SA online retail up 20% in 2005

11 January 2006

South Africans spent R514-million shopping online in 2005, 20% more than in 2004, according to a new report by technology researchers World Wide Worx.

The report, released in Johannesburg on Tuesday, predicts a further 20% increase in 2006.

These figures exclude the sale of air tickets online, which dwarf the numbers for online retail.

According to World Wide Worx, the four South African airlines selling tickets online – kulula.com, FlySAA.com, 1Time and Nationwide – together accounted for R1.8-billion in e-commerce in 2005, more than doubling the 2004 figure of R850-million, and more than three times the size of conventional online retail.

“Kulula.com has in fact been the single biggest success story of e-commerce in South Africa, and is the first South African consumer website to reach R1-billion in online sales in a single year,” said World Wide Worx MD Arthur Goldstuck.

“It is abundantly clear that online ticketing of air travel will continue to dominate consumer e-commerce in South Africa for at least the next five to 10 years, given present growth trends in conventional online retail.”

‘A year of positioning’
Not counting the sale of air tickets online, the 20% growth in online retail in SA was down from the 25% growth rate of 2004 – a decrease attributed by World Wide Worx to the high cost of broadband internet access in the country.

“The biggest obstacle to growth identified by all the executives we interviewed continued to be speed of internet access, and more specifically lack of affordable access to broadband,” Goldstuck said.

“But there is a growing realisation that the growing experience levels of users will also make a significant impact. We call it the experience curve, and we believe that is the key to online retail in South Africa.”

Media consultant Stephen Whitford, who conducted executive interviews with leading online retailers for the survey, described 2005 as a year of positioning.

“For most of the main online retailers interviewed this year, 2005 has been about re-strategising, implementing new systems, improving business processes and expanding product ranges,” Whitford said.

Auctions, gifts, apparel
The number of online retail sites in SA has grown substantially, from 719 at the end of 2003 to 826 at the end of 2005. This growth has come despite 210 sites – more than a quarter of those online at the end of 2004 – closing down during 2004 and 2005. No less than 311 new sites came online during this time.

World Wide Worx identified the fastest growing major categories, in terms of number of sites, as auctions (230% increase in sites), gifts (50%) and apparel (32%). Gifts were identified as representing “significant opportunity”, but also as one of the areas of greatest competition in online retail.

“The market can expect to see fallout in this sector, as well as in auction sites, which seem to have been fired up by the huge success of eBay, without having the market and structural benefits enjoyed by eBay,” Goldstuck said. “However, this sector is also dominated by a few large players, mainly Aucor and Bid-or-Buy, and many of the latecomers will disappear.”

10 sites dominate
The South African market is dominated by 10 online retail sites, which between them account for most online retail sales in South Africa.

They are the two major malls, M-Web ShopZone and Digital Mall; the two largest online grocers, Pick ‘n Pay Home Shopping and Woolworths; the two largest online book retailers, Kalahari.net and Exclusive Books; the largest online florist, NetFlorist; the largest online wine retailer, Cybercellar; the largest online electronics store, Digital Planet; and the largest online health and beauty store, Ascot Direct.

Kalahari.net also dominated several other categories, including music, where Look ‘n Listen and Musica are expected to offer serious competition, and movies, where it has almost no competition.

SouthAfrica.info reporter