By Warrick Kernes, Founder of the Insaka eCommerce Academy
The way you shop is about to change. The way businesses do business is about to change. Shopping online and selling online is not new, but we all know that it has been growing rapidly over the last decade. With us being based at the bottom tip of Africa in a developing country, we have the opportunity to look to first-world countries and to use them as a crystal ball of sorts to see the trends there, which are almost certainly going to come here too.
Ecommerce as a share of total US retail sales has reached 14.5% and in China, it’s 25%. In South Africa, ecommerce has been growing steadily year after year. But even though we saw a major step-growth in the lockdowns of 2020 we’re still only sitting around 4%. So the extra growth, which is yet to come, shows a massive opportunity for businesses selling online. But it also indicates that things are going to change rapidly for consumers and how we shop.
A great indicator of how rapid this growth is can be seen from the stats shared by FNB. In 2020 I listened to Bruce Witfield’s interview with the Head of Growth at FNB Aluwani Thenga. At that time in 2020, he stated that they expect ecommerce in SA in 2025 to grow to R225b. But just two years later, we’re already at R200b.
Recently I was giving a presentation to FNB’s Management Team and I saw that Mr Thenga was in the audience. So I asked if this stat had changed and he confirmed that they’ve had to adjust their forecast from R225b to R400b!
So what does this all mean?
It’s a major opportunity for businesses to see growth and it also indicates that the way consumers like you and me are shopping is about to change, fast. Up till now, many South African consumers have largely limited their online shopping to stores within South Africa. You can actually easily order from Amazon US and have it delivered to your door (I’ll touch more on Amazon in a bit) but many consumers still prefer to shop local.
While I’m all for shopping local, we have shifted into a global village and shopping behaviour will naturally follow suit.
What are the major contributing factors to this shift in buying behaviour?
One major change coming into effect is the Africa Free Trade Area, which is aiming to simplify intra-African trade and to do in Africa what European countries have done with the European Union, where they have less red tape and are incentivized to do business within the trade area.
Right now someone in Pretoria may feel super comfortable shopping online from a company in Cape Town. But maybe they don’t feel as comfortable shopping online with a business in Ghana, Kenya or Egypt. Of course, trust is a major factor, but also the complexity of customs duties and VAT play a major role in this.
Apart from opening up new stores to shop from, another major benefit for us as consumers will be lower prices of the items that we buy when these items can be made in Africa. Currently, many items sold locally are made in China, and we all understand that this is due to the lower costs of manufacturing. But when the importing companies bring these goods, the importer pays import duties, which is kind of like a penalty for not buying that item from a local supplier. But up till now, these duties have been worth paying because the company can still get it cheaper than if they were to try to manufacture that same item locally.
The Africa Free Trade Area will mean that a company in SA could source from a clothing manufacturer in Ethiopia, for example, and not have to pay import duties. Even though the cost of manufacturing probably won’t be as low as in China, the savings on duties will actually make it cheaper overall. So not only will companies be able to source products cheaper and pass those savings on to consumers BUT, as you can imagine, this is also going to be a major job creator all across Africa and that’s just great news for everyone (everyone except for China).
Big changes are coming
Many international corporations are seeing Africa as the next big opportunity, and they are working hard to secure their part of that opportunity.
One of the world’s biggest online retailers, AliExpress (which is from China) has stated that they aim to get to a point where they can offer 2-day delivery anywhere in Africa. This would be great for consumers, but not so great for African retailers as the low prices of buying directly from China, even after import duties, will still be very appealing for African consumers. When this happens, it will be a game-changer for sure.
Amazon is opening up in South Africa. The fact that they have identified SA as their next expansion opportunity is yet another great indicator of the major growth yet to come in online sales. If they didn’t see the growth that I’m talking about then they wouldn’t be coming here.
But let’s not forget, there is another player in the game who’s going to have a significant role in jump-frogging the growth of online shopping right across Africa. And that’s Pretoria’s very own Elon Musk with his Starlink project, where he and a number of other players are looking to enable faster growth by putting a strong internet connection in the hands of Africa’s 1.4b people. And to do so at a nominal cost.
If the so-called Digital Divide can be removed entirely with everyone having access to the internet, then online retail right across Africa will accelerate at an incredible pace. For us consumers, this means more companies competing to offer us better products and services at better rates. So, let’s all get ready for the major changes in shopping behaviour which are coming in the not-so-distant future!
About the author
In 2010, being a serial entrepreneur at heart, Warrick Kernes founded the award-winning online store, Action Gear and went on to grow and scale the business to over R20 million in annual revenue. He later found himself with a deep desire to grow the South African eCommerce industry and help entrepreneurs achieve more success through selling online. This led him to sell his shares in his flourishing business, Action Gear and pursue his newfound mission of helping others to Start, Launch and Grow their very own online stores to achieve more income and freedom in their lives. Warrick then founded The Insaka eCommerce Academy in 2017 which has helped thousands of online sellers and is dedicated to empowering entrepreneurs with the best eCommerce training that South Africa has to offer.