The number of South African retail websites has exploded to more than 700 at the end of last year from 215 at the end of 2001, defying a slow-down in growth of online retail sales, according to a survey by World Wide Worx.
However, according to “The Goldstuck Report: Online Retail in South Africa 2004”, the market is dominated by the top eight online retailers, who between them account for about 80% of all online retail sales in the country.
The dominant players are Pick ‘n Pay Home Shopping, Kalahari.net, Woolworths’ Inthebag, Netflorist, Cybercellar and Streetcar.com. The M-Web ShopZone dominated the market in online shopping malls, followed by Digital Mall. Growth for these players is steady, but not as strong as in past years, when an annual doubling of turnover could be expected.
The survey found that online sales by retailers (which exclude property, cars and travel) increased by 35% in 2003 and are expected to grow by 25% in 2004. A total of R341-million in online retail sales was achieved in 2003 — a mere 0,14% of the overall retail market in South Africa.
Of this, around R66-million in sales, or 20% of online retail, was recorded over the November-December holiday shopping season. This suggests that the holiday season is still important for online retailers, but far less so than for traditional retail.
“If online retailers have a bad year, they can’t rely on December to save them,” Goldstuck said. “With costs of online retail high and margins tight, they have to be on their toes around the clock as well as around the year.”
Among other key findings of the research are that the most commonly purchased items are groceries, apparel and books, that the single fastest growing retail category by number of sites is flowers and gifts, followed by apparel and then food, beverages and groceries.
The research found that most of these sites are an extension of an existing physical retail operation, although several of the largest are online only and that 2003 saw the first slowdown in rand growth of online retail sales.
The total grew by R89-million in 2003, from R90-million in 2002, while the rand growth figure is expected to decline even further in 2004 and 2005.
“The single biggest obstacle to growth identified by all the executives we interviewed was access to higher and cheaper bandwidth. Unless the telecommunications authorities deregulate the market more effectively, online retail in South Africa will stagnate,” Goldstuck said. – I-Net Bridge