South Africa’s e-commerce market is expected to reach more than R400 billion by 2025, on the back of more than one billion transactions per annum.
This is according to FNB Merchant Services, which anticipates explosive growth in the local e-commerce market, amid the accelerated digital adoption over the past two years.
It states the e-commerce market is currently estimated at just under R200 billion per annum, up from R90 billion in 2019 and R142 billion in 2020.
While originally dominated by digital goods such as airline travel and accommodation, consumers later turned to the e-commerce sector for an array of goods and services, notes an FNB statement.
Thokozani Dlamini, FNB Merchant Services CEO, says: “Not all major retailers were prepared for the sudden change, but those that were successful were the ones who could adopt a fast, reliable logistical solution in meeting the delivery demand. Key challenges to overcome were consumer trust in the fulfilment of sales where physical products had to be delivered, and logistical solutions to meet spiking demand.
“Despite the accelerating trend, there is still time for retailers without a digital presence to make the shift, but a lot depends on the industry in which they operate and the nature of their client base.
“Large-ticket items such as household electronics and décor (televisions, dining room sets, kitchen equipment, living room sets) would likely still see consumers wanting the touch/feel/witness experience before committing to an expensive purchase. This highlights the urgent need for retail companies to focus on their omni-channel retail strategy.”
As the COVID-19 crisis continued, e-commerce became a natural extension of the consumer’s shopping experience. The online shopping habits picked up by consumers during the pandemic are expected to stay for the long-term.
FNB Merchant Services says before the COVID-19 pandemic, e-commerce accounted for 8% of total card payment spend in the retail space. By the end of 2021, e-commerce accounted for 14% of total card payment sales, with travel and accommodation accounting for only 11% of that, it states.
In addition, online spend doubled (102%) in 2020 and continued its surge in 2021 with another 39% in growth.
Dlamini points out the increasing competitiveness of smaller, independent retailers is the interesting result of the shift to e-commerce.
“Larger retailers have bargaining power and with that potentially significantly lower input costs than an SME going virtual, but even so, their digital costs are significantly higher since they need to maintain a unique digital offering while data security is paramount.”
According to Dlamini, larger retailers are compelled to have a brand-specific digital and shopping presence that requires extensive day-to-day management and maintenance, particularly in the security of payment and customer data.
Meanwhile, SMEs don’t necessarily have this data security problem as they can leverage off marketplace and payment gateway portals to manage their data and payment risk. SMEs can also specialise, finding niche offerings that counter the need to compete on price, he states.
“E-commerce has already exceeded our conservative estimates initially published at the peak of the pandemic, and it is clearly here to stay,” Dlamini concludes.
“Travel and accommodation are still lagging significantly behind pre-pandemic values and volumes as borders are tightly controlled and travel restrictions remain in place. Even so, we can expect e-commerce to continue its strong growth in the medium-term. Millennials and Gen-Z are evermore digitally entrenched and have little or no fear of online experiences, whether social or commercial.”
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