Pre-Covid eCommerce in South Africa
It wasn't long ago that creating an online store was reserved for the largest of retailers with 6 figure budgets. South Africa's eCommerce growth has been strong over the past 5-6 years as more South African's have become more accustomed to shopping online. Much of this has been perpetuated by the growth and strength of Takealot's offering, setting a new standard for logistics. While large marketplaces like Takealot and Amazon (internationally) are often pinned as the antithesis of SME's they have undoubtedly created opportunities for sellers and for propelling online consumption. While it's far from the norm for businesses to sell online it is increasingly becoming a big part of retailers' strategy to increase the percentage of sales hapenning online and to create a stronger omnichannel (in person + eCommerce) experience. For individuals and/or small businesses the real shift in growth has come from a wave of aspirational merchants. The costs associated with creating online stores have come down drastically in the past five years making it easier than ever to create an online store. Things like product discovery have been simplified by dropshipping platforms like Oberlo and Dropstore (SA based). Logistics can be relatively automated by a number of couriers who are increasingly invest in SME eCommerce. It's an exciting time for eCommerce in South Africa yet when we compare ourselves to the US and/or Europe we still have a so much runway for growth and room for innovation. It's not clear if the solutions from a platform perspective will come from locals or abroad but one thing that can be said with certainty is that the world of eCommerce platforms is driven by international platforms and they are not going to focus attention on improving their solutions for our context anytime soon. Solutions and implementations will be predominantly driven by local entrepreneurs, startups and web development professionals ready to invest in making eCommerce increasingly viable for all in South Africa.
Rapid Digitalisation: Changes in Consumer Behaviour
While Covid-19 has left many businesses and industries barely hanging on, it's also propelled us forward by years in terms of the need for rapid digital adaptation. According to a recent report by Accenture on eCommerce in South Africa, they state that eCommerce accounts for just 1.4% of all retail sales but they expect 3x growth of the eCommerce sector by 2023. We are currently in the midst of this change where retailers and entrepreneurs are re-envisioning their digital strategy. Covid-19 is clearly impacting businesses to rapidly change their thinking but customer behaviour is also rapidly changing out of necessity. Again quoting Accenture's report the number of tech savvy South Africans incorporating technology into all dimensions of their lives has gone up from 53% to 70% from 2015 to 2018.
Consumer behaviour has been greatly impacted by Covid-19. In a recent poll we conducted in Cape Town we found that people have shopped at 2.5 new online stores since lockdown on average. In a recent article from Bizcommunity Payfast CEO talked through the spikes they are seeing in the amount of sign ups and transaction volume but even more surprising is the demographics that have seen the biggest increases.
"According to the company, Gen Z is the fastest-growing group of online shoppers, with a 139% increase in users compared to 2019. By comparison Millennials, aged 25 to 34, only grew by 55% but still account for the largest group of online shoppers. Millennials are also most likely to be using their mobile device, with 37% in this age group making payments with their mobile versus 28% on desktop.
Older generations who had previously shied away from online shopping have, effectively, been forced to change their habits in the face of social distancing measures. “Younger Baby Boomers make up our second-fastest-growing age group, with a 62% year-on-year growth,” ." Source: Bizcommunity
Perspectives from Online Store Founders.
This newfound interest in eCommerce from consumers is sending ripples or waves to the world of businesses as they quickly adapt. We had the chance to connect with a handful of merchants who are different stages of their eCommerce journey over the past weeks. Here's a handful of quotes on the impact of Covid-19 on these businesses. For each quote we've also published the stories of the founders in our first batch of Seller Stories.
"This Covid-19 pandemic has been a bit of a blessing in disguise for our business, it forced us to go through one of the toughest periods we've ever gone through, and in turn we have had to re-evaluate the way we do business and it taught us how quickly things can be turned upside down. We've learnt a lot from it and have done deep thinking work around our brand and what the most important things are that we need to have in place to adjust quickly in a bit of a reckless environment, but also how to continue to serve our customers in an authentic way that makes them want to continue supporting us as we do them." - Shannon
"Initially it negatively impacted our production and we soon realised we had to reinvent ourselves even with the restrictions and so we decided we’d go through with opening our own shop and also include other local products that would augment our offering so we could make sales beyond honey. We wanted to celebrate other indigenous supplies that are also immune boosting essentials to assist our customers during this pandemic. This desire to work with new products pushed us to push our product offering even further." -Mokgadi
"In times of crisis people handle things differently. After I’d gotten over the initial shock of what my fate might be over the next few weeks, I went into survival mode. How would I get through this? What would my next move be? How could I use my skills to generate an income during a time where people are having contracts cancelled, being retrenched, freezing positions and closing their businesses? I'd do what I know best - cook, bake, photograph and create content which people needed. And so began what I hope will be something that I can successfully do now and continue doing after this is all over." -Nicky
"I run several fashion based startups here in Cape Town both of which rely on retail spaces. At Ballo we quickly pivoted to ramping up our apparel and mask production which helped keep us going. We found joy in unexpected places by teaming up with some local community initatives, giving away over 1,000 masks.
Our other business Bo-Op started as a physical retail co-op between Cape Town designers. Well-positioned in Bokaap, we ran a successful space representing a number of amazing local designer brands and grew in sales and reputation for 3 years. Peaking with sales figures to rival the V&A Waterfront. We had the rug pulled from under our feet and had to reinvent ourselves. The digital pivot was one we had thought of before, but became essential. This has lead to the birth of bo-op.com and we are here to stay."
-Alistair
Perspectives from Web Development Agencies
"For many South Africans, online shopping has become the new norm during the pandemic. As behavioural patterns we repeat most often become etched into our neural pathways, new habits are formed. Even individuals who might not usually interact online on a daily basis, such as the elderly, have had no choice but to tech up to get their weekly supplies of essential goods. As an agency we've had to adapt to the rapid needs of many businesses. It's been a privilege to help South African businesses survive and grow." -Dirk
"In the early stages of Covid-19 lockdown we spent a lot of time advising our clients on how to communicate with their customer bases. Businesses have had to formalise new strategies on how to operate in this time. Out of the challenging time we've been able to help some exciting new business models. These are times full of business adaptations and with each move comes the need for digital excellence. We've been a part of a number of quick implementations to get entirely new businesses off the ground, while others have quickly pivoted. We helped launch a new online liquor stores, saw several manufactures begin to procure masks, a fine dining client began doing takeaway and an events company transitioned their fleet into last mile couriers. These are wild and challenging times, it's brought us some joy to help our clients make strategic moves." -Felix
"The infinite space called eCommerce has grown with no black hole or virus in sight, almost comparable to Covid numbers itself, but without the death rate. While potential customers, sitting at home and getting creative, without any products to sell, has now realised that selling services online is the next space race. As an agency, the last couple of months was nothing short of a moon landing. Very few oxygen to breath, with high demand and short timeframes. Not all of them had a takeoff but we have seen some great success in a very short timeframe and would like to encourage people to think about going online and reaching for the stars, you might hit the moon." -Walton
eCommerce Landscape
Intro to eCommerce Platforms and SA landscape
Pre-Commerce
We decided not to cover CMS (content management systems) at large in this report but it's important to note that one advantage WooCommerce and Wix have over their competition is the role they are playing in enabling businesses of all sizes to start their journey with a website and then offer eCommerce functionality later on. For the hundreds of thousands (you read that right) of WordPress sites in South Africa this means they can quickly enable eCommerce on their site at no additional cost using WooCommerce.
Micro-Merchants
There's a ton of eCommerce happening outside of the eCommerce platforms we're covering and it's easy to overlook it. Tons of small businesses are using Instagram, Facebook and WhatsApp to trade online. There's also an entire world where businesses sell on marketplaces like Takealot and BidorBuy with or without selling directly to consumer on their own websites. Micro-merchants and aspirational merchants tend to use ShopStar, WooCommerce, Wix and Shopify.
SME eCommerce
WooCommerce, created by WooThemes, a predominantly South African based startup, began pulling away from the competition back in 2013 with their personal investment in the ecosystem and the broader tech community. Shopify has been growing like crazy internationally and began really seeing growth in South Africa since 2015 with help from partners like uAfrica. They stand apart from the rest of the eCommerce platforms as the one innovating the most from a product perspective. Unfortunately much of that innovation isn't fully realised in South Africa (yet). Wix was not a viable solution for eCommerce on its on until they added several payment options recently. Wix is the most affordable hosted platform you'll find but in its current state it doesn't have as many localised apps and functionality as its competition.
Midmarket / Enterprise
Magento was and remains the leading platform for larger (R5m+) businesses but they are seeing increased migrations to Shopify and WooCommerce with smaller merchants and are losing some of their largest merchants to the true enterprise platforms such as Salesforce Commerce Cloud and SAP Hybris.
eCommerce Growth
Methodology
In 2013 I was introduced to Builtwith.com in the early days of WooCommerce and have used it regularly ever since. The tool allows you to track the growth of website tools using web scraping. From cross referencing data Builtwith.com is the best around for understanding of what tools are powering the web. We run reports on a regular cadence and since lockdown we've been running them more regularly to gather these insights. For the following sections we are looking at growth in terms of the number of businesses using eCommerce platforms. This is one of many different ways to look at growth. A more comprehensive view would also look at the amount of transactional volume that these stores are doing and more closely examine the churn rate (how many survive) over time.
2016 to Current Growth
Looking at the number of sites using eCommerce platforms, South Africa is growing faster than the US and most European markets at between 40%- 55% year on year. South Africa has more online stores than the rest of Africa combined, this won't be true by the end of the year as markets like Nigeria, Kenya, and Egypt are growing even more aggressively. Depending how you look at the size of the eCommerce market in South Africa it will rank between 12th and 17th in the world. In terms of number of sites it's similar to that of New Zealand or Singapore.
2016 to Current by Platform
Looking at specific eCommerce platforms WooCommerce is leading the way by a long shot. However, we estimate that only about 55% of WooCommerce sites are selling online. Across the board eCommerce platforms are growing but it's WooCommerce, Shopify, Wix and Ecwid that stand out amongst the pack as the current leaders. Again if we were to look at this growth by transactional volume it would look much different. Magento has under 1k sites but it's very likely that they are the leaders in transactional volume as they power many of the South Africa's largest online stores. Similarly while WooCommerce has more than 6x the number of Shopify stores I suspect that Shopify represents close to the same amount of transactional volume. Businesses paying the $29 (and up) a month for an online store are more advanced merchants.
eCommerce Growth in 2020
As lockdown ensued you can start to see the sharp increase in eCommerce growth in 2020. Six months in and South Africa has already added as many online stores as in were added in the whole of 2019.
June 2020 online store breakdown
As you can see the majority of the online stores launched in June chose WooCommerce, but Shopify and Wix are growing quicker.
June 2019 to June 2020
Comparing the YoY (year on year) growth of June 2019 to June 2020 it's incredible to see the impact of Covid-19 with a 306% change.
Overview
Collectively South Africa has over 54k online stores. Here's the full breakdown of the platforms, including the amount of stores added in June 2020. Below we share a link to a migration report we've put together which looks at the movement between platforms in the past year.
Stores by Category
We looked at over 500 stores (20% of stores that launched in June 2020) to gain some insights into which categories make up the bulk of stores. Below we highlight 8 categories and trends that we've spotted. Click on the icons to read more about the categories and to see some examples of newly launched businesses.
Popular Categories
Click on the categories below to read more about the trends we're seeing in each category.
New Stores by Location
Here's the breakdown of online stores launched in June by Province. Click on the regions to learn more.
Platform + Apps: the tools powering eCommerce
What follows is a quick overview of the top themes and tools being used to help drive eCommerce in South Africa. Keep an eye on ecomm.africa for more blogs and guides soon.
Most Popular Themes
Divi, Flatsome, Avada, Astra, and Ocean WP.
Free - Debut, Supply, Venture and Brooklyn.
Paid - Prestige, Testament, Pipeline, Empire and Blockshop.
Porto, Ultimo, Athlete, Intenso and Argento.
Most Popular Apps, Plugins and Extensions
Here's a breakdown of the most popular apps and/or services in the four most popular eCommerce platforms in South Africa. Note that Wix is in it's early days of localising it's product in South Africa.
Payments Moves in 2020
There's been some interesting moves in the payments space in the past few months.
• Yoco launched their WordPress/WooCommerce plugin delving into a more omni-channel role.
• Peach Payments is the first provider to support Wix in South Africa which you can clearly see has had an impact on Wix Stores growth.
• Payjustnow and Payflex are popping up on more sites particularly for higher value goods (R500 and up), it's clearly a fast growing space. Payjustnow was added to Shopify as an alternate payment method.
• Wirecard is in the midst of a whole lot of trouble brewing but it seems things are business as usual for now.
• DPO the company that acquired Paygate and Payfast was acquired by Network International.
Conclusion
As you can see we've entered a new era of eCommerce in South Africa. It's important to note that in spite of the growth and opportunity represented in this report there's still much work to be done. For every winner in the world of eCommerce there's three sites that launched and will never see a sale. It's hard work to build an online business. Our hope is that we can create resources that are useful for you if you're pursuing an online business. We also want to bridge the gap between businesses and other eCommerce professionals so be sure to keep an eye on this space.
We hope you enjoyed our report on the impact Covid-19 has had on eCommerce in South Africa, until next time, keep safe, support local and reach out to us if you have any questions.
