Online vs physical retail shopping – which is cheaper in South Africa

E-commerce retailers grew their share of the South African technical consumer goods market by 52% in 2017, accounting for 6.9% of total consumer spending by rand value for the year.

This means online shops have nearly doubled their share of the market since 2015, according to new research from GfK South Africa.

GfK South Africa’s report indicates that more than 44% of connected consumers claim to have made a technical goods purchase online in 2017 – including consumer electronics, telecom devices, IT, photo equipment, TV, audio and video, and office equipment.

“E-commerce in South Africa is still in its infancy compared to European markets, where a quarter of technical goods spending goes through digital channels,” said Cherelle Laubscher, senior retail manager at GfK South Africa.

“However, growth in South Africa is strong and shows no signs of declining as bargain-seekers flock online to buy technical consumer goods like smartphones, IT, consumer electronics, and major home appliances.”

Though they dominate the market, GfK found that traditional stores are not growing the value of the sales they generate in technical goods as quickly as the digital players. E-commerce retailers are seeing strong growth in smartphones, panel televisions, small domestic appliances, gaming consoles and laptops.

Survey respondents cited better prices, attractive promotions and wide product selections as major reasons for shopping online rather than at a traditional store. By contrast, experiential factors such as getting to see and feel goods motivate shoppers to go to physical stores.

GfK South Africa’s point of sale data indicates that the consumer perception that e-commerce prices are lower than in-store prices is accurate – more than two-thirds of the top 100 sellers among technical goods products in South Africa are cheaper through digital stores than at physical retailers.

In addition, across the top 100 products, online prices are an average of 4.7% cheaper.

The report found that online retailers perform particularly well during seasonal promotions – they seized their highest monthly share of the South African technical goods market in November 2017, largely thanks to the impact of their Black Friday promotions.

Meanwhile, 45% of connected consumers in the survey claimed to increasingly use the internet to buy products online compared to the previous year.

Just under half of survey respondents have made an online purchase after seeing a product in store. About six in ten went to a physical store to buy a product after seeing it online. Mobile phones also play an important role in the customer journey, with two thirds of connected consumers using their smartphone to help shop for a product or service in the past six months.

The study highlights delivery costs, information security fears, and concerns about the ease of returning goods as reasons consumers cite for caution when shopping online. Connected consumers say better delivery options, discounts and loyalty programmes are among the pull factors that could entice them to shop for technical goods online.

Debt

While South African consumers increasingly turn online for their shopping, a worrying amount of young buyers are also going into debt to do so, according to DebtBusters, which found that 27% of people who have asked for financial assistance in the last three years are between the ages of 24-32.

This aligns with the results of a youth survey conducted by The Credit Ombud Office in 2017, which involved about 250 young people between the ages of 18-30 in Gauteng, and showed that most of those surveyed had debt, and had opened accounts from as young as 18 years of age.

The survey showed that the most prominent of the credit accounts opened were clothing accounts, personal loans and credit cards.

“With the digital age upon us, we also have a very tech savvy youth who are conscious of keeping up with the latest technology and trends. We are living in a brand conscious society, where significant value is placed on the clothing we wear, the cars we drive and the gadgets and accessories we possess,” DebtBusters said.

“Whatever the reasons may be, the youth should make sure that they can fully understand and afford the long term commitment of taking out credit, as well as the implications of the interest rates and fees attached to a loan,” said Ian Wason, CEO of the Intelligent Debt Management Group, of which DebtBusters is a subsidiary of.


Read: New report shows the good and bad of consumer debt in South Africa

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