Rosy future for SA online retail

South African online retail is turning into a healthy and attractive business as more consumers access broadband and become more comfortable with online shopping, internet research firm World Wide Worx reported on Monday.

By the end of this year, online spending on retail goods in the country is expected to have grown by more than 35%, compared with 33% growth a year ago.

The total spent on online retail goods in South Africa this year is expected to be R929-million, up from R688-million in 2006, according to a new World Wide Worx report titled Online Retail in South Africa 2007.

These figures exclude the sale of air tickets online, which continue to dwarf the numbers for online retail. The five South African airlines selling tickets online—, South African Airways, Mango, 1Time and Nationwide—between them accounted for R2,3-billion in e-commerce in 2006, almost four times the size of conventional online retail.
The figure is expected to rise above R3-billion in 2007, the report notes.

Online retail in South Africa has shown a dramatic turnaround after it appeared to be stagnating in 2005. “There are two major factors behind this growth,” says Arthur Goldstuck, MD of World Wide Worx. “The first is the rise of broadband, which by the end of next year will see more than a million users in South Africa.

“The second is a phenomenon called the experience curve, which shows that only once users have been online for around six years are they comfortable with the more challenging aspects of the internet, such as e-commerce. And the number of people who have been online for six years or more has finally reached the level where it is making a substantial impact in online retail.”

The number of online retail sites has also grown substantially, from 826 in 2005 to 1 014 this year. This growth has come despite 310 sites—more than one-third of those online at the end of 2005—closing down since then. However, no less than 498 new sites came online during this time.

The online retail market is dominated by 12 sites, which between them account for more than three-quarters of online retail sales in South Africa, according to the World Wide Worx report.

They are the three major digital malls—MWeb ShopZone, the eBucks Shop and Digital Mall; online grocers Pick ‘n Pay Home Shopping and Woolworths; book retailers and Exclusive Books; NetFlorist; wine retailer Cybercellar; electronics store Digital Planet; health and beauty store Ascot Direct; and auction site Bidorbuy.

“There have been many competitors to these dominant players,” says Goldstuck. “They tend to look at the numbers reported by a Pick ‘n Pay or NetFlorist, and imagine there is a big market ripe for the picking, not realising just how much infrastructure, development and market knowledge has contributed to those dominant positions. The result is that the biggest drop-off of online retailers occurs precisely where the biggest players are active.”

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