A watershed moment for ecommerce in SA

by Lauren Hartzenberg
South Africa's strong shopping mall culture should not be underestimated. Combine this with the country's well-established retail channels and it's already a compelling case for why physical retail will remain steadfast for many years to come. But for businesses seeking growth, "online is where it's at", according to Jonathan Smit, MD and co-founder at online payment gateway PayFast.

In conversation with Warrick Kernes, founder of The Insaka eCommerce Academy, during the second annual PayFast eCommerce Virtual Summit taking place last week, Smit said the Covid-19 pandemic has fast-tracked ecommerce by three to five years.

Ready for lift-off

“We’ve reached the tipping point for ecommerce. It’s been shown in other markets that once you get 1% of retail spend occurring online the growth is rapid,” said Smit.

The Online Retail in South Africa 2021 report, released by World Wide Worx recently, revealed that online retail sales now make up 2.8% of total retail in South Africa, climbing to R30,2bn – more than double the R14,1bn reached just two years ago.

South Africa now has the right tools, systems, service providers and infrastructure in place to act as a foundation on which ecommerce can thrive. “It’s a great time to be in ecommerce. Logistics is easier, payment is easier … Everything is in place now for online to grow and become a significant part of the industry,” Smit said.

He added, “The beautiful thing about technology specifically is that it democratises the landscape, making it possible for smaller businesses to compete against larger ones. Yes, having deeper pockets helps, but it’s so easy to get going selling online. You don’t need a huge team of people, you can start very small. It’s not expensive anymore, barriers are low and you have what you need at almost at a click of a button.”

Payment volumes and basket size

PayFast registered over 40,000 new merchant accounts since the start of lockdown last year, and an 83% increase in total payment volumes in comparison to the same period in 2019.

Smit said the company also recorded a 51% increase in new online shoppers, with the fastest-growing demographic being 18 to 24 year-olds, growing 218% year on year. He noted that this is likely younger than the age group merchants usually stake their bets on, as they aim for consumers who tend to have more disposable income.

The average basket size for merchants was R817 for the March 2020 to Feb 2021 period, marking a slight decrease from previous years, according to Smit, despite PayFast recording an increase in both the number of transactions and payment volumes.

“The conclusion we’ve drawn from this is that online shoppers are spending more online and making more frequent purchases, but potentially for smaller values. People would historically buy many big ticket items online but are now buying smaller, more regular stuff. So they’re spending more online but this is driving the basket size down slightly,” said Smit.

Category growth

Based on new accounts registered with PayFast over the past year, the top growing industries include the food and baby sectors, which have been boosted by the stay-home economy. “Companies needed to reach parents, and parents were especially cautious to go out with their kids and put them at risk,” explained Smit.

Some of the fastest new growth industries include online alcohol sales, bakeries with home delivery services, and ecommerce stores catering for pet supplies and jewellery, all of which have grown by between 1,000 and 3,000%. This is based on the number of transactions from new merchants who signed up with PayFast and started transacting for the first time over the lockdown period, compared to the previous year.

While many consumers experienced salary cuts during the pandemic and grappled with financial uncertainty, many people also found themselves with additional disposable income. “Lots of people spending online seemed to have weathered the pandemic pretty well, and have had access to money that they would usually have spent on restaurants and entertainment.”

Some of this extra cash was funnelled into consumers’ home environments, where they’ve been spending more time, leading to a lift in categories like home improvement and décor – a trend Massmart and other businesses have experienced too.

Originally published on Bizcommunity
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