South African internet retailing market to increase at a CAGR of 10%

Press Release   •   Jun 07, 2013 14:52 BST

The South African internet retailing market increased by 20% in current value terms through 2012, reaching an industry value of R3.3 billion.

Internet users are slowly maturing in terms of understanding the importance of the internet and how it can simplify their lives. The confidence in transacting online is slowly increasing, as online retailers continuously try to increase the payment options for consumers and improve the level of security when carrying out transactions online.

Internet retailing continues to significantly grow in South Africa, as the number of online users continues to grow. The increase in the number of internet access platforms stimulated such growth; mobile phone operators in South Africa increased their offering on smartphones to subscribers at affordable rates for both calls and 3G services.

Cable internet service providers such as Telkom are now facing serious competition from mobile operators such as Vodacom and Cell C, and Telkom is likely to review their rates in the long term through their recently launched mobile division 8ta. This increased competition is expected to help the growth of internet retailing, which was previously limited to higher-income consumers only.

Internet retailers, however, still face a challenge in terms of consumers being willing to do business online. Very few people are willing to divulge their banking information online due to the high risk of credit card fraud worldwide. Instead, consumers prefer to check product availability online, and then go to complete the purchase in-store, and this significantly boosted the revenue for store-based retailers which have very informative websites.

Most retailers which provide online shopping prefer to take payment through credit card, and this has limited their market to mostly high-income consumers who can afford to get credit cards. Credit cards in South Africa are only issued to people who are employed and have a stable income, and those not employed or informally employed can only afford to get debit cards from their financial institutions.

South Africa's internet retailing market is still fragmented, as there are so many retailers. The leading retailer in 2012 was Kalahari.Net, which held a share of 7%, and the company anticipates extending its lead in the channel.

For more information on the South African internet retailing market, see the latest research: South African Internet Retailing Market

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