South Africa online spending on retail goods is expected to grow by more than 34 per cent by year end totaling nearly 929 million Rand, says a study.
This is up from 688 million Rand in 2006, says report from World Wide Worx, “Online Retail in South Africa 2007”.
These figures exclude the sale of air tickets online, which continue to dwarf the numbers for online retail. The five South African airlines selling tickets online, namely kulula.com, FlySAA.com, Mango, 1Time and Nationwide between them accounted for 2.3 billion Rand in e-commerce in 2006, almost four times the size of conventional online retail. The figure is expected to rise above three billion Rand in 2007.
“There are two major factors behind this growth,” says Arthur Goldstuck, Managing Director of World Wide Worx. “The first is the rise of broadband, which by the end of next year will see more than a million local users.
“The second is a phenomenon called the Experience Curve, which shows that once users have been online for around six years are they comfortable with the more challenging aspects of the Internet, such as e-commerce. And the number of people who have been online for six years or more has finally reached the level where it is making a substantial impact in online retail,” he said.
The number of online retail sites has also grown substantially, from 826 in 2005 to 1014 in 2007. This growth has come despite 310 sites – more than a third of those online at the end of 2005 – closing down from 2005 to 2007. However, no less than 498 new sites came online during this time.
e online retail market is dominated by 12 sites, which between them account for more than three quarters of online retail sales in South Africa, according to “Online Retail in South Africa 2007”.
“There have been many competitors to these dominant players,” says Goldstuck. “They tend to look at the numbers reported by a Pick ’n Pay or Netflorist, and imagine there is a big market ripe for the picking, not realising just how much infrastructure, development and market knowledge has contributed to those dominant positions. The result is that the biggest drop-off of online retailers occurs precisely where the biggest players are active.”
