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Growth of ecommerce in SA still exceptionally high

Local ecommerce has not attained the sophistication of major Western markets -Arthur Goldstuck.

Online retail in South Africa will reach 1% of overall retail during the course of 2016.

This is according to the Online Retail in South Africa 2016 report, released earlier this year by technology consultancy World Wide Worx. Notably, the report indicated that online retail continues to grow at a rapid rate in South Africa, having maintained a growth rate of above 20% since the turn of the century. In 2015, the rate of growth was 26%, taking online retail to the R7.5 billion mark.

Although the rate is expected to drop off slightly in 2016 to 20%, growth in rand terms is expected to remain the same as in 2015 – taking the total to over R9 billion.

Moneyweb asked Arthur Goldstuck, MD of World Wide Worx, what these numbers mean for local e-commerce players.

 

Q: South Africa recently passed the 1% mark in terms of the e-commerce share of total retail. How significant is this milestone?

AG: It’s a psychological barrier more than a marker of success. Being a mere 1% means it remains insignificant in the overall retail landscape, but highly significant for those businesses that make the biggest contribution to the number. In other words, a few significant performances make the greatest contribution to the overall number, and those organisations responsible will have seen a significant contribution to their own numbers.

 

Q: How does this growth compare with e-commerce adoption in the UK and the US?

The growth rate in South Africa is still exceptionally high, coming off a very low base, whereas it has slowed down in major markets. However, one cannot compare SA with those markets, as they tend to have a far higher proportion of retail happening online. The US will pass the 10% mark at the same time as SA is passing the 1% mark – in a far bigger market….

 

Q: What are the major challenges facing SA e-commerce players as they look to expand?

AG: The range of business models used by South African online retailers is still somewhat conventional. This suggests that local ecommerce has not attained the sophistication of major Western markets, where every category of product is characterised by a wide range of business models.

Q: Are there any unique opportunities emerging for local e-commerce startups, as well as established brands?

South African ecommerce is relatively conventional and has not see the level of innovation brought to bear on most product categories in major Western markets. Along with limited activity in other areas, this indicates that there is tremendous potential in this market for new business models and even underexposed product categories.

 

Q: How important is mobile for the SA market? How does this compare with the role of mobile in other African markets?

AG: Mobile is still a non-starter for mobile commerce, outside of airtime and ticket purchases. In the rest of Africa, it is very significant for money transfers and airtime top-ups, but not for e-commerce purchases.

 

Q: Are we seeing the adoption of e-commerce in other African markets?

AG: Only three markets in Africa are seeing significant e-commerce take-up, namely Egypt, Nigeria and Kenya. However, each market faces major infrastructure challenges, which makes SA appear to be an easy market. As much as South Africa’s courier and delivery set-up is slow and expensive, it is far more advanced than in any of these countries.

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