South African pharmacy and health store chain Dis-Chem has revealed that online sales for the 24 weeks ended 15th August rose by 344%. Over the same period Dis-Chem’s revenues grew by 8.8% to R11.7bn ($699m). The company believes COVID-19 has sped up the maturity of online retail by 3-5 years in South Africa.
Although trading increased strngly during the worst of the COVID-19 lockdown, during level 5 (i.e. highest level) of the lockdown period in South Africa, Dis-Chem was unable to sell 20% of its products, including higher-margin products from its beauty category, it said. Lost revenue were approximately R200m ($12.0m) for April.
Dis-Chem believes that something fundamental has changed in South African shopper patterns. It has noted that consumers have been slow to return to shopping malls as lockdown measures eased. Inastead, they have chosen to shop locally in smaller malls.
Sales at “convenience centres” (i.e. local malls) rose by 16.4%, but fell by 7.8% at shopping malls over the reporting period. Dis-Chem also notes that it did not see the ‘Lipstick Effect’ (consumers buying small luxury items in an economic downturn) and sales of sports supplements understandabl fell. But healthcare and nutrition products such as vitamins and products to support immune health did perform well.
A fundamental change in how consumers use ecommerce in South Africa
Dis-Chem believes that “COVID-19 has matured the e-commerce environment and consumer adaptation by three to five years.” These sentiments echo findings from the much more mature US market, where IBM research estimates that the pandemic has accelerated the shift away from physical stores to digital shopping by roughly five years.
Although South Africa has a sophisticated retail landscape with a high penetration of modern stores and shopping malls, online retail has struggled to take hold, even among many wealthier consumers. That looks to have changed permanently, driving two major changes: a greater willingness from cosnumers to buy lower value goods such as groceries and health products online; a tipping point among retailers of FMCG products for commitment to online retail (with notable exceptions – the main Shoprite chain does not sell online) and move to multichannel retailing.
