Kathy Gibson reports – In 2023, the online retail market was worth R71-billion, making up 6,15% of the total R1,1-trillion retail market.

“At the current rate, this means online retail will reach 10% of the total retail market by the end of 2025,” says Arthur Goldstuck, MD of World Wide Worx, presenting the latest Online Retail Survey results.

“This is a truly significant number,” he says. “We have seen that when that level was reached in mature markets like the US, it caused tremendous excitement, with companies driven to make greater investments.

“This resulted in a massive boost for the overall online retail landscape, which fed further growth.”

South Africa is currently experiencing massive changes in the online retail space with international players like Amazon and, to a lesser extent, Shein and Temu, entering an established market.

In terms of demographics, men still have greater access to online shopping than female shoppers in South Africa, by a small but significant factor.

Younger shoppers are still prevaltent, with those 25 to 34 years old being the biggest demographic (46,3%) followed by those 15 to 24 years old (36,6%).

Access to online shopping is always predicated by socio-economic level (SEL), with two-thirds of those in the top SEL shopping online. From SEL 2 to SEL 5, the numbers are pretty level, indicating that it is becoming a standard way of shopping.

The big difference in who is shopping online is in education, Goldstuck says. The biggest group is those with post-matric (54,2%), dropping to 35,2% for those with Grade 10 to 12, 31,1% for those with Grade 11 and 21,8% for those with lower than Grade 11.

For the first time, more than half of people shopping online are using their mobile phones (50,4%), followed by laptop (23,4%), desktop (11,1%) and tablet (7,4%).

The shift to mobile shopping has largely been driven by the big grocery retailers and their shopping apps, Goldstuck adds.

People are still buying mostly clothing (30%), but groceries has grown significantly, to 22,3%. Lagging behind are footware, electronic goods, children’s toys and games, medicines and gifts.

Online shopping attitudes are interesting, says Goldstuck, in that the most common attitude (28,5%) says respondent prefer instore than online experiences, and just 14,5% saying online shopping is more pleasant.

“This places a challenge on online retailers to make the shopping experience more enjoyable or pleasant, so people don’t get frustrated, which is often the case.”

A survey of 200 South African retailers revels that customer service is still the top factor driving online success (73,9%), well above stock availability (54,8%), wide range or quality of products (44,7%), competitive pricing (25,1%), personalisation of offers (21,1%), range of payment options (18,1%), and range of delivery options (9,1%).

The main technologies and strategies that retailers are using include using in-store payments (69,2%), delivery to townships (53,2%) and physical collection and return of goods (41,8%).

Significantly, online retail sites are highly profitable (46,7%) or somewhat profitable (30%). In addition, 18,3% say they are breaking even, 4,1% are making a small loss, and just 1% making a big loss.

In addition, the percentage of revenue derived from e-commerce shows that it is increasingly a high proportion of revenue.

Retailers are very optimistic about the future of e-commerce (63,2%) or optimistic (27,9%), with 7,5% saying they are neutral and just 1% pessimistic.

However, there is a variable landscape in this country, with the biggest retailers the most optimistic – 71,9% of them are optimist, compared to under 60% for smaller retailers.

The payment gateway is one of the keys to growth, with 51,7% of retailers being satisfied with their gateway, and 34,8% being very satisfied.

“The payment gateways have largely enable the e-commerce environment,” says Goldstuck.

All retailers use credit cards in their payment gateway, followed by EFT (96%) and then other methods including BNPL and e-wallets.

The trust factor is a big driver, at 91%, followed by security at 90,6%. The other factors are important, but not as significant as trust and security.

The survey asked why carts abandoned. The top reason is because a credit card was declined (52,2%), followed by a lack of trust (26,9%).

“This is a significant one: just over a quarter of respondents still don’t trust mainstream retailers with their credit card info. It is important that these retailers educate customers about the trustworthiness of their sites.”

Online retail has been growing steadily over the last 10 years, with a big spike seen in 2020 (66%) as a result of Covid. But growth since then has been high, at 39% in 2021, 31% in 2022 and 29% in 2023.

“The empowerment of small businesses through digital commerce holds significant promise for South Africa’s economy, enabling enterprise to tap into broader markets, improve their operational efficiency and contributed to economic growth and job creation,” says Gabriel Swanepoel, Mastercard country manager Southern Africa.

The entry of players like Amazon is expected to help grow the market, by enabling smaller retailers.