Feeling the growing pains: a picture of eCommerce in South Africa
Updated: Mar 21, 2020
For a while now, the South African economy has been taking a battering. Last year alone, we saw our GDP shrink by an annualized 1.4% in the last quarter. This, coupled with power cuts and inflation exceeding average salary increases, has really battered small-to-medium sized businesses (SMEs). This is neither a state of investor optimism, nor a climate of business confidence.
Yet, despite their fair share of economic (and political) hardships; South African businesses are able to consistently show resilience to the most adverse of conditions. They have adapted to hard times, and in this blog post I shed light on the ways I see the South African retail market continue to adapt, and invest in its intellectual resources to overcome the slump it’s currently facing.
Now, it’s not all doom and gloom: despite these adverse business conditions, the eCommerce landscape in South Africa has grown...and I don’t mean resilience in a turbulent market. I mean aggressive and consistent growth.
Last year, the eCommerce market in South Africa grew by 13.65%; far outpacing prior expectations. It’s expected to show a further revenue growth of 12.2% in 2021, with food and personal care products in particular leading growth up to 2024. In monetary terms, the South African eCommerce market generated R58 trillion in 2020; with roughly R4.5 trillion of that being Food and Personal Care products.
These statistics are testament to how important it is for businesses in South Africa to not only adapt to the economic difficulties, but also to a rapidly transforming marketplace. It shows the need for investment in the digitisation of their brands in order to capitalise on the current growth the market is experiencing. This highlights the need to partner with an eCommerce platform that understands the market, its direction and most importantly how to deliver on the needs of SMEs within such a context.
There should be a conscious effort by South African businesses to connect to the domestic eCommerce market, unlocking new revenue streams and providing them with fresh opportunities.
That being said, SMEs need to know what to look for in a good digital enablement partner. This relationship will dictate the success of their digital journey, as well as the financial sustainability of their brand in the long run. This calls for digital partners with both scale and skills that can ensure the preservation of the unique brand identity that has been grown and cultivated for years. There is a fine balance between maintaining the direct relationship customers have come to know, and transformation from analogue to digital.
Granted, this high-growth rate (even relative to the rest of the world) coupled with a relatively low market penetration rate means that SA is not at the mature phase of the digital cycle. Online retail is still roughly 1% of all retail trade in South Africa; pointing to the fact that our people haven’t truly embraced online. I do believe that we will catch up with the global trend, especially in such a rich context of innovation, such as airtime payments and Blockchain Technology opening eCommerce to a previously excluded majority.
So, will South African businesses be early adopters, or wait it out on the hunch that this is another ‘fad’ trend. Only time will tell, but just remember that billion-dollar companies such as InstaCart, Amazon, Alibaba, DoorDash and Postmates didn’t exist 20 years ago; all built on the same crazy hunch.