Covid-19 lockdown regulations, coupled with store closures, have resulted in many consumers turning to online shopping for essential products and services – and a surge in both online spending and number of online retail merchants. The biggest beneficiaries, according to sales statistics from FNB Mechants, have been the education sector, which saw online sales grow a massive 320%, and Electronic, Electrical and Computer, which more than doubled, at 126%.
Overall average online retail spend recorded on FNB Merchant devices grew 30% during the 1st half of 2020 compared to the same period in 2019. The active ecommerce merchant base increased by 15% in this period.
These growth values exclude travel and accommodation-related spend, which is usually a significant contributor to overall ecommerce spend.
Thokozani Dlamini, CEO of FNB Merchant Services, says the impact is not only on shopping behaviour, but the manner in which consumers opt to pay for goods and services. For example, when considering franchise food delivery services, very few consumers physically pay via cash or card; most of the payments are carried out digitally.
“For those consumers that still go into brick and mortar stores for groceries and other essentials, we have seen a significant growth in the use of contactless card payments,” says Dlamini.
Sector performance in eCommerce between January and June 2020 on FNB Merchant Services, compared to 2019.
| Industry | |
| Transportation & Related Services | -44% |
| Lodging/Accommodations/Travel arrangements | -51% |
| Retail | 16% |
| Marketing/Subscriptions | 49% |
| Educational Services | 320% |
| Electronic, Electrical and Computer | 126% |
| Outdoor/Recreational | 54% |
| Home and Office Furnishing | 77% |
| Restaurants, Bars, Fast food & Related | 32% |
| Grocery shops, Supermarkets, Butcheries, Bakeries & Related | 79% |
Demand has been largely driven by educational services on the back of home-schooling and distance-learning requirements. This was further supported by an increase in demand for computing equipment and home/office furnishing to facilitate the distance-learning drive and work-from-home initiatives that many individuals and companies adopted.
An increase in the need for gaming and related entertainment (PlayStation, Xbox etc) had to be satisfied as outdoor hobbies were restricted.
Says Dlamini.: “From a Rand value perspective, when compared to the average Q1 values (Jan to Mar), the lockdown period resulted in eCommerce spend decline of -21% in April 2020, while level 4 saw recovery to 10% compared to the average Q1 values. Level 3 of the lockdown has seen further recovery to 12% compared to the average Q1 values.
“Behaviour will and has certainly changed quite rapidly on the back of Covid-19. Transaction volumes have increased at a much faster rate than value, indicating a lot of smaller purchases are being made. Many customers who had reservations about shopping online are beginning to realise that the ease and efficiency outweighs trekking to shops and malls.”
Journey towards online shopping to accelerate
Meanwhile, new Consumer Pulse research from GfK South Africa indicates that consumers look set to accelerate their journey towards online shopping beyond the pandemic as they stay in to enjoy the investments they have made in their homes during the lockdown.
The survey reveals that consumers are preparing themselves for a prolonged period of cocooning, with 59 percent of consumers expecting the pandemic to last more than another 12 months, and 34 percent predicting that it will continue for another 18 months or more. Only 2 percent reported that they have booked a holiday for the summer and 71 percent agreed that they will travel closer to home in the future.
This reality is catalysing changes in consumer behaviour that are likely to outlast the pandemic. Some 30 percent of consumers reported that they had made an online purchase in the week preceding the survey, up from 19 percent in the Level 5 lockdown. Meanwhile, 26 percent said they would definitely increase their usage of home delivery even after the pandemic.
Some 16 percent agreed that they would definitely try to avoid the malls and shops and almost half (48%) said working from home would definitely continue to be a reality for many companies after COVID-19. These figures reflect consumers’ growing fears about the virus as infection numbers soar – 70 percent said that they are “extremely worried” about the coronavirus in lockdown level 3, up from 66 percent in lockdown level 4.
“The pandemic and the national lockdown have forced South Africans to change how they connect with the things they care about and how they experience life,” says Rachel Thompson, insights director at GfK South Africa. “Consumers are seemingly ready to stay in beyond the end of the pandemic to enjoy the investments they have made in DIY, home appliances, and consumer electronics for home entertainment.”
The research shows that consumer preference for online shopping has grown dramatically in most product categories during the lockdown; across product segments an even higher proportion of consumers said that online shopping would be their post-COVID channel of choice. The survey results indicate that growth in adoption of online shopping in groceries, consumer electronics, DIY, and mobile phones will be robust post-pandemic. A significant portion of consumers who claimed they used online as their preferred channel for fashion and IT shopping during the pandemic said they would go back to traditional channels after COVID-19, but not enough to bring this number down to pre-COVID levels.
What do cosnumers want from online?
When it comes to shipping and delivery options, consumers want them to be free, fast, and flexible. Two thirds (66%) said they expect free delivery, 64 percent demanded fast delivery, and 55 percent wanted click-and-collect options. Hygiene was also on their minds, with 56 percent insisting delivery staff must wear masks and 52 percent saying staff must not touch products with their bare hands.
Even as they move towards digital channels, South Africa’s online consumers are still looking for human contact. More than half (52%) expect to be able to speak to a person on the phone for support, 44 percent expect to speak to someone via video chat and 35 percent expect home installation. Most (65%) are also seeking reassurance about the security of their personal information when using a mobile payment app.
“With 44 percent of consumers reporting that they will decrease spending after the pandemic, leading brands are thinking about how they can position themselves for growth in a difficult market,” says Thompson. “The key to succeeding with online shopping at a time that people are feeling vulnerable is to offer wraparound value and to build and reinforce trust through a more human brand experience. Established retail brands have an advantage since consumers find it easier to shop online with brands they already know and trust in uncertain times.”
According to Thompson, some of the steps that brands can take to provide reassurance to consumers as they transition from offline to online include:
- Making the product tangible through virtual product tours, virtual shopping, unboxing videos and other techniques where human touch is visible.
- Using testimonials and peer reviews to build confidence in the brand.
- Offering transparency on product availability.
- Letting consumers choose the payment app or brand they trust to pay.
- Ensuring there is no friction or extra cost involved in order collections and deliveries.
- Communicating hygiene measures to consumers and enforcing them with logistics partners.