World Wide Worx and Mastercard’s online retail study revealed that South Africa reached R55 billion in 2022, a 35% year-on-year increase.
Online sales growth was driven by a boom in demand for home deliveries which started during the extended lockdowns.
World Wide Worx CEO Arthur Goldstuck predicts that online retail will grow by 25% this year, generating R68 billion in sales.
“It is interesting to note that online retail will exceed 5% of total retail in South Africa. It is a magic mark which many people will pay attention to,” he said.
Takealot continues to dominate eCommerce in South Africa. With around R27 billion in gross merchandise value (GMV), it accounts for nearly half of all online sales in the country.
However, its growth rate slowed drastically in 2022. Takealot’s GMV growth rate declined from 72% to 15% over the last year.
The significantly lower growth rate and rising operational costs resulted in a much higher loss over the last reporting period.
Takealot’s loss increased from R34 million for the six months to September 2021 to R221 million for the six months to September 2022.
Takealot’s trading margin has also worsened to -3% versus -1% in the prior period.
Things are not going to become easier for Takealot in the year to come with increased competition from local and international players.
On the local front, Checkers Sixty60, Mr Price, Makro, Game, JD Group through Everyshop, and TFG through Bash.com are investing heavily in their eCommerce offerings.
Checkers Sixty60 grew turnover by 150% from July 2021 to July 2022, and Mr Price reported online retail sales up 48.2% for the year to April 2022.
Massmart’s eCommerce sales, which include Makro, Game, and Builders, rose by 50%, and Woolworths Food’s online sales grew 45.4% in South Africa.
However, Takealot’s biggest concern is not local eCommerce players chipping away at its dominant market position.
It is the planned South African launch of the world’s largest eCommerce company, Amazon, this year.
Amazon is the global leader in online shopping, and coupled with its Prime membership, it is a formidable online shopping competitor.
Amazon is well-known for its aggressive prices and excellent third-party marketplace, which will put pressure on Takealot.
Takealot Group CEO Mamongae Mahlare downplayed the impact of Amazon’s planned launch in South Africa.
She said the launch of an Amazon marketplace in South Africa in 2023 is a “compliment” to Takealot and its customers.
“It’s a great compliment to Takealot and the people that have built this business to where it is today, and our customers in South Africa that have supported that growth,” Mahlare said.
“It demonstrates that we have built something that has built an investment case good enough for global companies like Amazon to want to come here.”
Although Mahlare puts on a brave face, Amazon is the most feared eCommerce company in the world.
If Amazon creates a successful local presence, It will significantly impact Takealot and make it even more challenging for the company to become profitable.