Bigger spike in SA online retail amid Covid-induced ‘explosion’ in home deliveries

While 2020 will go down as a year when Covid-19 wreaked havoc on financial markets and hit the broader retail sector badly in the wake of lockdowns and restrictions to trade, it will also be noted for the massive growth in online retail both for pure-play e-commerce players and traditional retailers aggressively expanding online offerings.

In South Africa online retail sales topped R30 billion in 2020, following a 66% annual spike on the back of a Covid-19-induced explosion in home deliveries.

This is revealed in a new research study published on Wednesday by World Wide Worx.

The report, titled Online Retail in South Africa 2021, is backed by Mastercard, Standard Bank and Platinum Seed.

Big numbers

Arthur Goldstuck, MD of World Wide Worx and principal analyst on the research project, says the total online sales figure of around R30.2 billion locally last year is more than double that of 2018 (R14.1 billion).

“It is also 50% higher than the total forecast for 2020 three years ago, when online retail in South Africa was expected to reach R20 billion by 2020,” he says.

The boom in online sales has been well reported with pure-play e-commerce players like Naspers-owned Takealot.com not the only ones benefiting.

Most JSE-listed traditional retailers – including Shoprite Group, Woolworths, Pick n Pay, Massmart, and clothing giants like Mr Price and TFG – have highlighted record high double-digit growth in online sales, in line with the overall growth figure mentioned in World Wide Worx’s latest report.

Some of these retailers have reported even higher online sales growth as this comes off a low base.

Home deliveries of groceries in particular has boomed, with Shoprite’s Checkers retail chain leading the pack with its highly successful Checkers Sixty60 on demand delivery app. Pick n Pay has also innovated with its acquisition of the Bottles service, while Woolworths has upped its game both with its own online offering and the launch of its Woolies Dash on demand delivery service.

‘Dramatic’

According to World Wide Worx, the R30.2 billion online sales figure “comes into the most dramatic context” when it is compared to traditional retail.

“In 2018, the R14.1 billion in online retail represented 1.4% of total retail, estimated at the time at R1.07 trillion. Online had outpaced traditional retail growth throughout the past 20 years, since it came off a low base, but traditional retail still grew every year until 2019,” it notes.

However, in 2020, traditional retail slumped as a result of lockdown as well as economic stress, the report further points out.

“According to preliminary data from Stats SA, total retail fell by 4.2%, to R1.05 trillion at current prices. The percentage of retail made up by online retail sales came to 2.8% – exactly double the percentage for 2018,” says World Wide Worx.

Goldstuck, however, explains that while equivalent growth in online retail cannot be expected for 2021, it can be “stated fairly confidently” that it will exceed the 30% growth of 2019.

Back in 2019, he says, online retail expansion “was organic and a factor of the evolution of shopping habits and retail strategies”.

“Those factors remain in place, along with the massive boost given to both areas of evolution since the pandemic began … This means we can expect to see total online retail sales of around R42 billion in 2021, taking the online percentage of total retail to around 4%, assuming traditional retail returns to its previous growth path,” he adds.

The signs were there …

World Wide Worx says its findings are not a surprise.

“Already in November 2020, Mastercard released the findings of a survey of 1 000 South African consumers, which found that 68% of respondents were shopping more online since the onset of the pandemic,” it notes.

The categories experiencing the highest growth, aside from data and airtime top-up, were clothing, at 56%, and groceries, at 54%.

More than two-thirds – 68% – of these consumers said they used the time during the pandemic as a positive learning experience, while the demand for online entertainment also surged, with 52% of respondents saying they have spent more money on virtual experiences than they did before the pandemic.

The majority had participated in video calls for work or leisure (88%), three quarters (75%) had watched TV or films through an online subscription service, and nearly half (47%) had taken part in a virtual cooking class.

“This trend appears to be here to stay as 71% of respondents say they will continue to shop online post-pandemic,” says Suzanne Morel, country manager at Mastercard South Africa.

Listen to Nompu Siziba’s interview with Arthur Goldstuck (or read the transcript here):