World Wide Worx notes there is an experience curve, of about five years, from when people initially log on to when they are ready to shop online. "As long as that curve rises - and will keep rising at least until the end of this decade - online retail spend will keep rising."
Happy campers
Goldstuck explains as people become more comfortable with the Internet, they allocate more of their existing spend to the online environment. "It is money they would have spent anyway; they are just spending it online."
Citymob.co.za co-founder Claude Hanan notes the defensive nature of online presents an opportunity for businesses and brands, especially in an environment of slowing retail sales. Established companies are seeing revenue gains, although Hanan says the trick is how much they are spending behind the scenes to lead to the growth.
"E-commerce in SA is quite a defensive industry at the moment. Even when broader macro trends point to muted consumer spending, the number of shoppers becoming online shoppers is growing faster than the decline in basket sizes as a result of falling disposable income."
Hanan adds that South Africa has 3% e-commerce penetration, or about 1.5 million people, which should double by 2016. He points out that 4.6 million people have been online for more than five years.
"The tailwinds in the industry are legitimate and we are benefiting massively from that and are hugely excited about the growth of e-commerce in SA over the next five years."
Echoing Goldstuck, Hanan says the reason for the growth is that the pool of shoppers has expanded and awareness is growing. He adds that the group-buying phenomenon - the impetus that led to Citymob's initial launch - has pushed people online.
Online shopping will become cemented over the next two to three years, notes Hanan. He says there is space for between 15 and 20 large entities online. "Everyone will rise with the tide... It's happening now."
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