Arthur Goldstuck | CEO | World Wide Worx | @art2gee | mail me |
A blueprint is emerging for online retailers in South Africa. Ahead of Amazon entering the local market, setting up a titanic battle for customers with market leader Takealot, a new study shows that there is not only room for new entrants, but also opportunity for growth for incumbents.
The Online Retail in South Africa 2023 study, we conducted with Mastercard, showed that online shopping shot up from 27% of adult South Africans in 2020 to 38% in 2022. The headline number alone showed that the pandemic boom in the sector was not a once-off shot in the dark.
Findings
But lurking beneath the numbers was a startling finding: the over-64 age group, which joined the rush to ecommerce in 2020, was the only segment to reduce its online shopping in the following two years.
“The oldest age group has a strong reticence towards online shopping, which is backed up by another finding that this bracket is the most likely to still prefer in-store shopping experiences.”
– Gabriel Swanepoel, Country Manager at Mastercard Southern Africa
In fact, the widespread view that in-store shopping is preferable to online is doubly true for over-64s: 41% agree with the statement versus 24% for the youngest group of adults.
The data emerged from the study’s analysis of the annual Target Group Index (TGI) survey conducted by Ask Afrika. It interviews 16,000 South Africans every six months to gather data on their purchasing behaviour and attitudes, and provides the most detailed demographic breakdown of online shopping available in the country.
Overall age breakdown
While this data reveals differences in gender, income and education, in terms of propensity for shopping online, no demographic measure shows as strong a divergence from the rest as age of shoppers.
The overall age breakdown has also seen a significant shift from 2020. During the pandemic, online shopping had “normalised” across age groups and, in that year, an average of 27% to 30% penetration was seen in all age groups up to the age of 64.
Only in the 65+ age group did we see a significant drop off, down to 19%. This was still dramatically up on less than 4% two years before. Back in 2018, online shopping was strongly related to age, and that pattern resumed in 2022: it peaked in the 25-34 age bracket, and then steadily dropped off with each successive age group.
The 25-34s are clearly the sweet spot for online retail: almost half of adults in this age group shopped online last year. This was three times higher than the over-64s, which came in at only 16%.
At first sight, this suggests retailers looking to grow their market share or customer base should be targeting the younger segment, and ignoring the older. In reality, the opposite is true. The 25-34 segment is heavily saturated, with characteristics like income and education representing something of a ceiling.
On the other hand, the over-64s showed that, given a strong enough incentive, they will venture online. The fact that penetration in this segment jumped so dramatically in 2020 reflected a fundamental truth of online retail. If they want it, and they need it, and they can’t get it anywhere else, they will come. If the price is right, delivery cost is minimal, and fulfilment is seamless, they will keep coming back.
In conclusion
Now, more than ever, it is crucial for retailers to understand their consumers. Understand who they are, where they are, and how our country’s economics affect them. This will assist in understanding how and where to reach the targeted consumers, therefore creating a seamless consumer experience from online to in-store.
Of course, it’s easier said than done. But all of these features add up to a blueprint to grow online retail further in South Africa.
