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PayPal expects SA mobile spend to reach R12bn this year

As smartphones, cross-border commerce drive online sales.

JOHANNESBURG – Digital payments business, PayPal this week said it expects South Africans to spend more than R37 billion online in 2016 as a high penetration of smartphones and cross-border shopping drive online spending. Mobile phones and tablets are expected to account for nearly R12 billion of that – a 70% growth on 2015.

By 2017, mobile payments are expected to contribute more than R19 billion to online spend of R46 billion.

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Source: PayPal

Based on a recent Ipsos survey of more than 800 adult internet users, PayPal finds that 57% of them shopped online in the past 12 months. The majority shopped domestically only, while roughly a third shopped domestically and cross-border.

The USA, the UK and China attract most of South Africans’ offshore spend for reasons including better prices (China), as well as access to items not available in South Africa and greater product variety (USA and UK).

The estimated cross-border spend for 2015 is R9.5 billion, the bulk of which went to the USA, and the figure is expected to grow by 42.3% in 2016. Based on responses from 192 cross-border shoppers, the survey finds the following items to be the most popular.

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Source: PayPal

Among the most significant barriers to shopping cross-border are shipping costs, concerns that items aren’t delivered or are not in the expected condition when delivered, as well as worries around the security of personal and financial details.

PayPal recently introduced a refund and return service, where it covers the cost of up to 12 returns per year at a maximum of $30 per return for users of its payments service. “It costs PayPal less to cover the returns in terms of the increase in shopping volumes,” Efi Dahan, PayPal’s regional director for Africa and India, told Moneyweb.

“People who opt in to this service spend on average 30% more online,” Dahan said, noting that the service comes at no extra cost to PayPal users, who are refunded for their return costs after supplying PayPal with an invoice.

Businesses such as MallForAfrica, meanwhile, offer a shipment calculator that indicates what fees and duties you can expect to pay for online purchases.

“There are no more borders between online and offline,” Dahan added, pointing out that consumers may go into store and try a particular item of clothing on and then buy it online at a cheaper price or in a different colour.

Robyn Cooke, head of The Foschini Group’s (TFG) e-commerce, says the group has built a “fully omni-channel environment, meaning that the experience in store is mirrored online and has all the same benefits”. “Online sales are double the value of the in-store basket size,” she notes.

While TFG has not yet seen any cannibalisation of its store traffic, Cooke believes that its online presence attracts people who may shop online exclusively, while also making it easy for customers to shop the group’s entire set of brands in one go and ‘check out’ in one bag.

“We have noticed a bag size uplift, as well as an increase in customers cross-shopping all of our online brands, as TFG is the only retailer currently offering customers this option,” Cooke remarks. “A unique feature to TFG online, store account holders are able to shop online using their account cards and we’ve seen an increase in this. During the festive season 55% of online sales were made via store account cards.”

‘Black Friday’, held over the festive season, drove more than 350 000 unique visitor’s to TFG’s website. The group aims to have all 18 brands online by the end of 2018.

More than a quarter of the 4.9 billion transactions that PayPal processed in 2015 were done via a mobile device. The company boasted total payment volumes of $282 billion last year and revenue of $9.2 billion.

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