The future of online shopping in South Africa is not quite what you think

This past week, Mastercard released its first South African SpendingPulse report.

The report, which is published worldwide, is based on transactions across every payment medium – including cash, wire transfers and credit cards.

This equates to over 80 billion transactions processed annually in 210 countries, and provides an accurate representation of consumer spending habits.

Speaking at the report’s launch event, Sarah Quinlan, senior vice president and head of market insights for Mastercard, indicated that one of the biggest changes in shopping trends came after the 2008 recession.

She said that it was no longer “chic” for consumers to flaunt their wealth with flashy purchases, and those who had previously spent money on big-ticket items have now cracked down on the “appearance of being wealthy”.

This has coincided with the rise of millennials’ purchasing power, who have typically lived up to their stereotype of buying “experiences” instead of products, she said.

South Africa is no different, and following the recent uptick in consumer spending in the country, more South Africans are looking to buy “time” as opposed to “things”, she said.

“MasterCard has already seen this change in data as more South Africans go to McDonald’s on a Tuesday or Thursday night as opposed to the weekend, as well as an increase in in-country travelling.”

Online shopping

Speaking to BusinessTech on the sidelines at the event, Quinlan said that this mindset change has also begun to affect local and international online stores.

“The online shopping that is happening here in South Africa is primarily the purchasing of commodity goods,” she said.

“This is why the number one selling online item in South Africa is electronics. People don’t have time to shop and then return items, so instead they are primarily buying devices like smartphones because they know exactly what they are getting.”

This is in contrast to buying something like a blouse and hoping its the right size and colour, or trying to guess the quality of food, she said.

This issue was not unique to South Africa, and online retailers around the world were battling with the perfect “ideal” of online shopping because they could not handle the logistics involved.

Citing Amazon as an example, Quinlan said that it was incredibly costly for the company to have to deal with returns, as well as trying to offer the same level of service to everyone.

“It sounds really good but it’s not very convenient,” she said. “Not everyone has a doorman”.

As a result, she predicted that the online stores that are likely to do the best in South Africa are those that offer an incredibly specific or niche product (likely based around electronics) and offer a high level of service.

Selling services

In line with South Africans valuing their time and experiences over material possessions, the most successful online stores in South Africa will be those that offer services or a service alongside a product, said Quinlan.

Citing South Africa’s recent rise in spending on cosmetics as an example, she said that those companies that sell make-up alongside a course on how to properly apply it will be the most successful.

“People don’t have time to shop and then return items,” she said.

“This is why it is very important that retailers curate their experiences”.

Read: South African consumers are fighting through Zuma politics and uncertainty

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The future of online shopping in South Africa is not quite what you think