Why ecommerce will continue to grow rapidly
by Jonathan Hurvitz. Online retail sales grew by around 40% during lockdown alone in 2020 and there is room for far more growth.Monday, 18 Jan 2021
by Jonathan Hurvitz. Online shopping can be as easy as selecting your items, entering a few details and then whatever you want or need is on the way. It’s that simple. While South Africa’s ecommerce sector has historically fallen behind much of the developed world, lockdown gave both retailers and consumers a hard shove into the digital realm.
Online retail sales have seen a sharp uptake since the onset of the pandemic. COVID-19 has undeniably had a negative – and in many cases a devastating – impact on business. eCommerce, however, has thrived and grown. In fact, the Online Retail Industry in South Africa 2020 report estimates that online retail sales grew by around 40% during lockdown alone. This boom can be attributed to social distancing and safety measures, convenience and, during hard lockdown, necessity.
Looking at a broad spectrum of e-tailers from Alibaba to Zara, and many more in between, the report highlights the stark contrast between the industry before and after the onset of the pandemic.
After a tough year, many people are understandably looking forward to 2021 a year that will (ideally) include widespread vaccinations, hope for a Covid-free future and a lot more freedom. This begs the question: will online shopping continue on its upward trajectory path? Sales of masks will certainly be down, but ecommerce in South Africa was already gaining momentum prior to the pandemic. The Online Retail Industry in South Africa 2020 report further notes that the sector has seen rapid growth in terms of scale and value and double-digit sales growth in recent years. Despite this improvement, the online sector was responsible for less than 2% of the country’s retail trade in 2019.
As more and more businesses (from home enterprises to major retailers) are entering the digital space as a lifeline for economic survival, however, we can expect to see growth continue. There is likely to be an initial drop in online sales as people who prefer to shop in-store return to this ritual, but this will not erase the massive growth experienced this year.
From a consumer perspective, more people have become comfortable with ordering online and many will embrace its convenience going forward. As this rising consumer demand meets the increase in digital businesses, even larger existing online businesses will be pressured to operate at peak performance. Covid has also put significant pressure on consumer spending, so businesses must offer exceptional value, faster turnaround times and an excellent user experience in order to compete.
What should e-tailers consider to build on the momentum seen this year? Going forward, we need to learn from international markets where the online industry is more advanced. We can expect to see a number of international trends embraced locally as going digital makes the retail sector more global. And if 2020 taught us one thing, it’s that we can’t afford to rest on our laurels. We have to be prepared for challenges, whatever they may be. With consumers having greater access to products online, local businesses will need to offer the same (or better) quality as international retailers that deliver to our shores.
Biggest trend of 2020
According to the National Retail Federation (NRF) in the United States, the shift to ecommerce was by far the biggest trend in 2020, leading retailers to roll out new technologies, apps, products and more.
The NRF predicts that in 2021 we will see more multichannel brands, increased spending on logistics technologies, livestreaming to connect directly with consumers and other social media shopping experiences, further adoption of robotics technology, smaller shopping spaces instead of large-scale malls, touch-free technology across all retail sectors, on-demand manufacturing to reduce waste, and more payment model options.
Another trend seeing a significant uptake globally is the Rent-to-Own (RTO) model, which Teljoy specialises in locally. According to the US Rent-to-Own Market: Size and Forecasts with Impact Analysis of COVID-19 (2020-2024) report, the month-to-month payment model (which enables consumers to own the product outright at the end of the initial rental period) has significantly risen in popularity over the past decade and is projected to progress further between now and 2024. This growth can, in part, be attributed to increased consumer uptake of digital channels. With consumer expenditure taking strain and ongoing social distancing, RTO has made essential appliances and technology accessible to many people. With this in mind, we expect this industry to see positive growth in South Africa in 2021. Post pandemic, the ease of online shopping will remain appealing to the masses. Ultimately, the entire retail sector is undergoing a digital transformation that will not reverse.
Jonathan Hurvitz is the CEO of online retailer Teljoy and a registered Chartered Accountant in South Africa.
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