South African e-commerce potential stalled by economic uncertainty

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After a somewhat remarkable year in 2020, many may be hoping that 2021 will be more predictable. For the most part, many of us are still experiencing a daily sense of déjà vu. Lockdown measures are still widely in place, encouraging people to turn to e-commerce to fulfil their shopping needs or spice up isolation.

Worldwide, the adoption of e-commerce has accelerated. e-commerce growth has not been limited to any particular product category. However, there has been a considerable shift toward online groceries. The experience of e-commerce in South Africa has been no different. According to Visa, approximately 64% of South African consumers purchased groceries online for the first time during the Coronavirus crisis.

South Africa’s experience of the Coronavirus crisis has mirrored the situation in Europe. The country has opted to impose lockdown measures, to contain the spread of the virus. As a result, the pandemic has been a catalyst, accelerating the digital transformation across the country. Due to the crisis, businesses and consumers who were reluctant to embrace e-commerce have chosen to take the plunge.

According to Nielsen research, 29% of South African consumers are currently shopping more online than before the pandemic. According to McKinsey, approximately 40% of consumers intend to increase their spending on e-commerce after the Coronavirus crisis has passed.

These sudden shifts in behaviour forced retailers to adopt e-commerce much sooner than anticipated and to a much larger scale. Companies wishing to survive have invested in their e-commerce offerings despite feeling the economic costs associated with the pandemic. Early in the pandemic, consumer demand overwhelmed retailers’ e-commerce operations. On-demand delivery grocery platform, Zulzi, for example, was forced to limit trading to two hours a day for two weeks after shoppers overwhelmed its app. Since then, the company has quadrupled the number of employees and drivers it employs to meet demand. Zulzi now processes approximately 2,000 orders a day, five times the number of orders in 2019, and made a year’s worth of turnover between April to June.

The Coronavirus crisis has highlighted the vast potential for e-commerce growth in the South African e-commerce market. However, several challenges are stalling its progress and preventing it from reaching its full potential. One challenge that needs to be resolved will be ensuring that e-commerce is accessible to most of the population. Currently, South African data charges are ranked amongst some of the most expensive worldwide. Combined with unreliable coverage and frequent blackouts, mean shopping online can be somewhat of a challenge. Additionally, logistics providers and retailers need to conquer a lack of a national street address system, a general distrust of online transactions, low bank card penetration, and limited e-commerce payment options.

This growth is all very well and good, especially as some start-ups are developing innovative tools to resolve the challenges such as the lack of national street address system. However, South Africa was already in an economic recession before the Coronavirus crisis took hold, due to structurally weak government finances, ongoing electricity shortages, lacklustre industry growth and diminishing business and consumer confidence. Therefore, it may take a while for South African e-commerce to reach its full potential as it begins to recover from the Coronavirus crisis and an economic recession.

Source: Transport Intelligence, February 16, 2021

Author: Beth Poole