Internet retailing continues to see growth in value terms across South Africa, according to a research report by Euromonitor International. The main growth driver has been the increasing number of internet users in the country mainly because of greater internet accessibility, which in turn boosts the value sales of internet retailing.

In previous years, the disparity between incomes in South Africa has had an impact on the performance of internet retailing. The high costs of bandwidth did not allow low-income and middle to low-income consumers to have access to the internet at home. As a result, only 11% of the total population had access to the internet.

“Internet retailing has seen a 20% to 30% value growth mainly because of the convenience, expansion of digital devices such as tablets and smartphones, and increased competition within the online retailing segment,” says Christy Tawii, research analyst at Euromonitor International.

In the context of the review period (2008–2013), the current value growth in 2013 was slightly higher than the review period CAGR. The increasing volume of smartphones and tablets led operators to develop more platforms allowing consumers to have access to online shopping.

Key findings

Internet retailing remains niche in South Africa. However, the increasing launch of online clothing and fashion retail stores has been seen, such as Mr Price Apparel and Mr Price Home. Conversely, digital gaming though internet retailing performed well, thanks to the rise of tablets and smartphones in 2013. Store-based retailers were not really impacted by the good performance of internet retailing in South Africa in the review period.

As the payment methods have been simplified over the years, more consumers are shopping online. Most websites used to only accept payment via credit card, but now more and more sites have payment options for EFT, Bitcoin and loyalty points. Tawii further explains that the digital gaming, apparel and footwear and grocery retailers are doing very well as consumers are shopping for these items more than other things.

Competitive landscape fragmented

The competitive landscape within internet retailing is fragmented in South Africa. The leading players are domestic, such as Kalahari.net, a pure internet player. Grocery retailer Pick n Pay Retailers performed well in 2013, with a 6% value share. Mr Price made their mark in online shopping in 2013, as they have an option for customers to select their goods online and pay for them when collected in-store. This therefore made consumers who have security concerns more open to shopping online.

Internet retailing is expected to register a value CAGR of 16% in South Africa over the next four years up to 2018 at constant 2013 prices, as growth drivers are expected to be better internet accessibility at home, and mobile phone access should trigger value sales of overall internet retailing, thanks to the increasing number of smartphones over the forecast period.

This article was first published by Euromonitor International.