By Joseph Booysen for Business Report
Although traditional retail stores dominate the South African market, consumers are choosing the online option for cheaper technical goods purchases.
According to the latest research report by GfK (Growth from Knowledge), South Africa, E-commerce 360:Navigating the Technical Goods E-Commerce Market in South Africa, e-commerce retailers grew their share of the South African technical consumer goods market by 52 percent last year, accounting for 6.9 percent of total consumer spending by rand value for the year.
This meant they had nearly doubled their share of the market since since 2015.
Cherelle Laubscher, a senior retail manager at GfK South Africa said e-commerce in South Africa was still in its infancy compared to European markets, where a quarter of technical goods spending goes through digital channels.
“However, growth in South Africa is strong and shows no signs of declining as bargain-seeker flock online to buy technical consumer goods like smartphones, IT, consumer electronics, and major home appliances,” said Laubscher.
She said although traditional stores dominated the market, they were not growing the value of the sales they generated in technical goods as quickly as the digital players and e-commerce retailers were seeing strong growth in smartphones, panel televisions, small domestic appliances, gaming consoles and laptops.
According to the report, survey respondents cited better prices, attractive promotions and wide product selections as major reasons for shopping online rather than at at a traditional store, while by contrast, experiential factors such as getting to see and feel goods motivated shoppers to go to physical stores.
GfK South Africa’s point of sale data showed that the consumer perception that e-commerce prices were lower than in-store prices was accurate. More than two-thirds of the top 100 sellers among technical goods products in South Africa were cheaper through digital stores that at physical retailers.
Across the top 100 products, online prices were an average of 4.7 percent cheaper.
Odette Jardim, a client solutions manager at GfK South Africa, said 45 percent of connected consumers in the survey claimed to increasingly use the internet to buy products online compared to the previous year (2016).
“However, a consumer journey often straddles both physical and digital channels, meaning that the most successful retailers should have an omnichannel strategy,” said Jardim.
Meanwhile, Kevin Tucker, PriceCheck chief executive, said although South African consumers might be lagging in the amount of online shopping they did compared to the US, for instance, with increased innovation and tech security, South Africa would continue to see growth.
“South Africa has seen a boom in cutting-edge e-commerce innovation, and this needs to be celebrated,” he said.
Tucker said although the e-commerce industry had grown by 25 percent in South Africa, only 1.5 percent of online consumers ended up making a purchase.
“Online spending in South Africa is expected to reach R53 billion by the end of 2018, up from R37.1bn in 2017, according to research conducted by PayPal. There is clearly huge untapped potential in this industry,” said Tucker.