More online shopping sprees ahead for South Africans

Read time 3min 20sec
Vincent Hoogduijn, CEO of e-commerce at Media24, which owns Spree.
Vincent Hoogduijn, CEO of e-commerce at Media24, which owns Spree.

While online shopping currently makes up a small percentage of total retail sales in SA, local fashion e-commerce site Spree predicts it will grow to 4% by 2021.

This reflects a significant, growing market, as in 2016, research firm World Wide Worx said online retail in SA was just about to break the 1% of total retail sales mark, representing a figure of R9 billion.

Spree cites the rapidly decreasing barriers to entry, such as lack of access to the Internet and limited online payments methods, as the driving force for this increase.

"In mid-2017, total sales at Spree were up 88% year-on-year, sales on the shopping app more than doubled and daily transactions increased by 76%," says Vincent Hoogduijn, CEO of e-commerce at Media24, the company that owns Spree.

"If this growth continues and is mirrored by other players, we will see online retail gaining serious ground and growing market share measurably over the next couple of years."

In August last year, TFG (The Foschini Group) reported 40% year-on-year growth in its e-commerce division. It implemented several changes to its platform, including more payment and collection options, which it said resulted in the average order value going up by 17%.

Similarly, Mr Price reported its online sales had grown last year. During the third quarter of the financial year ending 31 March 2018 (October to December 2017), online sales were up 12.2%, with divisional growth in online sales in MRP Apparel, MRP Sport and MRP Home of 27.7%, 19.8% and 1.6% respectively.

However, World Wide Worx MD Arthur Goldstuck says Spree's prediction of online shopping market share growing from 1% to 4% in five years is highly optimistic.

"Overall retail grows at around 5% each year, which means if it was R900 billion in 2016, it will be over a trillion rand in 2012, which means 4% would be R40 billion for online shopping."

Goldstuck says this figure is very unlikely.

Tracking trends

Hoogduijn says South African shopping trends often follow those in the rest of the world.

"Globally, online retail currently stands at 11% of all retail sales, with China coming in well over 20% and large markets such as the UK and Germany standing at 18% and 11% respectively."

He says the increasing smartphone penetration in SA will contribute to online shopping growth. This is not only because it gives users easy access to the sites, but people become used to the digital mobile environment and are therefore more trusting of various digital payment options.

The personalisation of online shopping, thanks to advancements in machine learning, will also drive growth in the e-commerce industry, says Hoogduijn.

"Machine learning [is] building up a psychographic profile of every customer at a granular level and suggesting products accordingly... Essentially, machine learning serves customers looks they will love. Once shoppers get used to this feature, they'll quickly grow impatient with the shop-to-shop mall walk. This technology, along with improved online search functionality through voice (think Alexa), will extend beyond clothing and will help shoppers find the best possible skincare products as well as other items such as homeware, sportswear and even groceries."

Hoogduijn says delivery times and how deliveries are done will also evolve in the next two years. He believes at least some local deliveries will be handled by drones by 2021 and this faster delivery time will mean a large uptake in online shopping.

World Wide Worx is working on a new South African online shopping report, which will be published later this year.

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