South African online retailers’ confidence is soaring, with many expecting another jamboree year of double-digit revenue growth as high as 60% in 2022.
This was among several key findings of the second phase of the Online Retail in South Africa 2021 study, conducted by World Wide Worx, with the support of Mastercard and Standard Bank.
The first phase of the study, released in mid-2021, showed the total growth for online retail in South Africa in 2020 had come to 66%, bringing the total of online retail in the country to R30.2 billion. The forecast for 2021 of 30% growth to R42 billion will be tested in the 2022 edition of the study.
The new research examined retailers’ success factors, challenges and outlook, and delved into their marketing and technology strategies.
“The research was of particular significance due to the major glitches that bedevilled online shopping during peak times in recent years,” Arthur Goldstuck, CEO of World Wide Worx and principal analyst on the project, said.
“The findings were encouraging, despite ongoing challenges like fulfilment disruption and inventory forecasting.”
The single biggest challenge facing the sector was managing customer queries and challenges, cited by just over half (53%) of respondents.
The Christmas holiday season remained the most important time of year for online retailers, with 73% rating it as important, while 60% regarded Black Friday as important to their sales. In contrast, Valentine’s Day and Mother’s Day were regarded as important by only about a quarter of respondents, and ‘Back-to-School’ by fewer than one in five.
Retailers were surprisingly upbeat in expectations for turnover in 2022, with more than a third of respondents expecting more than 60% growth, and well over half expecting more than 20% growth. This was in contrast to around half of respondents anticipating less than 20% growth for 2021. However, more than a quarter expected to report over 40% growth for last year.
The study found that online retailers were almost unanimously confident in the prospects of the industry. Nine in ten said they were very optimistic about growth in the online retail industry over the next five years, while a mere 2% were neutral or pessimistic.
“The findings anticipate an economy emerging from the darkest shadows of the pandemic,” Arno van der Howen, head of digital e-commerce and housing platforms for consumer high net worth at Standard Bank said.
“Consumers remain under pressure, but the retail sector is assisting by making the shopping experience and the payment process increasingly seamless.”
The key success factors for most retailers were good customer service (98%) and a good user experience (90%). Quality of products came in third at 83% of respondents, while pricing was ranked only sixth, cited by only 73% of respondents. This aligns with other research by World Wide Worx, which has consistently shown price to be less important to consumers than service and quality.
“Consumers want frictionless, convenient checkout regardless of whether they check out online or on mobile,” Gabriël Swanepoel, country manager at Mastercard, Southern Africa said.
“When you consider cart abandonment rates nearing 70% due to security concerns or often complicated checkout processes, the concept of frictionless quickly moves from a nice idea to a must-have. If friction can be removed, it should be removed.”
Goldstuck said innovative technologies and business models were expected to continue enhancing both retailer performance and customer experience, but would not become a case of technology for its own sake.
“Eight out of ten online retailers are already using parcel tracking, and a similar proportion offer collection and return points. This may feel like a norm to the online shopper today, but it was almost unheard of just five years ago,” Goldstuck said.
Just over half are offering QR code scanning, which is expected to increase this year. On the other hand, only one in five participants were using artificial intelligence, which is not expected to rise much in 2022.
He said retailers also had no plans to use chatbot-enabled payments, while only 3% accepted cryptocurrency, and 2% allowed biometrics-based payments. Credit cards and debit cards dominated payment methods, with electronic funds transfer and vouchers widely offered. Innovations like mobile credit and buy-now-pay later (BNPL) were emerging, but not challenging mainstream payment systems.
“Even as people embrace a new way of shopping, they still trust the older styles of payment,” Van der Howen said.
