SA e-commerce market still in baby shoes

According to research by World Wide Worx, even though online shipping started in South Africa in 1996, it is estimated to reach only 1% of total local retail sales in 2016, writes GARETH VAN ZYL.

Online shopping in South Africa was birthed in 1996, but e-commerce is only forecast to reach 1% of total local retail sales in 2016.

This is according to the managing director of research company World Wide Worx, Arthur Goldstuck, who was speaking at an event hosted by digital marketing initiative Heavy Chef in Johannesburg on Wednesday night.

Goldstuck said that local e-commerce sales are set to top R9bn in 2016.

This is expected to be 1.03% of total retail sales in the country in that year, a milestone for SA’s e-commerce space.

Goldstuck further said that online retail is expected to grow 26% year-on-year in 2015 to reach a market size of R7.5bn. The country’s total retail market size is forecast to be R807bn this year.

“For now things look great from a point of view of growth rate, but at the same time in terms of what it represents of the overall retail space, you have to understand that online retail is still in baby’s shoes,” Goldstuck told the audience.

Goldstuck noted that overall retail growth in SA has average around 7% per year, close to the global figure of 6%. However, he said that inflation eats into total retail sales and that the traditional brick and mortar market still has a stronghold over the online sales space.

And that’s the backdrop of the online retail scene, because online retail is always going to be a subset of traditional retail,” he said.

Nevertheless, growing local internet user numbers, which are forecast to surpass 18 million this year, along with smartphone usage topping 23.5 million in 2015 are among factors driving greater local e-commerce adoption.

Unpacking the country’s e-commerce figures further, Goldstuck said the total number of online shoppers in SA at the end of 2014 amounted to 3.225 million.

He added that 60.8% of those ready to e-shop are doing so. Meanwhile, online shoppers aged 25-34 make up the biggest percentage of e-buyers at 16.3% followed closely by those aged 35-44 (15.6%).

Goldstuck also said that males make up 14.5% of e-commerce purchases in SA and females 13.1%. Couples that are married or living together are 13.2% of the local online buying population while those who are divorced or separate are the biggest segment of e-buyers at 18.9%.

Among the biggest categories of online purchases by adults are music and videos (3.6%), business purchases (3.6%), gifts (2.8%), clothing (2.6%) and software (2.4%).

Concluding his talk, Goldstuck said there are three essential rules that e-tailers in SA and the rest of Africa need to consider.

Number one, the segmentation is more important online than offline,” said Goldstuck.

“It’s more important online because every user has a different motive and different fear when they go online,” he said, highlighting that fears still exist regarding the security of shopping on the internet.

The other two key points are that conversion is key.

“So, you have 5.2 million people that are ready to shop but only 3.2 million are actually shopping.

And the third one, finally, confidence is actually the currency of online retail. And if you don’t instill confidence in your shopper, you’re actually undermining a key value of your own currency,” said Goldstuck.

Fin24

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http://www.fin24.com/Tech/News/SA-e-commerce-market-still-in-baby-shoes-20150507