e-Tailers & Legacy Chains Are Vying To Advance e-Commerce In South Africa

The South African e-commerce industry is on track to achieve “developed market penetration levels” by the next couple of years, estimates Rand Merchant Bank, one of the country’s prominent corporate and investment banks and part of one of the largest financial services groups in Africa.

E-commerce showed increasing customer acceptance during COVID-19, leading to a “step change in demand for online shopping, which we expect to continue for the foreseeable future,” according to Arun Varughese, head of technology, media, and telecoms at RMB. “By next year, we expect 31.6 million South Africans to shop online,” he shared

South Africans spent ZAR 59 B (~USD 3.1 B) online in 2022; by 2025, they’re projected to spend up to ZAR 225 B (~USD 12 B), a 300 percent rise. “Checkers Sixty60 has benefited from changes to how South Africans shop. Their sales growth continues with 86.8 percent increase in the first half (ended January 2023) on top of more than 250 percent growth in the prior year, and remained the top South African grocery app with 3.1 million downloads,” Varughese emphasised.

Similar to other retailers, Woolworths reported a 22.4 percent growth in online sales over the previous year, largely due to significant increases in its online sales of clothing, cosmetics, furnishings, and food. By providing grocery delivery services via Takealot’s Mr D app, Pick n Pay is growing its current asap! app and scheduled service, while also establishing an online presence, reports local tech publication TechCentral.

Spar2U, the on-demand grocery app platform that the retail chain Spar also introduced, is expanding its availability and anticipates expanding its provision to more places in the upcoming months.

Because cash is still so prevalent in South Africa and the rest of the continent, Varughese continued by saying that the move from cash to digital payments will give online development another boost. The digital trend is anticipated to continue significantly into the near future, he said, with the growth of cheaper connectivity for South Africans in the form of internet services and access to cheaper smartphones. with South Africa, 62 percent of all transactions still take place with cash. This is in contrast to developed markets like the UK (35%), and Germany (47 percent).

“Across Africa, there is a lot of runway for development of the digital landscape. Smartphone penetration is expected to rise from 44 percent to 65 percent; mobile internet users are expected to increase from 272 million to 475 million, while Sim connections are expected to rise from 815 million to 1.05 billion by 2025,” Varugehese added.

The rise in “buy now, pay later” (BNPL) transactions, according to Varughese, is also changing e-commerce in South Africa. Customers can buy goods and services using the alternative payment method known as BNPL without having to pay the entire purchase price upfront. BNPL has surpassed conventional credit cards in popularity among millennials thanks to its straightforward offering and absence of interest.

Payflex, Payjustnow, and TymeBank are among BNPL providers in South Africa that offer payment intervals of between two weeks to one month. These providers have reported encouraging growth in their customer bases.  

“For online retailers, BNPL has the benefit of driving greater sales volumes, increasing the number of potential customers, and offers an alternative way to access finance as well as removing a major hurdle to larger, more expensive purchases,” Varughese said.