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ONLINE SHOPPING’S GROWTH IN SA – WHERE TO NEXT?

Just about all your friends are buying goods online and you are beginning to feel left out. What’s the big deal about all this online shopping you ask? You then start to investigate and discover that it’s true what is happening, and that online shopping can be great fun!

Let us explore the growth of online shopping in South Africa, from 2015 to 2017.

WHAT WAS THE GROWTH IN SOUTH AFRICAN ONLINE SHOPPING IN 2015?

Data obtained by PayFast in 2015 showed that the average online purchase was about R725 per order. According to uAfrica.com, in 2015, e-commerce will have been going for 21 years worldwide. uAfrica.com indicated that e-commerce was still quite small in South Africa, amounting to about R6-7 billion. However, the growth rate was 25 - 35% year-on-year. At that stage, e-commerce accounted for about 1% of the entire retail sector.

The managing director of World Wide Worx mentioned that although 1% of overall retail didn’t look like much, it did show the amount of investment made by retailers. However, at that stage, the market was considered to be still quite underdeveloped, when one compares South Africa’s 1% with the US’s 10% of overall retail. Online stores such as Pick n Pay, Woolworths, and Edcon Holdings, which operates Edgars, Jet, Jet Mart, and CNA, were highlighted as companies that were serious about online shopping or e-commerce. Yuppiechef and Netflorist also entered the online scene at that stage.

A 2015 SURVEY BY THE SOUTH AFRICAN E-COMMERCE AWARDS

A South African e-commerce Awards survey conducted in 2015 showed the following:

  • Women between the ages of 18 – 39 made up most of the online shoppers
  • When buying online at any one time, most South Africans spent between R250 – R1,000
  • Of those surveyed, 33% made more than 10 purchases per year
  • 28% of online purchases were made using a cell phone

PayFast found out that most purchases were made on the 25th of each month, and that 70% of all online business was executed via a credit card or cheque card.

HOW MUCH ONLINE GROWTH WAS THERE IN 2015?

KPMG stated that business conducted using the cell phone (mobile commerce or m-commerce) would constitute the main part of future electronic commerce (e-commerce) in South Africa. During 2015, South Africa had 7.9 million Android cell phone users, which by far exceed all those using desktops and laptops. In 2015, there were about 14 million Internet users in South Africa according to the Digital Media and Marketing Association and Echo Consultancy. This represents about 39% of all South African adults.

MOBILE USERS AND M-COMMERCE IN 2015

In 2015, about 2.5 million South Africans were able to access the Internet using their cell phones. This group is being targeted for m-commerce. Smartphone numbers in 2011 was estimated at only about 8.5 million. In addition, cell phone users must feel safe when making transactions.

ONLINE SHOPPING AT END OF 2015

Online stores observed record sales over the festive season in 2015. Cape Town boasted of the most online shoppers (32%), with Johannesburg at 28%, and Pretoria at 7%.

WHAT GROWTH IN E-COMMERCE WAS THERE IN 2016?

It was estimated that online shopping would make up about 1% of all South African retail during 2016. A 2016 report by World Wide Worx indicated that e-commerce growth in 2015 was at 26%, making online retail amount to R7.5 billion. This growth rate was expected to decline in 2016 by about 20%, which translates to about R9 billion. At that stage, e-commerce was still quite conventional, lacking some of the serious innovations that typified major Western markets.

GROWTH OF ONLINE SHOPPING IN 2017

According to research conducted by PayPal and Ipsos, online shopping in South Africa was expected to total R53 billion in 2018, growing from R37.1 billion in 2016/2017.

In 2016/2017, research showed that 58% of online adults shopped online. The survey indicated that online shopping would continue to grow. Most online shoppers said it was so much more convenient to do so. The most popular items bought online included downloadable digital entertainment, items used for education, event tickets, and clothing.

HOW MUCH ONLINE SHOPPING DO SOUTH AFRICANS DO CROSS-BORDER?

South Africans are attracted to shop online across the borders because of free shipping, the ability to still use the South African rand, and the availability of secure payment systems. This cross-border online shopping is estimated to grow by 38% in 2017 according to many online shoppers. The good reputation of online stores in the US attracted many South African shoppers. This is followed by shopping with China and the UK.

M-COMMERCE IN 2017

More and more online shoppers are buying using their cell phones. This is expected to result in an expected growth of online spending of about 65%, through the use of either smartphones or tablets. Spending via cell phones is expected to increase by 123% in 2018, according to PayPal and Ipsos. From February 2016 – February 2017, 43% of cross-border shoppers used a smartphone, and 21% used a tablet.

WHAT ARE SOME BARRIERS TO ONLINE SHOPPING GROWTH?

  • A strong deterrent to the growth of online shopping is the well-established mall shopping culture of many South Africans. It is because of this that some stores can still manage to avoid investing in e-commerce. According to Urban Studies, the retail market is considered to be over-saturated with off-line shoppers, who have access to over 2000 shopping malls.
  • Other major barriers to online shopping are limited access to the Internet, as well as the price of broadband. Uncapped access via fibre optics networks is on the increase in South Africa, but access to the Internet is still expensive, and beyond the reach of many would-be online shoppers.
  • Other barriers are the general lack of trust and confidence by the public in making online purchases, and the incorrect perception that only credit cards can be used to make such purchases. Much activity is seen online, but in the end only a small number choose to make purchases. Perhaps online education of the public is a serious prerequisite for the public to understand better what online buying is all about. Such education could calm many unfounded doubts about online shopping.
  • Online stores want to reduce their shipping costs, by using PayPal products such as ‘Refunded Return’ and ‘Buyer Protection.

GROWTH FORECAST FOR 2018

By 2018, online spending by South Africans is expected to grow to over R53 billion.

The above-mentioned insights clearly show that online shopping in South Africa is a sleeping giant that is slowly but surely waking up. As online shopping takes on a more and more meaningful role in South Africa, with ever-increasing numbers of online shoppers obtaining easier access to a cheaper Internet, South Africans will go online to buy just about anything, including shopping for car insurance.

BENEFITS WHEN BUYING CAR INSURANCE USING PMD’S ONLINE INSURANCE PURCHASE PLATFORM

An online car insurance purchase platform was developed by PMD so that its clients can enjoy its great benefits, such as the user-friendly process available to those wanting to buy car insurance online. The client can customise the package according to their own specific requirements by checking its own boxes. The process is quick and making contact with anyone is not required. However, if someone does want to make contact and speak to someone, a call-back facility is available on the website. Assistance is also made available on the website in the form of audio and video materials. The other great benefit is that the client can do it at any time.

Sources:

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