E-commerce in South Africa: Growth and Challenges in 2021

An informative article on e-commerce growth, benefits and unique challenges in South Africa.

Globally, e-commerce is booming. More and more people are shopping online, and even small businesses are rushing to set up fully fledged e-commerce sites. This trend has been accelerated by the pandemic – but it appears unlikely to lose momentum, even once COVID-19 is fully behind us.

E-commerce in South Africa is unique in some ways. It offers both specific opportunities and challenges.

In this article, we cover:

the recent boom in e-commerce
predicted growth of e-commerce in South Africa
e-commerce benefits for small businesses
advantages for consumers
key South African challenges for e-commerce businesses
e-commerce storage space in South Africa.

The rapid growth of e-commerce in South Africa

The South African e-commerce sector has seen massive growth since the start of 2020. This has been spurred by the COVID-19 pandemic. Business Insider cites FNB reporting a 30% growth rate in the first half of the year compared to 2019.

Online retail giants reported massive increases in sales and revenue. Takealot had revenue growth of 28%, while OneDayOnly recorded a 128% increase in sales.

According to research conducted by Mobicred, SA’s largest digital credit facility, the growth was in adoption rates and product selection. The study revealed some interesting trends. Consumers over 60, who have been traditionally hesitant to shop online, showed an increase in Mobicred applications of 90%.

Predicted growth of e-commerce in South Africa

Despite the massive growth, online shopping still only accounts for 2% of South Africa’s total retail spend. This is 14% less than the global average.

Online shopping is beneficial to small businesses and consumers. If the full potential of the e-commerce sector can be harnessed, it can have a positive impact on the economy.

Advantages of e-commerce for small businesses

Online shopping is an increasingly viable option for entrepreneurs. Many small businesses are turning to online sales due to the low entry barriers. Setting up a shopping website is easy and affordable compared to setting up and operating a physical shop.

Also, it’s easy to target consumers via social media and search engine advertising. Once a business has established a client base, it can build a reputation online, with reviews and ratings.

E-commerce is unique in that it helps level the playing field. It gives small businesses the opportunity to compete against much bigger players – not just locally, but nationally and internationally too.

Why consumers benefit from online shopping

Consumers across all age groups have adopted e-commerce because it’s so simple. Product information is readily available, so it’s easy to make product comparisons. During lockdowns, home delivery has been available.

Products are often cheaper online because retailers transfer their reduced expenses down the supply chain.

Overall, shopping online has become safer and more convenient than shopping at brick and mortar retail outlets. There’s no need to face traffic, navigate or pay for parking or waste time.

Challenges affecting e-commerce in South Africa

Certain obstacles continue to limit growth in the South African e-commerce landscape. Below we outline some of the top challenges.

High data costs

Exorbitant data prices make it difficult for the average South African to regularly shop online, as it adds to the final out-of-pocket expense.

Township infrastructure

A large portion of South African consumers live in townships. E-commerce deliveries are hampered by unpaved roads, lack of standardised residential address systems, overcrowding and security concerns.

Across much of Sub-Saharan Africa, poor or lacking infrastructure is an obstacle to e-commerce growth.

Possible developments like drone-based deliveries – and improvements to infrastructure in dense population centres – could pave the way for much faster e-commerce growth.

High delivery costs

Compared to the prices offered by international e-commerce giants such as Amazon, delivery fees in South Africa are high.

This is especially true for outlying and rural areas, where the existing public transport system doesn’t allow combined modes of delivery.

Inventory management

Especially as online sales grow, it’s imperative to manage inventory in a way that’s scalable and cost-effective.

This requires proper tracking, forecasting and management of inventory levels. It also depends on fast, reliable courier or delivery services and affordable e-commerce storage.

These challenges certainly aren’t unique to South Africa. However, they are among the most important for new e-commerce businesses to overcome.

E-commerce storage space with XtraSpace

At XtraSpace, we don’t offer expert advice on e-commerce in South Africa.

However, we do offer ideal, affordable storage for e-commerce businesses, in Gauteng, KwaZulu-Natal and the Western Cape.

The right storage is a vital ingredient for many e-commerce companies. Even start-ups that begin by operating from a living room or garage typically find they need suitable, off-site storage within a short period.

At XtraSpace, we offer:

secure, strategically located storage facilities near key population centres across South Africa
storage units in a wide range of sizes so you don’t have to pay for more space than you need
easy access to storage units, any time during business hours or after hours by arrangement
affordable rates with built-in insurance
flexible terms – with no need to commit to a long contract
cardboard boxes and packaging materials for sale onsite, at all our branches.