South Africa sitting on a R14 billion goldmine – that’s only getting bigger

South Africa’s on-demand grocery and fast-moving goods delivery market is estimated at around R14 billion, but still only makes up a tiny fraction of retail and e-commerce sector, which major players see becoming a R90 billion-plus contributor to the economy over the next decade.

South Africa’s on-demand grocery shopping sector has garnered significant attention over the past few years, with more and more people choosing to shop for essentials from the comfort of their own homes.

While it might seem that grocery delivery bikes outnumber other vehicles on the road and that there are more delivery workers than actual shoppers in supermarkets, “in South Africa, grocery e-commerce is still a tiny fraction of both total e-commerce and total grocery retail.”

This is outlined by Nicola Allen, a senior analyst at retail business research and insights company, Trade Intelligence.

“Retailers are very selective and often inconsistent about the data they share on their e-commerce efforts,” said Allen.

Some report volume growth percentage, others value growth percentage and, though rare, others report share of total revenue and others declare its online food sales as a percentage of its total food turnover.

So “getting to an accurate market estimate is challenging,” Allen explained.

However, through its market size model, Trade Intelligence calculated the value of the Fast-Moving Consumer Goods (FMCG) e-commerce segment to be R13.9 billion in 2023, or 1.8% of total FMCG retail. 

Can it really be that small?

Allen said that the big players in South African grocery e-commerce (Checkers, Pick n Pay, Woolworths, SPAR) are nowhere near as big as Shoprite Retail, which has only just begun to dip its toe in the e-commerce pool (i.e. with Shoprite Cash & Carry e-commerce).

“For grocery e-commerce to hit 30% of total grocery revenue (this is the most common estimate Trade Intelligence has encountered), it would mean that every third till in every grocery store in South Africa would be processing only e-commerce purchases bound for delivery by the branded motorbikes,” said Allen.

Allen added that currently, neither Boxer nor Usave generates any of their significant turnovers via e-commerce.

However, “it’s definitely a significant and untapped opportunity.”

“But the main barrier is likely to be cracking the last mile component of getting deliveries quickly and safely to shoppers’ homes, which, for the big discounters like Usave and Boxer are largely in informal settlements.

“Basket sizes are also unlikely to be as big as for Sixty60, asap! and Dash, and the R35 delivery fee could be a deterrent for shoppers who can access a conveniently situated Shoprite or Boxer ‘for free’,” added Trade Intelligence.

Why invest in e-commerce?

Due to its growth, Trade Intelligence’s R13.9 billion estimate factored in +44.1% year-on-year growth – a significant number.

Allen explained that while growth rates have already started moderating as the market ‘matures’ (although Checkers Sixty60, the ‘pioneer’ of local on-demand e-commerce, is barely five years old), indicators of future growth are all positive.

The senior analyst explained that retailers are still in full growth mode, with initiatives like:

• Launching improved apps
• Expanding e-commerce to more locations
• Targeting underserved townships (e.g., SPAR2U, Sixty60)
• Adding general merchandise and prescription drugs (e.g., Sixty60, Pick n Pay ASAP, Zulzi)
• Offering marketplace services to suppliers (Makro)
• Introducing subscription options (Sixty60, Takealot)
• Promoting ‘click and collect’ (Pick n Pay, Woolworths)
• Investing in dark stores (Sixty60, Woolies Dash)
• Bringing online group buying to groceries (SolShop)
• Offering flexible bundle options (GooGro)
• Experimenting with live shopping (Pick n Pay ASAP)

Additionally, beyond what the FMCG e-commerce players are doing, Allen said that “positive forces are supporting the ecosystem too,” which includes:

• New international players like Shein and Temu are growing the overall e-commerce market, potentially being a ‘gateway’ for added online grocery shopping
• In Trade Intelligence’s surveys of online shoppers, the majority say they plan to shop online more in future, whether for groceries and/or other products
• Digital access and infrastructure are still improving, which will facilitate access to online shopping for more people
• Grocery shopping is starting to leverage the power of social media

Overall, “indications are that FMCG e-commerce will continue to ‘deliver’ growth,” added Allen.

For more, refer to the Trade Intelligence E-commerce Channel Report.

This view of a prediction of growth in FMCG e-commerce has been echoed by various other analysts, including in McKinsey & Company’s 2024 State of Grocery Retail in South Africa report.

“Our 2024 consumer survey indicates that 26% of South African consumers plan to increase their online grocery shopping this year, significantly higher than in global markets, where interest is stabilising,” said the group.

The report notes that convenience drives online shopping, with 43% of consumers citing time saved from not visiting a store as a primary reason, and around 30% appreciating the flexibility to shop when it suits them.

“While online sales are still less profitable than offline sales, retailers are increasingly using their online channels to attract new customers, especially in the higher end of the market, which improves the economic equation for these businesses,” said the consultancy group.

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