South Africa's online retail business grew to $3.8 billion (R71 billion) last year and is likely to exceed $5 billion (R100 billion) within the next two years.

This is according to a new report released today by World Wide Worx in conjunction with MasterCard, Peach Payments, and Ask Africa.

According to the analysis, this tremendous development marks a 29% increase from 2022, putting the sector on track to surpass $5 billion by 2026.

The study also highlights the success of Shoprite Checkers' Sixty60 service, which witnessed a 63.1% increase in the latter half of 2023, as well as Pick n Pay's 76% increase in online sales and Woolworths' 47% increase in online sales.

Takealot, the country's largest online store, had only a 6% increase in sales.

The report observes that the overall growth coincides with a little fall in total retail sales, the second this century, highlighting the growing importance of online platforms in the retail industry.

As part of the study, World Wide Worx conducted an industry survey among South African retailers, which revealed that customer service was critical to online retail success, with 73.9% of respondents highlighting its importance.

According to World Wide Worx, stock availability and a diverse choice of quality products were also significant, but competitive price and personalised offers were less important.

This is expected to change when artificial intelligence is used to personalise offers, according to the company. Payment problems (18.2%) and dealing with customer queries and complaints (16.8%) were the industry's most significant operational challenges.

However, denied payment cards were stated to be the most common reason for cart abandonment by consumers (52.2%).

Concerns about credit card security and difficult checkout processes were also major reasons in abandoned carts.

"The strategic shift towards competitive e-commerce offerings and enhanced customer engagement, including sophisticated AI-driven tools, has fundamentally transformed the retail landscape in South Africa," says Arthur Goldstuck, CEO of World Wide Worx.

Gabriel Swanepoel, country manager of Mastercard South Africa, adds: "Our collaboration has streamlined payment processes, making online shopping easier and more secure, thereby increasing consumer confidence and contributing to this growth."

For Rahul Jain, CEO of Peach Payments, the findings underscore how his company also enabled the proliferation of new payment methods such as Buy Now Pay Later that meet the evolving demands of the consumer.

He says: “In turn, this allows consumers to spend more online with greater confidence. Merchants are utilising our enterprise grade infrastructure to make their financial operations more efficient as they continue to capitalise on this growth.”

Andrea Rademeyer, founder and executive chair of Ask Afrika, notes the demographic data supplied by the company’s Target Group Index (TGI) survey underscored a significant shift in consumer behaviour.

He explains: “As South Africans move more of their spending online, they also become more confidents in the medium, and increase their individual levels of spending. Most significantly, they are becoming more aware of the increased convenience and choice available online."

Goldstuck says the overall findings provided a powerful indication of continued future growth: “This comprehensive report not only reflects the current state of online retail but also forecasts continued robust growth in the sector, partially driven by the arrival of Amazon.com in the local market,” he notes.