While South Africa’s e-commerce sector is expected to show year-on-year growth over the Black Friday weekend, local retailers are worried that international e-tailers, such as Temu and Shein, will take a large chunk of their sales.
This is one of the key findings of a study conducted by the Bureau of Market Research (BMR), on behalf of fintech group Capital Connect.
The research used a time-series econometric model populated with macro-economic, monthly retail and big data covering the period 2015 to 2024. It also included a survey conducted among local retail executives.
It found that consumer interest in Black Friday (29 November) looks to be higher in 2024 than any of the past three years (2021 to 2023), with the retail industry predicted to generate R22.08 billion in direct revenue as a result of Black Friday weekend sales this year.
The indirect economic impact sales value of the suppliers of retailers is expected to reach R28 billion during the period.
This boost is expected to help drive total retail sales for the month of November 2024 to approximately R136 billion, up 17.3% from the R116.1 billion recorded in November 2023.
According to the report, the local e-commerce sector is expected to contribute around 6% (R1.3 billion) towards the direct revenue (R22.08 billion), with the retailers’ online presence forecast to be a strong facilitator of Black Friday sales.
However, the study highlights that local retailers still face a host of challenges that will negatively impact both in-store and online sales in SA. These include constrained disposable incomes and high levels of financial vulnerability among consumers in SA; high inflation and interest rates; and the rise of international e-commerce providers.
Speaking yesterday during the research results announcement, in Johannesburg, Dr Requier Wait, chief researcher at BMR, said: “Online-only retailers have really been hurt by competition from the international retailers, such as Shein, Temu and Amazon.
“However, online sales will only entail 6% of the total retail sales, so there is still the rest of the omni-channel, which most consumers will focus on. The South African Revenue Service’s recent tariff changes to the import duty regime will likely also have an impact on consumers’ purchases; however, that will take some time to show.”
Total retail sales (in-store and online) during the entire 2024 is forecast to reach R1.45 trillion, a 5.7% improvement in nominal terms, on total retail sales of R1.37 trillion during 2023, notes the study.
According to the report, local retailers also face operational challenges and supply chain disruptions (including poor infrastructure and logistical challenges, such as delays, and increased costs associated with shipping and inventory management), rapidly-changing consumer preferences and energy insecurity.
“Amid the intensified national and international competition, the innovators will be able to grab the biggest market shares during the Black Friday period,” notes the research.
The low-cost multinational e-commerce apps − Temu, Shein,Sunsky and Wish, among others − have taken SA by storm, aiming to saturate the market with products at a fraction of the price on competitors’ sites and free international delivery.
ITWeb previously reported on the frustration felt by local retailers, which accused the global online sites of offering unreasonably cheap prices, with some saying their sales have declined by almost 30% from the beginning of the year, when Temu made its debut in SA.
The Institute of Chartered Entrepreneurs and SA’s biggest e-tailer Takealot have been among those calling for government regulatory intervention to create a fair playing field that supports the country’s localisation efforts and safeguards the sustainability of local manufacturing industries.
In an interview with ITWeb, a Temu spokesperson confirmed the e-tailer has big plans for SA’s Black Friday. “Temu recently added a dedicated sectionto the website, making it easier for shoppers to discover deals and offers.
“South African shoppers have the opportunity to enjoy discounts of up to 90% across various categories, including popular products curated specifically for the Black Friday season. Offers span multiple categories, catering to all shoppers, from electronics to home goods.”
Shein did not respond to ITWeb’s questions by the time of publication.
According to the Capital Connect survey, online shopping is growing rapidly in SA, driven by increased internet penetration, widespread use of smartphones, improved payment options and competitive retail strategies.
Many retailers are already implementing strategies to optimise sales, it says. These include having a strong online presence, adding a “click-and-collect” offering as part of an omni-channel, and introducing ‘shoppertainment’ for better in-store customer experiences.
Steven Heilbron, CEO of Capital Connect, tells ITWeb: “E-commerce/online shopping should not be viewed in isolation, but within the omni-channel context, where sales can occur through in-store, online and hybrid channels.
“Overall, the total direct retail sales gains, across all channels, are estimated to be approximately R22.08 billion. Based on industry estimates, ‘online only’ sales account for approximately 6% of retail sales. About 43% of retail sales value accrues from hybrid shopping, while about 51% of retail sales value accrues to physical shopping.”
Heilbron points out that across all shopping channels, five categories will stand out in terms of the products consumers will focus on: groceries, clothing, footwear and accessories, electronics and hardware.
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