Despite the slow-down in growth of online retail in South Africa, the number of retail web sites has exploded: from 215 at the end of 2001 to at least 719 at the end of 2003.However, the market is dominated by the top eight online retailers, who between them account for about 80% of all online retail sales in South Africa, according to “The Goldstuck Report: Online Retail in South Africa 2004”.

The survey by World Wide Worx found that online sales by retailers – which exclude property, cars and travel – increased by 35% in 2003, but are expected to grow by only 25% in 2004. A total of R341-million in online retail sales was achieved in 2003 – a mere 0.14% of the overall retail market in South Africa.

Of this, around R66-million in sales, or 20% of online retail, was recorded over the November-December holiday shopping season.

This suggests that the holiday season is still important for online retailers, but far less so than for traditional retail.

“If online retailers have a bad year, they can’t rely on December to save them,” says Arthur Goldstuck, MD of World Wide Worx, who led the research. With costs of online retail high and margins tight, they have to be on their toes around the clock as well as around the year.”

The dominant online retailers are Pick ‘n’ Pay Home Shopping, Kalahari.net, Woolworths Inthebag, Netflorist, Cybercellar and Streetcar.com, with the MWEB ShopZone dominating the market in online shopping malls, followed by Digital Mall.

Growth for these players is steady, but not as strong as in past years, when an annual doubling of turnover could be expected. However, most of them are healthier than at any time in the past, and most are generally profitable on an operational level.

This is despite the high-profile failure of market leaders like The Shopping Matrix and StopQ.com, which based their value proposition to a great extent on heavy discounting.

“If one lesson has been learned in online retail, it is that discounting as a strategy is not sustainable during the early years of heavy investment in web site functionality and backend systems.”

The report includes in depth interviews with nine key executives in the e-commerce arena, and reveals the strategies behind the success stories in South African online retail.

Other key findings of the research included: