On-demand delivery game-changer in South Africa
On-demand grocery shopping has proven to be a game-changer in South Africa’s retail market – for both consumers and retailers.
It offers the convenience of browsing and purchasing a vast selection of items, from fresh produce to household staples, without the stress of crowded aisles or long checkout lines in just a matter of clicks.
This has seen users flock online in droves, with an estimated ~40% of South African adults using online shopping, making online continue to grow in its share of the country’s overall retail sales.
“In recent years, we have witnessed a remarkable transformation in consumer behaviour, with a notable shift towards the use of digital channels for shopping,” said Gabriel Swanepoel, the Mastercard country manager for Southern Africa.
In 2013, the annual revenue for online retail in South Africa amounted to R4.43 billion, growing to over R71 billion in 2023 and expected to break the R100 billion mark in 2026, according to the Online Retail in South Africa 2024 report by World Wide Worx, in partnership with Mastercard, Peach Payments and Ask Afrika.
As such, most of South Africa’s biggest grocery outlets have (and often very successfully) jumped on and reinvented the bandwagon in the country. This includes that of Checkers Sixty60, Pick n Pay ASAP!, Woolies Dash, and SPAR2U, to name a few.
“This transition [to on-demand shopping], driven by advancements in technology and changing consumer preferences, has redefined the way businesses engage with their customers and conduct commerce, giving them the competitive edge,” said Swanepoel.
Such a move has proven to be beneficial to the grocery outlets’ balance sheets.
The online retail study points out the success of Africa’s largest grocer, Shoprite, with its Checkers’ Sixty60 service.
“Once again, Shoprite Checkers was the star of the online retail stage,” said World Wide Worx.
“While its overall sales grew by 13.9% in the second half of 2023 to R121.1 billion, it reported that its Sixty60 app-based service had ‘surged’ by 63.1% in the same period,” it added.
By contrast, the country’s largest online retailer, Takealot, grew sales by only 6%.
Key statistics highlighting the contribution of Checker Sixty60 to the e-commerce scene in South Africa are:
- 4.5 million downloads, making it one of the most widely-used apps in South Africa;
- Delivery fulfilled from over 505 stores, which is just ahead of Pick n Pay as the largest e-commerce footprint in the country; and
- A tenfold increase in sales since the first half of 2021.
The group’s revenue went from R147.5 billion in the year of Checkers Sixty60 launch (2019) to R215 billion in 2023, as per an analysis by The Outlier.
A hint towards its success could be found in a minor detail mentioned within its interim results at the end of 2023: direct communication with customers through 454 million personalised offers.
Pieter Engelbrecht. CEO of the Shoprite Group, said that “advanced analytics capabilities brought in-house to enable precision retailing, and investment into Al-led pricing and promotion engines,” has significantly boosted the retailers standing.
Recently, Checkers announced that it will be beta testing a new and improved version of its Sixty60 app.
This will expand its item listing to over 10,000 larger Hyper products in hopes of being fierce competitors to likes of other online retailers offering similar larger items, like Takealot and Amazon.
Although a dominant player in South Africa’s on-demand grocery landscape, Checkers Sixty60 is not operating without others biting at its heels.
Pick n Pay reported that online sales in the half-year ended 27 August 2023 leapt by 76.3% year on year, compared to a previous strong jump of 72%. The retail group’s total sales grew by only 5.4% in the same period.
The company attributed online growth to a doubling in its on-demand platforms, comprising both the ASAP! app and Pick n Pay groceries that are on Takealot’s Mr D app.
In its interim report, the retailer attributed its growth to the ramping up of its online services.
“Online execution continues to be ramped up, with 25,000 products now available on asap! and 500 stores (including supermarkets and liquor stores) now on the platform,” said Pick n Pay.
Looking at Woolworths, the retailer reported online sales increased by 47% for the year ending on 23 December 2023, saying it was driven primarily by increased penetration of the on-demand Woolies Dash offering.
For the full fiscal year, Woolworths recorded a food sales profit of R1.595 billion, showing an increase of 13% compared to the previous year. The overall food sales reached R22.9 billion, up by 8.4% from the year before.
Of the total sales in South Africa, online sales accounted for 5.1%, which translates to an online turnover of R1.1679 billion.
“While the online growth rates of Shoprite, Pick n Pay and Woolworths were spectacular, it must be borne in mind that they came off the back of massive investments in online systems,” said World Wide Worx.
At Woolworths, expenses were up 11.1%, driven by a combination of load shedding and online costs.
Looking at Spar, they recently adopted an “e-commerce as a service” strategy, given the shifting dynamics of shoppers’ preferences.
Their 2U delivery service expanded significantly during 2023, launching 269 SPAR2U to bring their total to over 350 sites.
“From a technology perspective, the focus was to stabilise the app and back-end infrastructure to support the complexities of the multi-store model,” said the company in its recent annual report.
Spar is now focused on upgrading the user interface and experience, and integrating rewards into the app, however like the previous retailers, the solution requires substantial financial capital as it “invests in a suitable platform and team,” added the retailer.
The future of online retail in South Africa is predicted to transform and grow in the years to come.
“As South Africans move more of their spending online, they also become more confident in the medium and increase their individual levels of spending,” said Andrea Rademeyer, executive chair and founder of Ask Afrika.
“Most significantly, they are becoming more aware of the increased convenience and choice available online,” she added.
Thus, the future success of retailers hinges on strategies for sustainable competitive advantage, particularly in the online space.
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