Online still accounts for just 1% of total SA retail

The South African ecommerce space is growing seriously fast — more than 26% in 2015 alone — but it still accounts for just one percent of the country’s total retail spend.

That’s according to the latest Online Retail in South Africa 2016 report, released on Wednesday by World Wide Worx.

According to the report, ecommerce has maintained a higher than 20% growth since the turn of the century and in 2015 was worth R7.5-billion. While the rate of growth is expected to slow down a little in 2016, the report says that growth in Rand terms is expected to remain the same as in 2015, taking the total to above R9-billion.

When looking at that figure, it’s also worth bearing in mind that World Wide Worx is referring only to online retail, which only makes up a small portion of the R37-billion South Africans PayPal expects South Africans to spend in 2016.

“While one percent represents a very small proportion of overall retail, it is also a psychological barrier for investment in ecommerce initiatives by physical retailers,” says Arthur Goldstuck, managing director of World Wide Worx and principal analyst for the online retail survey.

“The number,” he says, “also masks the extent to which a number of major retailers have exceeded the one percent online mark by a substantial margin, compared to the vast majority that are not yet close to this mark, if they have an ecommerce presence at all.”

Read more: Is mobile driving a South African ecommerce explosion?

While many characterise ecommerce in South Africa as being underdeveloped — the German ecommerce market is worth US$74-billion versus US$500-million for South Africa — Goldstuck says that we shouldn’t underestimate how healthy its growth rate is.

It’s worth noting however that much of this growth is a result of an increase in the number of experienced internet users in South Africa who are ready to transact online, rather than the retailers themselves getting it right and convincing shoppers to spend more online.

Forecasts by World Wide Worx for the next five years, from 2016 to 2020, show online retail sales almost exactly doubling over this period.

While this may seem significant, the research firm says enthusiasm should be tempered by the awareness that the range of business models employed by South African online retailers is still somewhat conventional. This suggests that South African ecommerce has not attained the sophistication of major Western markets, where every category of product is characterised by a wide range of business models.

Read more: Sorry ecommerce evangelists, people still prefer real stores

The report includes data from the Target Group Index (TGI) survey conducted by Ask Afrika, the largest market research organisation in Africa. World Wide Worx collaborates with Ask Afrika in the structuring of ecommerce, digital and electronics components of TGI, which comprises 15 000 interviews across a vast range of consumer topics and behaviours.

According to this data, the total number of online shoppers in SA at the beginning of 2015 was 3.225-million. This represents 60.8% of the internet user base that World Wide Worx has established is ready to shop online. The balance comprises those who have the propensity to shop online but have not yet been persuaded by online retailers to convert this propensity into actual shopping activity.

“In other words,” says Goldstuck, the online retailers have not yet found the full range of triggers needed to convert propensity for behaviour into actual behaviour”.

He points out that the trigger is to “provide what we call an Undeniable Value Proposition, which is an elaborate way of saying that they need to make the online purchase decision a ‘no-brainer’.

“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.”