Picture: THINKSTOCK
Picture: THINKSTOCK

DESPITE a very developed and competitive retail landscape, South Africa lags behind in online grocery retailing and will need at least to double internet usage before it sees a rise in e-commerce, Cedric Bra, a retail analyst at Euromonitor International, says.

Among South Africa’s major retailers, only a handful have set up online stores and the effect on the bottom line is yet to be seen. Even the most active players in the grocery space, Pick n Pay and Woolworths, derive less than 1% of their total sales from the internet.

Mr Bra says this is a consequence of the low penetration of internet in South African households. "At 11%, it is four times lower than Brazil, although both countries have a similar gross domestic product per capita."

By global standards, online shopping activity in South Africa is small, but retailers are optimistic about an uptick.

Faster and cheaper broadband would be the tipping point for e-commerce in the country, Woolworths CEO Ian Moir said last week.

"It’s still slow in South Africa and you don’t have the delivery infrastructure that you’ve got elsewhere, and there are security issues, but all this will eventually be overcome. There will be a tipping point and the acceleration post that tipping point is remarkable, as we’ve seen in other markets," Mr Moir said.

"Online will come. We are spending a lot of money to make sure we have the best platform, so when the tipping point comes we are prepared and able to maximise our sales and our profit from this channel," he said.

Mike Cotterell, GM for Pick n Pay online shopping, said last week that gaining the trust of customers in using credit cards online was a challenge, but had improved "dramatically" over the years.

Mr Cotterell said the typical online grocery shopper had historically been in the higher living standards measure (LSM) groups, but was now moving further down the LSM bands. "We see our typical shopper as someone who is looking for convenience."

Stanlib retail analyst Theresa Heath predicted that e-commerce in South Africa would grow a lot quicker than estimated. "A lot of people have access to the internet via smartphones now. When online grew in developed markets, smartphones didn’t have the penetration, so people had to have access to a computer terminal to shop online, whereas now you don’t need that any more." Mobile sales capability will be vital for retailers soon.

Mr Bra said:"Since consumers can easily browse and research products on their mobile devices, they are more likely to spot price gaps between different companies for the same product or be aware of promotions at their local store."