E-Commerce in South Africa: A Guide for Businesses

7th ,November, 2023
SME Guides
Introduction

E-commerce in South Africa has revolutionised retail by moving the traditional store online.

For consumers the benefits are greater convenience and access to a wider range of goods. Consumers can now, using their smartphones, choose any product or service they want, from any supplier, anywhere in the world without leaving their homes. Additionally, consumers benefit from cost savings as products offered over the Internet are generally cheaper than those in the shops.. The greater availability of product information online also means the consumers are able to make a more informed decision. 

For retailers the impact has been equally significant. E-commerce has opened up a whole host of opportunities for businesses. The biggest benefit is its lowered cost of business by doing away with the need for a bricks-and-mortar store. This means businesses save on rent, signage, sales equipment, as well as various staff requirements. 

E-commerce technology has also brought greater efficiency and profitability to the retail process. Businesses can access and analyse customer data such as their preferences and shopping behaviour to improve sales performance. Finally, businesses owners can now reach a wider market because they are no longer limited to a single geographical area.

E-commerce Growth In South Africa

Online shopping has become the preferred way to shop for millions of consumers across the world. This growth is being driven by the rise in mobile commerce, a growing middle class and improvements in logistics and delivery infrastructure. South African consumers have also become more tech savvy and are more comfortable shopping online.

E-commerce growth in South Africa has accelerated by the COVID-19 pandemic. A Mastercard study on consumer spending has revealed that 68% of South African consumers are shopping more online since the onset of the COVID 19 pandemic.

South African online sales increased by 66% from 2019 to 2020 to more than $1.8 billion (ZAR30 billion). The top e-commerce product categories in South Africa are data and airtime, clothing and apparel followed by online entertainment. Groceries saw an increase of 54 percent from 2019, driven by the COVID-19 pandemic and lockdown restrictions. There is also growth in most food delivery platforms from both grocery and fast food/convenience.

This growth is not expected to slow down anytime soon. According to Statista, the e-commerce market in South Africa is expected to grow to US$11.58bn by 2027.

Challenges And Opportunities For E-commerce In South Africa

The current state of e-commerce in South Africa is promising. South Africa’s relatively low number of people shopping online means there is massive growth potential in the market as more people get online.

The Global Digital Report for 2023 published by We Are Social and Maltwater shows that less than half (47.7%) of South Africa’s internet users actually making online purchases.

Even with massive opportunities that exist in this market, there are challenges that entrepreneurs entering this market are likely to face.

Limited internet access continues to be a barriers in some areas of the country. An ITWeb report shows that as of January 2021, South Africa had 38.13 million active internet users, which indicates that a large proportion of citizens do not have access yet. This can limit the reach and effectiveness of e-commerce businesses. Adding to this, high levels of financial exclusion in the country means that many people don’t have access to traditional payment methods like credit and debit cards, making it challenging for e-commerce businesses to process payments.

Logistics and delivery challenges are additional barriers to the industry’s growth. E-commerce deliveries are hampered by unpaved roads, lack of standardised residential address systems, overcrowding and security concerns. Problems with last-mile delivery, which refers to delivery of products from the distribution centre to a customers doorstep, also holds back the enormous potential for online retail growth. Finally, there is still a certain level of distrust among consumers with online shopping, particularly with making online payments.

Businesses that are able to overcome the challenges and tap into the opportunities have the potential to succeed and grow.

Strategies For Building A Successful E-commerce Business In South Africa

It takes careful planning to build a profitable e-commerce building. The strategies below can improve your chances of success and growth in a competitive and rapidly changing market.

1. Choose a profitable product to sell

Selecting the right product or service can determine the ultimate success of your business. There are many profitable niches that entrepreneurs can explore.

Currently, the tourism and entertainment industries, consumer goods, and professional services are the sectors that possess the greatest e-commerce capabilities and notable levels of penetration in South Africa.

A Bizcommunity report shows that the three most popular online shopping categories for South African consumers were clothing/apparel (53%), entertainment/education (digital/downloadable) (51%), and event tickets (51%). Other emerging product categories in South Africa are pet accessories, men’s grooming and electronic goods .

2. Conduct market research

Most businesses don’t succeed because they are selling the wrong product or service. Market research is essential for e-commerce businesses because it provides valuable insights into the market, customers, and competitors which is key to the success of your business.

As part of your market research process – some of the questions business owners should consider include:

  • Who is our target market
  • What are their needs and pain points
  • Are there any gaps in the market that you can fill
  • What does profitability look like – including cost of goods sold, shipping costs, and other expenses associated with selling the product.

Once you have identified your target market and understand their shopping behaviour, you can start to customise your online store to provide them a better customer experience. You can also target your marketing campaigns to appeal to your ideal customer to drive more sales.

Read: How to Start an Online Business in South Africa 

3. Market your business

Marketing is key to the success of e-commerce stores. Promoting your e-commerce store increases the visibility of your business among potential customers and can help you gain a competitive advantage. Marketing is also one of the best ways to build a relationship with customers which can help drive repeat businesses.

Digital marketing tools make it easier, than ever, to drive potential customers to your store and drive sales. Business owners should consider using a mix of sales tactics. These can be leveraging Google ads, targeting keywords with high purchase intent, creating SEO-optimised content, and developing instructional videos that provide solutions to common queries.

Below are some the digital tools e-commerce store owners can take advantage of

  • Social media
  • Email marketing
  • Paid ad campaigns
  • Influencer marketing
  • Pay-Per-Click (PPC) Advertising
  • Affiliate marketing
  • Customer testimonials and reviews
  • Search Engine Optimisation (SEO)

Each of these platforms allow businesses to connect with potential customer and warm them up to make a purchase on your website. Social media, in particular, can play a strategic role in driving online sales. The ‘2022 South African Digital Customer Experience Report’ found that 10% of all e-commerce sales take place directly via social media platforms such as Instagram, Facebook and WhatsApp.

The article ‘Customer Acquisition Through Social Media’ identifies the following tips and tactics for using social media for customer acquisition.

  • Choose the right social channels (Facebook, Twitter, Instagram or Tick Tock).
  • Create Compelling Content.
  • Promote user-generated content through strategic giveaways, working with influencers, running branded hashtag contests.
  • Partner with influencers to build brand awareness and maximize your social media reach.
  • Partner with other brands on social media to increase your reach and tap into new audiences.
  • Brands can use their social media channels to provide customer support.
  • Finish off your social media content with a powerful call to action (CTA).

3. Build a trustworthy e-commerce store

Many South Africans continue to be wary of buying online because of fraud concerns. For customers to spend money in your store it must generate trust.

Below are some of the effective ways you can make customers feel safe and secure buying from your website:

  • Ensure your website is secure – An SSL certificate provides a way for visitors to verify that the website they are on, indeed belongs to the associated domain name.
  • Have a clear privacy store – Let your customers know that their credit card information, login details and email addresses are safe on your website.
  • Use a reputable payment gateway
  • Make sure that customers have a way of reaching your business such as an email address or phone number.
  • Return policy – Clearly state your return policy and make it easy for customers to initiate a return if they are not satisfied with their purchase. This will show customers that you stand behind your products and care about their satisfaction.
  • Customer reviews – Display customer reviews on your website to show potential customers that others have had positive experiences with your store and products. This can help build trust and increase the likelihood of a sale.

Read: Website Design Musts to Gain Your Customers’ Trust 

4. Provide a seamless purchase journey

Customers want a positive shopping journey if they are to spend money in your store. You can make them comfortable by making it easy for them to move through your e-commerce store with ease.

Here is a checklist of website musts to convert customers:

  • Emphasise your value and help your customers see exactly what they will be getting and how it will make their lives better.
  • Clear and easy navigation make it easy for customers to find what they are looking for.
  • Have clear product and shipping information.
  • Ensure safe and secure payment.
  • Make the checkout process simple and easy to understand.
  • Ensure that your website is optimised for mobile devices, as more and more customers are shopping from their smartphones and tablets.

Read: Encourage and Win Over Regular Customers to Your E-commerce Store 

E-commerce Technology Tools

Launching an e-commerce store has never been easier owing to tech tools that are now easily available to small business owners.

E-commerce website builders enable ecommerce businesses to quickly and easily create and manage an online store with ‘plug-and-play’ mechanisms and professional templates.

Some key features for your e-commerce website are responsive website design, user-friendly navigation, security features, shopping cart and checkout buttons With buyers increasingly using their smartphones to make purchases, it’s equally important that your website is mobile responsive.

Read: Top E-Commerce Website Builders for Small Businesses 

Payment gateways enable businesses to receive payments online via an e-commerce store.

There are many payment gateway options available to businesses. Some of the most important features to consider are easy shopping cart integration, detailed reporting, security and one-click checkout. Payment gateways also offer multiple payment options. In addition to credit and debit cards, payment gateways can also process other alternatives such as Masterpass, Zapper, SnapScan, Mobicred, PayPal, as well as SiD Secure EFT and MoMoPay.

Read: The Top Payment Gateways in South Africa