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E-commerce reaches 1.4% of South African retail in 2018

E-commerce in South Africa is due to pass the ZAR 14 billion mark in 2018, according to a study by World Wide Worx with the support of Visa and Platinum Seed. Online retail is projected to reach 1.4 percent of total retail, based on an estimated ZAR 1 trillion to be spent via traditional channels in 2018. The Online Retail in South Africa 2019 study says the 2018 figure represents 25 percent growth over 2017, beating the forecast for growth below 20 percent this year.

Growth accelerated in both 2017 and 2018, and only a small dip in the rate of growth can be expected in 2019 and 2020. E-commerce is expected to reach 2.0 percent of all retail sales by 2022, says the study. The forecasts by World Wide Worx for the next three years, from 2018 to 2020, show online retail sales more than doubling from 2016 to almost ZAR 20 billion, a year sooner than originally forecast.

The study says online retailers in South Africa still make up a small proportion of overall retail, but for the first time, there isthe promise of a broader range of businesses in terms of category, size, turnover and employee numbers. Seventy-five companies with an online retail store or market participated in a survey as part of the project. This survey yielded over 6,000 data points for analysis.

There has been rapid uptake of new shopping channels like mobile shopping and Instagram. Most established online retailers have enhanced their digital presence, and refined their fulfillment models, while many traditional retailers are starting to see significant growth in their online offerings. It is not unusual to see growth rates of between 25 percent and 50 percent reported by individual online retailers, with slightly more tempered expectations for 2019 and 2020.

The study says apparel remains the fastest growing sector in Online Retail in South Africa 2019, but is also the sector with the highest turnover of businesses. Apparel illustrates the perils of a low barrier to entry: the survival rate of online stores in this sector is probably directly proportionate to the ease of setting up an online clothing store.

A significant impediment to the growth of e-commerce in South Africa is the unwillingness of business to reinvest. Only one in five companies surveyed invested more than 20 percent of their online turnover back into their online store. Over half invested less than 10 percent back. This is despite a high 71 percent of all online retailers surveyed saying they are profitable.

The single most critical factor in the success of online retail activities, as reflected in this survey, is customer service. No less than 75 percent of respondents regarded it as highly significant, with another 23 percent seeing it as somewhat important, giving it a 98 percent importance rating.

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