E-commerce sales in SA grow 20-35% annually

While a Durban based online store grows by 300% year-on-year.
Ecommerce sales in South Africa are increasing, although lagging compared with the rest of the world. Image: Andrey Rudakov, Bloomberg

It is no secret that e-commerce is giving brick-and-mortar a run for its money, and every year the numbers keep increasing.

According to global market researcher, Statista, an estimated 1.8 billion people worldwide purchased goods online in 2018. During the same year, global e-retail sales amounted to $2.8 trillion, with projected growth of up to $4.8 trillion by 2021.  

In South Africa, the market for online retail reached approximately R10 billion in 2017,  according to an Online Retailing in South Africa: Review by the Industrial Development Think Tank (IDTT). 

However, it says that with the size of general retail trade estimated to be R 1 trillion in 2017, this still only amounts to 1% of the total retail market.

This basically means that even though there has been an increase in online store, South Africa is stilling lagging worldwide, because in countries such as the UK, online sales account for 18% of sales.  

This, however, does not dispute the fact that online retail has been growing at a pace that far surpasses traditional retail.

The data reveals that the growth of online retail in South Africa to be between 20-35%, based on the graph below.

Online store performance graph in SA. Graph: Euromonitor (2018).

E-commerce value chain

The whole process of purchasing online until the product reaches the consumer’s hands is a value chain of online retailers inputs such as marketing and customer, analytics, provision of the technical platform, supply of sales stock, inventory management, payment systems warehousing and logistics. Every one of these functions can be provided inhouse or outsourced.

One of the stores that have been able to optimise the full potential of e-commerce is Planet54.com.

Planet54.com, a Durban based virtual shopping mall of The Word Focus Group (TWFG) which was launched in 2016 has grown by 300% year-on-year. The online store offers 10 000 product types from clothing, footwear, fashion accessories and technical products.

Opening doors

Image: Supplied.

Now the locally online retailer is offering entrepreneurs the opportunity to sell their products on its site through their Planet54 E-Retailer Entrepreneurship Programme.

“Planet54’s vertical business model, which includes local manufacturing, quality imports, local warehousing and in-house distribution, allows us to keep our pricing on high-quality merchandise competitively low, allowing reseller enterprises the flexibility to add a lucrative mark-up and create sustainable small businesses for themselves,” says MI Jeewa, Planet54 managing director.

The retailer says it has been able to increase its sales because it does not have restrictions on quantities and allow shoppers the liberty to shop according to their budget and style.

It attributes its success to offering its consumers’ affordable pricing coupled with an efficient distribution that has unlocked the door to hundreds of new smaller enterprises.

“The products you see online are all available in our warehouses and we can deliver anywhere in the country within an average of three to five days,” says Jeewa.

Shahil Maharaj  Planet54 Director, says the program mainly targets bulk buyers, offering them incentive discounts and business support.

“Customers who regularly spend R5000 or more in a single purchase may apply to participate in the Planet54 E-Retailer Entrepreneurship Program and following a basic vetting process, may be recognised as an official Planet54 e-retailer”.

He adds it has 300 recognised e-retailers including buyers from South Africa, Namibia and Botswana.

“We remain in constant contact with these small business owners and are extremely encouraged by reports of up to 100 % growth in their turnover, month-on-month,” said Planet54 Director,” Maharaj says.

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COMMENTS   13

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Do we have a property fund (in SA) purely focusing on Warehousing rental income only?

Perhaps high time for that? Like what selected PGM metal or Gold funds are to the “Resources” sector?

Property fund? I think more likely this should be under logistics/ supply chain or even retail.

e-commerce has huge problems in SA: a hopelessly corrupt and useless Post Office, which forces you to depend on expensive couriers. This increases the price of relatively low cost online purchases tremendously. You buy an item for R200, but then have to pay R60 for delivery, which makes it much more expensive.

Also there are some apparently mainstream online malls who simply don’t deliver and are outright scams. I’ve ordered stuff online which didn’t arrive, and their so-called help desk doesn’t respond.

Sorry Incitatus no disrespect but I honestly think you are not thinking this through. Online businesses do not need the Post Office. Takealot for example uses MrD for their deliveries which is owned by the same parent company. They also offer free delivery for purchases over R450 so you can just bulk together your purchases to get over this threshold. If you look at Amazon in the US, they tend to use their own in house courier as well.

I order almost 100% online, havent been into a mall in months and have never had a single order go missing if i stick with the local online stores. Same thing goes for when ive ordered from Amazon in the US. Plus the item is cheaper online thank in store almost every time i order something.

I hate to say it but the online revolution is coming whether we like it or not.

“They offer free delivery for purchases over R450”, vs: “This increases the price of relatively low cost online purchases tremendously.” The latter being my point. If I buy anything for less than R450, I have to pay couriers to deliver it, making online purchases expensive because the courier fees are a significant part of the total cost eventually.

I hear you on your point of “This increases the price of relatively low cost online purchases tremendously.” However, I did say “you can just bulk together your purchases to get over this threshold”. Obviously if i need something small urgently i just go to the shops and get it but this certainly doesn’t stop me from doing the majority of my shopping online. Also you can pay R25 to collect from a collection point as opposed to paying delivery fee and i have a collection point literally on my way home.

Now I’m actually not disagreeing with you when you say “e-commerce has huge problems in SA” but i just think there are solutions to these problems. Again I say, you might not be a believer but doesn’t mean it isnt happening.

Oh and on a further point you made lower down with a link on an article that Amazon stopped shipping to SA, maybe you shouldn’t quote an article from 2008, a lot can change in 11 years, I ordered something from Amazon yesterday to be shipped to SA.

Honestly where in the world do people still want their deliveries to come via the Post Office? Amazon is going the drones route.

Honestly. Do you not read the news? Amazon stopped shipping to SA for this very reason, the incompetence of the SAPO. Furthermore, drone deliveries will only ever work for small, lightweight deliveries. That bicycle you buy online, is still going to come via truck.

https://www.moneyweb.co.za/archive/amazon-halts-shipping-to-south-africa/

Drone delivery is not viable in SA, also CAASA and municipal restrictions are prohibitive. We have numerous little men on scooters to do this, quicker, cheaper and covering greater delivery areas.

The setups like MrD, UberEats, Pargo and similar like supermarkets are competing in the “40 to 60 minutes” delivery times in specific urban areas. Not only for foods, but also whatever supermarket chains stock.

It’s always worth looking for reviews of the supplier. I’ve never had an outright non-delivery, but some “local” sites import to order and the indicated delivery times are hopelessly optimistic.

Absolutely. There are apparently e-commerce sites which appear high up on Google searches which are outright scams.

Planet54 have really bad reviews on Google, maybe they should pull up their socks and get with the program.

End of comments.

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