EThe work and study from home movement had been struggling to gain momentum Globally until the Pandemic forced everyone to work and study remotely, and as a result has been adopted by many employers, universities, and schools post lock downs. The Pandemic has also changed consumer behaviour and online retail looks here to stay, with many consumers adapting to shopping online and realising the increased efficiency without having to travel and que to shop.
The PWC Global Consumer Insights Pulse Survey:
Accounting firm PWC conducted a survey in 2021 to analyse the shift in consumer behaviour to understand the permanency of the shift and whether physical shopping was likely to return to pre pandemic numbers in a post pandemic world. The 2021 Global Consumer Insights Pulse Survey reports a strong shift to online shopping as consumers were first confined by lockdowns, and then the work from home movement post lockdown. Results of the survey also indicated shoppers becoming more aware of prices and using online platform to research prices across a broad spectrum of suppliers before making their final purchase decision, something that can't be done while shopping in store. Consumers are now used to a wide variety of offering online, as opposed to the stock a single physical store can carry.
8600 people across 22 territories took part in the PWC survey and asked how often they had bought clothes, books, and electronics using online shopping channels. The results from the survey indicated a shift to digital and a growing trend for online shopping using devices like smartphones, tablets, and voice solutions like Google home. More than 50% of the participants in the survey indicated they had used digital devices more frequently than they had 6 months prior, indicating a shift to the digital age. The report also found that the use of smartphones to shop among the participants had doubled since 2018.
Mckinsey and Company US Consumer Survey:
A survey conducted by Mckinsey and company gives an indication of the shift to digital shopping channels and the types of products consumers are making. The survey found a 15-30% overall growth in consumers who made purchases online across a broad range of product categories.
Many of the categories see a double-digit percentage growth in online shopping intent, led by over-the-counter medicines, groceries, household supplies and personal care products, with Mckinsey concluding consumers intent to continue shopping online post the pandemic. The below chart indicates the results of the survey:
Source: Mckinsey and Company.
The Takealot Group:
The Takealot Group which includes South Africa's largest ecommerce retailer Takealot.com has seen an increase in revenue of 27% over 2021. In March 2021 the group reported a 34% improvement in in Gross merchandise value or GMV, which indicates the total value of merchandise sold. Within the Takealot Group also includes online clothing retailer Superbalist.com and Mr D Foods whose revenues grew by 43% and 62% respectively, confirming a shift in South African consumer behaviour. The high fixed cost business still reported a loss of R111 million however this represents a 1% trading loss margin for year end March 2021.
How to obtain exposure to the Takealot Group?
Naspers the JSE listed entity is the parent or holding company of the Takealot Group. Naspers owns 100% of the Takealot Group and 96% on a fully diluted basis. This means investors looking to gain exposure to the Takealot group can do so through buying and holding Naspers shares. One of the options available to investors looking to get stretch their capital as far as possible for Naspers and Takealot.com exposure is to buy Naspers shares through FNB Shares Zero.
Shares Zero allows you as an investor to gain exposure to top listed local and global companies through the JSE top 40 shares, Exchange traded funds (ETF's) and Exchange traded notes (ETN's), without paying a monthly account fee, meaning more of your capital going into your investment and not fees. The JSE top 40, are the 40 largest companies on the JSE by market capitalization. These are what is known as blue chip companies due to their size, track record and profitability. Naspers is the largest company listed on the JSE by market capitalization, and because of this, the company can be purchased through Shares Zero and with Zero monthly account fees more exposure to Naspers can be acquired over the long term.
Amazon:
US online retail giant Amazon.com plans to launch online shopping services in South Africa and several other countries in 2023, clearly indicating the potential the US giant sees in the South African online market.
The five markets Amazon plans to expand to in 2023 include South Africa, Nigeria, Belgium, Chile, and Columbia, with February 2023 as the soft deadline for the South African launch. The online retailer currently has extensive operations in South Africa but does not sell and distribute any products independently yet. Instead, it has third-party sellers who can ship directly, handle their respective logistics and customer service, and charge for different shipping options.
However, with Amazon looking to enter the South African market directly, this will change, and Amazon will control the supply chain as it does in the United States, meaning greater competition for current South African online retailers like Takealot. However, competition is not a bad thing as it results in competitors needing to raise their games and South African consumers being offered a great variety of products. The South African ecommerce market has clearly been deemed attractive by one of the largest companies in the world by market capitalization.
Obtaining exposure to Amazon as a South African investor:
Investors have different options to gain exposure to Amazon:
In Closing:
Online retail has increased in popularity on account of the Pandemic and looks set to stay in a post pandemic world. As investors we need to understand different market trends and take this into account when building our basket of asset classes. Takealot.com as well as Amazon provide investors with exposure to the biggest ecommerce sites in South Africa and The United States, and depending on your level of knowledge, capital available and risk threshold there are different investment vehicles to suit all your needs. With the entrance of Amazon in 2023, the South African ecommerce market is bound to heat up. Investors will be waiting to see how ecommerce companies like Takealot.com handle the new competition, and how consumers respond to a broader variety of goods and prices.
