Amid a growing digital landscape characterised by increased Internet connectivity and smartphone use, as well as a pronounced shift towards online shopping, the South African e-commerce sector is undergoing significant development. In fact, it is projected to exceed R400-billion in value by 2025, driven by an anticipated one-billion-plus transactions a year, says Accenture sales and commerce lead for Africa Mushambi Mutuma.

As of 2023, almost 44-million South Africans were connected to the Internet, compared with 25-million in 2013. Mutuma says this surge has directly fuelled the growth of e-commerce users, with projections suggesting a further increase to 37.9-million by 2027.

In this regard, he says several notable trends and innovations are reshaping the local e-commerce landscape, arguing that the seamless integration of financial technologies and digital payments is enhancing customer experiences and conversion rates.

Supermarket chains have also embraced online platforms and delivery services, with online grocery delivery platform Checkers Sixty60, offered by retailer Checkers, registering a 63.1% increase in sales for the six months ended December 2023.

Mutuma adds that major retail chains, such as Shoprite, Pick n Pay, Woolworths, and Spar, are also dominating in this scale-up, with online sales rapidly gaining traction and expected to account for 5.7% of the retail market by 2027, tripling from pre-pandemic levels​.

Amazon, Shein and Temu have also entered the market, demonstrating the extent of future demand that global entities foresee in South Africa.

“Our research into Amazon’s market entry globally shows that when it enters a market there is upside for all parties, even its close competitors.

“We expect the next two to five years to be an exponential proof point of that, driving new consumer conversions and increased market growth. Businesses are likely to focus on integrating advanced technologies, enhancing customer experiences and optimising supply chains to capitalise on this growth.”

Mutuma adds that the industry is also witnessing a rise in personalised, life-centric customer experiences, supported by advancements in AI and data analytics.

“Essentially, pricing, offerings, service and experience are all growing in favour of the customer as more players invest to stand out. Innovations in last-mile delivery and fulfilment services are further bolstering the growth and efficiency of e-commerce operations. The customer will continue to win and benefit.”

As previously reported in Engineering News & Mining Weekly, a study by World Wide Worx, in partnership with Mastercard, Peach Payments and Ask Afrika – titled ‘Online retail in South Africa 2024’ – found that the local online retail sector surged to R71-billion in 2023, a 29% increase on 2022.

World Wide Worx CEO Arthur Goldstuck describes the local e-commerce sector as being in a “very exciting state of evolution”, arguing that the advent of 60-minute grocery shopping has “set the online retail environment alight.”

He explains that the online retail environment is expanding to introduce quick delivery times for more general consumer goods, such as appliances, which can also be delivered within hours of placing an order online.

This increases competition among local retailers to meet this standard of quick delivery, which has been heightened by the arrival of Amazon in South Africa, owing to Amazon’s having introduced same- or next-day delivery of all products.

“We are starting to see an e-commerce landscape that is suddenly reaching a level of maturity that we never imagined we could achieve in this country,” adds Goldstuck.

Local Cases

The ‘Online retail in South Africa 2024’ study describes Amazon’s arrival in South Africa, which is expected to partly drive growth in the local e-commerce sector, as “probably the most momentous event in the local e-commerce industry since the launch of Checkers Sixty60 in 2020”.

The report argues that the online retailer’s entry is likely to have an immediate impact on the local online retail landscape, as it incorporates several thousand small retailers into the online space that were not there before or didn’t have access to a significant online audience.

“It has enhanced retailer access, and it has increased competitive behaviour. Over the coming seven-and-a-half months, we can expect it to add a few billion rands to the total online retail pie in South Africa. It will also . . . transform the logistics industry in South Africa, as courier and warehousing services ramp up to meet the additional demand created,” the report says.

Further demonstrating the growth of local e-commerce, diversified consumer group Naspers revealed in its latest financial results an e-commerce consolidated revenue of $6.3-billion, and a consolidated e-commerce profitability ahead of target, with a $460-million improvement in trading profit to $24-million.

In a media release dated June 24, 2024, Naspers said it had been a “standout year” for the group, noting that it had simplified its group structure, delivered improvements across all core performance metrics and achieved e-commerce profitability six months ahead of target.

It also reported that operating businesses had performed well, accelerating profitable growth, while the open-ended buyback programme continued to deliver value for shareholders.

Moreover, the group noted that rapid deployment of AI-led technologies across the Naspers ecosystem was generating real results and would set the next frontier of value creation for the group.

“Naspers has a strong balance sheet and is well positioned to generate improved returns through smart and disciplined capital allocation, driving value for all stakeholders,” it said.

Challenges and Opportunities

In its 2024 study, titled ‘Commerce Without Compromise’, Accenture argues that the shift online is creating opportunities for the entire ecosystem, from employment growth in warehouses and logistics to the rapid development of financial technologies and digital payments.

However, despite the sector’s growth and subsequent potential to become a significant employment generator, Mutuma says the local e-commerce sector faces several challenges, such as high costs of doing business, as well as ad hoc systems, legacy technology, skills gaps and poor infrastructure.

The competitive pressure from global e-commerce giants entering the local market intensifies these challenges, with fragmented technology architecture and the need for continuous investment in modern infrastructure further complicating operations.

“These factors collectively hinder the ability of South African businesses to scale efficiently and compete effectively on a global stage . . . To remain competitive, large-scale investments in technology, operations and true digital transformation will be mandatory for survival,” Mutuma warns.

Hence, while local businesses are making strides to keep up with global economic trends, particularly in adopting digital e-commerce strategies, there are gaps that need to be addressed.

For example, Mutuma says that while 95% of South African executives believe they have made correct investments in commerce, only a small fraction successfully integrates these investments profitably.

“The high confidence levels among executives might be short term, focusing more on immediate gains rather than sustainable, long-term strategies. Continuous reinvention and integration of global best practices remain critical areas for improvement and remaining competitive in global eyes.”

Moreover, he observes that South Africa faces a mixed scenario regarding the necessary skills and systems to meet growing e-commerce demands, noting that, while investments in modernising infrastructure and building a solid digital foundation are ongoing, skills gaps remain a challenge.

Hence, efforts to reskill and upskill the workforce, combined with investments in AI and other advanced technologies, are crucial for maintaining competitiveness. Therefore, he argues that the transition towards a more integrated and efficient commerce ecosystem requires continued commitment to upgrading hard infrastructure and software capabilities.

“It’s essential for South African businesses to embrace a holistic approach to digital commerce, balancing investments across technology, operations and talent. Learning from global leaders who excel in integrating customer experiences with operational excellence can provide a competitive edge.

“Additionally, fostering a culture of continuous improvement and innovation will be key to navigating the complexities of the e-commerce landscape. By addressing structural challenges and leveraging emerging technologies, South African companies can position themselves for sustained growth and success in the global market and here at home,” explains Mutuma.

Meanwhile, Goldstuck argues that one of the issues facing the local sector is the disparity – and subsequent digital divide – between suburban and township shopping environments, as customers residing in suburban areas typically experience more seamless deliveries than those in townships.

However, he points out that Checkers Sixty60 has been a key player in transforming this environment by trying to bring online shopping as close to the customer as possible.

Goldstuck suggests, therefore, that despite the challenges, South Africa is known for having a sophisticated retail and online banking environment, which he expects to transcend into the online environment.

“We’ve been able to show that we have the skills and the talent to create a world-leading banking technology environment. There’s no reason why we can’t do the same in the e-commerce environment,” he concludes.